CTO - Citigold Corporation

[So_Cynical]

Who knows why this stock is getting dumped.

I know...its a piece of crap!

I have no inside information as to why and my guess is no else does either

Seriously dude you really need to read back over the last 3 or 4 pages of this thread to see its abundantly clear why there's an outstanding chance that CTO will end up in the hands of the receivers.

I imagine hardrock mining for gold at depth is not easy. It makes reasonable sense that expensive development work need to be carried out before efficiencies of scale start to tip the balance towards profitability. Since the last quarterly report the price of gold in Aussie dollars has been $1400 plus. Even if there is no increase in production for this quarter income should increase by 15%. In fact they could have a 15% drop in production and still have the same income as the last quarter when they were close to break even and even mentioned that they considered paying a dividend. I may be a mug but I'll wait and see and not base my investment decisions on short term market action.

I wont call you a mug ...but will point out that the CTO SP has gone from 51 cents to 8 cents over the last 4 years, while they issued new stock every 6 months or so, while Gold has doubled in price over the same time frame...all the good gold producing stocks have at least held there value over that 4 years, CTO hasn't...make of that what you will.

 

[Sean K]

CTO were claiming production aim of 40k oz pa back in 2004.

In 2006 they were claiming 50m oz au potential.

Since Adam was a boy their target has been 300k production pa at under $350 an ounce.

Last quarter 'record' production of about 5k oz at over $480 an oz.

225 of 11,000 shareholders took up the 'discount' SPP to raise $1m.

They're giving away half of 'City' for what we do not know.

Just raised $18m for half debt and equity, with no price mentioned.

It's a bad bad bad joke.

 

[bandicoot76]

wish i'd sold at .50 and not "kept the faith" ...good call miner... my bad! need it to get back to .16 to break even... not holding my breath tho

 

[jonnycage]

i enjoy roller coaster rides, so got in at 9 cents. crash imminent now lol

ah CTO where of where can your gold be ???

j c

 

[Quillan]

The June Quarterly. To Mark Lynch, CEO Citigold.
Dear Mark,
I have several points to make.
You recently reiterated your intention to produce 50,000oz in 2010,
in your submissions to our new Chinese Investor Zaojin.
The details are on their website.
This figure was also published last December, so it is now confirmed.

Bearing in mind that your production in the 1st Half of 2010 was about 7,500oz, I take it that we will see an acceleration to around 42,500oz in the next 5 months? If this turns out not to be the case, your Board, once again will be guilty of misleading its Shareholders and also its new investors.

Now you are really scaring me, with possible proposals to enter a much larger deal with Zaojin. Will you please assure Shareholders that you will also approach one or more Royalty Companies, for whatever finance you are looking in future? Your ability to negotiate appears to be seriously suspect, and at this rate, most of any future prosperity will be transferred into Chinese hands.

Will you also confirm that any proposed terms will be put to Shareholders for their approval, prior to any commitment?

Will you undertake to appoint a prominent respected Finance Director who understands mine finance and has the requisite contacts?

You mention in the Quarterly several interested partners for future developments. Will you therefore confirm:
Your negotiating Terms will be on a par with royalty deals recently concluded by Franco-Nevada,[F-N] and Royal Gold? This is giving away no privileged information. It would merely confirm that Terms are not going to be a "stitch-up" without Shareholders being told the scale thereof, as was the case with the Henan deal, with probably 88,000ozs of gold production pa. needlessly given away, and a dilution of future values of at least A$1 billion in Citigold's assets.

[PDF]
Franco-Nevada to acquire 22% gold stream on Taseko's Prosperity ...
You will see from these figures that F-N receives the gross revenue on 66,000oz pa, assuming Taseko reaches its target of 300,000oz pa.,
for providing C$350m. Pro rata that's 12,000oz pa. on the A$70m Citigold financing, to yield the same15%pa. for F-N at today's gold price.

The risk for F-N appears to be much greater at Taseko. They are advancing $350m on hoped-for production of 300,000oz pa, against the Citigold requirements of only A$70m [or C$65m @C$1 = A$1.07] on 200,000oz production pa. with far higher grades per tonne. and larger gold resources. Pro rata that would be an investment of A$105m for Taseko, not C$350m, [A$375m] when related to the two comparable annual productions in risk terms.

You still refuse to answer my point why surrendering 12,000 oz pa to finance A$70m would not be a better deal than committing100,000 oz pa to Henan?

Your present gross profit of A$867oz would provide a royalty financier with a return of 15%pa on 12,000oz, assuming the average gold price obtained in the previous Quarter, even allowing for the present high mining costs.

Royalty Companies, as you know, bet their returns on increasing gold prices, and provided the gold is there to be mined, are always interested in new investments.

All the available information suggests that a royalty deal with Citigold would be a safer investment for F-N than the Taseko financing, since Taseko has to find a further C$450m, on top of the F-N contribution, to open the mine, thus escalating the risk.

Your only response to these points was that you had looked at royalty finance "some time ago" and thought it was "too expensive".

Your comments make it clear that you did not pursue royalty deals at the time you were looking for finance for the City mine.
Are you are talking to Royalty Companies now?
If not, why not?
If not I would regard it as a gross dereliction of your duties to your shareholders, and incidentally, to your own personal investment in Citigold.

This is particularly so if you cannot produce evidence of negotiations with Royalty Companies along the lines of the Taseko deal or Royal Gold's average take of A$60 per oz on production finance, showing that no agreement better than 100,000 oz pa could be reached with any of them.

This suggestion simply doesn't hold water.

Your COO Chris Towsey asked me in an email if I would be prepared to enter a deal such as that with Henan?

My answer is that Royalty Companies enter far less generous deals all the time. Deals yielding them about one eighth of the Henan deal. It merely illustrates how little Chris Towsey appears to know about Royalty finance. He should know that these Companies have made huge profits for their shareholders over the years, based onTerms far less generous than the deal with Henan.

But we must bear in mind that Chris Towsey assured me in May that mining analysts would soon realise the Henan deal would value Citigold at around 74 cents, as soon as it was confirmed. I am not holding my breath.

Today's price is 9 cents with a tiny turnover of A$36,000. No evidence there of bargain hunters!!

It was largely on his assurance, and against my better judgement, that I became a shareholder. After all, I concluded, Chris Towsey has all the mining qualifications, and was intimately involved in all aspects of Citigold, so who was I not to accept his analysis?

Negotiations with the likes of F-N could have been entered into when I first pointed out negotiated royalty Terms to you in April, and your dealings with Henan were no more than an MOU. You chose to reject them, at huge cost to Shareholders, in my opinion, assuming a Taseko deal was a feasible possibility.

I refer you again to the contents of my emails of 7 & 22 July, covering most of these points. If you had a rebuttal you would have used it to show me where I was mistaken. As a comparatively large shareholder making what I regarded as important finance suggestions, I would have thought any CEO would have an obligation to respond.You have remained silent, except to say you thought royalty deals were too expensive, but giving no back-up evidence in support.

I am posting this email on the Citigold blog on Aussie Stock Forums.
Sincerely,
--------------------------------------------------------------------------
I invite CTO Shareholders and interested parties to copy and pass on this email to any contacts, analysts or mine finance persons.

 

[Quillan]

Here is the outline of a suggestion I put to Mark Lynch, the CEO recently.
The idea is that shareholders should become Royalty providers, just like Franco-Nevada.They provide the finance on a 15% return, based in the present gold price. The return increases or decreases according to the gold price, but starts at 15%. This is precisely how the Franco-Nevada shareholders have became very rich. I invite you all to put this to your Broker or Financial Adviser for comments.
It may not be limited to shareholders but they should be given first preference.
Here is the gist of what I wrote to Mark Lynch recently. He has not responded.
"You could finance say A$50m, by issuing what I have called Royalty Preference Shares.[RPFs] Modelled on the Taseko deal, they could be floated to shareholders to yield, say 15%***. Maybe with a later conversion Right to the Ordinaries. They would go to a large premium, meaning shareholders could easily finance the purchase, then sell some or all in the Market if necessary.
***The 15% being calculated on the present Gold price with say 8800ozs revenue going to Royalty Preference holders as a dividend pa. @ A$860 an oz. This way all mining earnings are kept amongst the shareholders, if they continue to hold the RPFs, instead of being exported to China or elsewhere."
Comments please.

 

[noirua]

Hi Quillan, your letters are very difficult to respond to - then i know only a little about Citigold.
In my recent emails to directors I've used a more cunning plan, that's to leave some information out, then they can reply, cleverly, and tell me something important 'I already know', of course. Giving some DEFINITE proof of who you say you are also helps.
Your letter seems as if it's an attack and at best will receive an annoyed reply, or, just, 'Thank you'. A letter from a Bank Manager in 1982, I still have it, agreed with most of what I said but didn't expect anything to change.

Just a thought really, or some thoughts; your needed though Quillan as few people bother to do anything and just grumble and moan, and they're on ASF as well, would you believe it? - noi

 

[Sean K]

Just scaned through your letter Quillan, but very interested to see if you have a reply.

This company should be absolutely on the ropes.

Absolutely massively overpromised and under delivered.

 

[Quillan]

Hi Noirua,
Wherever I go, there you are !!
[I suspect we may meet on the WEC blog sometime soon !!]
I have had a running correspondence with CEO Mark Lynch of CTO, over the past 3 months, including some Skype calls.
I told him I intended to put my opinions to this Forum, but invited his response first, in case he thought there were any inaccuracies in my contentions.
He said he would be replying to me within days. That was nearly 2 weeks ago.There was no response. Perhaps his Lawyers have shut him up?

As I have said, if I am talking nonsense, or my comment about the TASEKO deal is not a valid comparison, then Lynch should say so, and shoot me down with facts.

After all, it could be said that my possible ignorance on the Finance matter, is maligning the Directors, harming the Company, and my own considerable shareholding. He should want to stamp on it and put me right immediately,

My purpose is to try to inform more CTO Shareholders of my opinion, and hopefully to get a reaction from someone who understands Mining Finance. You may be able to help there?

The only bright spot about the Henan deal is that an independent 3rd Party, who are experts in mining, has satisfied itself that 200,000oz pa. is viable at the City mine, otherwise it wouldn't have been prepared to invest.That does not make the deal worth 100,000oz pa., which is outrageous.

Let me be clear. My correspondence with the CEO is in my name, which is only omitted for blogging purposes. I am hiding nothing.

 

[Quillan]

Excuse long silence. No, Mark Lynch didn't reply.
But it looks like my criticisms of the deal with Henan have struck home. Lynch, having told me that the proposed Chinese partnership was a good deal for CTO Shareholders, has now ditched them !!
Let's be frank. The record of this Management is abysmal. The only encouraging factor is that there are groups from India, Singapore and China, known to us, who think there is something to be made of the mine. Unless they have been told a pack of lies by our Board, then there seems to be a reasonable chance of production being profitable with the gold price above A$1200.
The question is, will they walk away if the figures don't add up? It would be good to get inside our CEO's head, and his COO. Lynch subscribed fairly heftily to the 10c Rights issue, adding to an already large holding suggesting the breakthrough could be close, or he needs psychiatric counselling.
Not forgetting our highly qualified COO who reckons the price should have been over 70cents had the Henan deal been sealed.
Since the Board has walked away from that deal, we must presume other more favourable deals are being negotiated, and therefore our COO's estimate is undervaluing the Company.
The alternative is a requirement related to my psychiatric suggestion.

 

[Maya]

Excuse long silence. No, Mark Lynch didn't reply.
But it looks like my criticisms of the deal with Henan have struck home. Lynch, having told me that the proposed Chinese partnership was a good deal for CTO Shareholders, has now ditched them !!
Let's be frank. The record of this Management is abysmal. The only encouraging factor is that there are groups from India, Singapore and China, known to us, who think there is something to be made of the mine. Unless they have been told a pack of lies by our Board, then there seems to be a reasonable chance of production being profitable with the gold price above A$1200.
The question is, will they walk away if the figures don't add up? It would be good to get inside our CEO's head, and his COO. Lynch subscribed fairly heftily to the 10c Rights issue, adding to an already large holding suggesting the breakthrough could be close, or he needs psychiatric counselling.
Not forgetting our highly qualified COO who reckons the price should have been over 70cents had the Henan deal been sealed.
Since the Board has walked away from that deal, we must presume other more favourable deals are being negotiated, and therefore our COO's estimate is undervaluing the Company.
The alternative is a requirement related to my psychiatric suggestion.

I wish you were right about "other more favourable deals are being negotiated" -but I can not believe, that CTO walked away from the Henan deal, it is ( unfortunately ) more likely, that Henan walked or maybe even RUN away from it.

 

[Sean K]

We all thought as much when this was happening.

Really poor darts from the company and being fined $33k is just rediculously lenient.

Citigold pays A$33 000 fine for disclosure failure

By: Esmarie Swanepoel
22nd September 2010

PERTH (miningweekly.com) – The Australian Securities and Investment Commission (Asic) has fined ASX-listed Citigold A$33 000 for an alleged failure to inform the market of a revised production forecast for the Charter Towers gold project, in Queensland.

Asic said on Wednesday that Citigold knew on December 11 already that its gold production for the December quarter would be 10 000 oz less than the the forecasted 15 000 oz, but that it did not revise its production forecast until December 16.

Citigold also knew that its full-year production guidance had been revised to 50 000 oz, as opposed to the forecasted 85 000 oz.

 

[skc]

We all thought as much when this was happening.

Really poor darts from the company and being fined $33k is just rediculously lenient.

Citigold pays A$33 000 fine for disclosure failure

By: Esmarie Swanepoel
22nd September 2010

PERTH (miningweekly.com) – The Australian Securities and Investment Commission (Asic) has fined ASX-listed Citigold A$33 000 for an alleged failure to inform the market of a revised production forecast for the Charter Towers gold project, in Queensland.

Asic said on Wednesday that Citigold knew on December 11 already that its gold production for the December quarter would be 10 000 oz less than the the forecasted 15 000 oz, but that it did not revise its production forecast until December 16.

Citigold also knew that its full-year production guidance had been revised to 50 000 oz, as opposed to the forecasted 85 000 oz.

Read that and had the exact same thought. If the penalty was to fine the directors peronally, say 30% of value destroyed I am sure they would be way more focused on their continuous disclosure obligations.

 

[sion]

I've read carefully the full year report for City Gold and I have to accept that they seem to be very close to the edge of failure. The executive summary is very up beat and optimistic including the fact that they made a "maiden profit" in 2010. Of course that can be interpreted as needed to spur interest in the stock to make capital raising easier. That is in the interests of the existing stockholders also.

On the plus side is that they managed to raise 3.5 million in September. That was designated working capital. Looking at their cash flow statement they need it pretty urgently.

What bugs me is that they don't explain why they can't get enough ore to the surface to run the mill continuously. They say there are not enough headings but I don't understand why their are not enough. Why did production suddenly drop after ramping up to two quarters at 5000 ounces per quarter? Why are they diverting their energy to suns of freedom and talking about the Imperial mine instead of the Warrior mine? Is it true that they ran into the edge of their mining lease and had to stop? That seems unbelievable. They talk about constraints not in their control is a lease boundary constraint what they are referring to?

Looking at the corporate set up on the plus side is that management are incentevised to help the company succeed. Mark lynch holds nearly 90 million shares himself. They are awarded options that are share price or production based and require marked increases to be activated.

I still think that management have a chance to pull City back from the brink. If they do then the potential upside is enormous. I didn't sell at 8 cents ,twice , maybe I'm a fool but I'm going to wait and see what their next quarterly report is like. I accept that if it is not good the share price will drop to 8c or lower again. Luckily I didn't buy at 30 cents or even 20 cents. Never the less it is hurting somewhat even at 12 cents.

 

[So_Cynical]

I've read carefully the full year report for City Gold and I have to accept that they seem to be very close to the edge of failure,
What bugs me is that they don't explain why they can't get enough ore to the surface to run the mill continuously. They say there are not enough headings but I don't understand why their are not enough. Why did production suddenly drop after ramping up to two quarters at 5000 ounces per quarter? Why are they diverting their energy to suns of freedom and talking about the Imperial mine instead of the Warrior mine?

Ill quote my self from 3 years ago with the same concerns...and point out that they have never even attempted to explain why a mine with so much gold cant actually produce enough to fund its self.

(24th-October-2007) I brought a couple of weeks ago..and was most underwhelmed by the annual report, i was expecting a gold miner to be very up front about there production numbers.

And why issue more shares to raise money, how about mine more gold to raise money

Everything that anyone needs to know about CTO is in this thread....lol its a gold mine of valuable information.

 

[explod]

Ill quote my self from 3 years ago with the same concerns...and point out that they have never even attempted to explain why a mine with so much gold cant actually produce enough to fund its self.



Everything that anyone needs to know about CTO is in this thread....lol its a gold mine of valuable information.

Importantly very well said. Quote myself from back there too.

This is a dud mob and a dud mine, its deep and the rock is hard so even at these gold prices its all bad.

The big point though is that I cannot come to terms with the fact that people just do not read over threads like this before diving in. I suppose because we talk a lot of rubbish sometimes they take the words with a grain of salt. (But we have moved the dribble to the other page)

Avagoodweekend

 

[explod]

Re: CTO - Citigold

Toyed with this for awhile, but like Bendigo et.al. it is deep and difficult. There are many better Aussie plays with nearer surface gold. With labour, fuel and equipment rising in price conserably production costs are a growing issue. Of course a higher gold price will lift them, but for the time being I prefer the lower cost producers.

But others may know better, I have been wrong before

Just going back over it all, I posted this up on 7th September 07. CTO was 47 cents back then.

At that time then I liked AND, LGL and OGC which have (and will continue to do though LGL swallowed up by NCM of course.) increased many 100s of percentage points. And have a look at my one and only blog entry RXM, 30 cents to $2.70. Having said that I also picked up many duds, but selling on a stop loss line moves one on. You must not fall in love.

Not blowing my trumpet here just pointing out that you need to do the hard yards in measuring what is really going on, that includes, ballance sheets, management, output, costs and of course overall sentiment in the stock and the price of gold.

Spekkies are great if it comes together but often they fail and if they have not done it in a few years they never seem to.

A great lesson for me a few years back was a company near to where I live (another mistake, trusting the locals) was Gold Star Resources, they promised great wonder over about 4 yeaars but completely folded in the GFC due to funding. I visited the mine site a year or so back out of curiosity and on physical checking the tailings found the rock to be as hard as high tensile steel.

 

[Sean K]

One interesting thing about the CT deposits are they are almost entirely Inferred with only about 300k ounces Reserves. How did they get through BFS/DFS with just an Inferred deposit?

This mob should go the way of Bendigo, stop mining and go back to exploration to firm up the numbers and understand the deposits better.

Still carrying on about this being potentially a Giant deposit at considerable depth when their only deep hole came up virtually dirt.

 

[sion]

My sense from this thread is that CTO as a stock would be hard pushed to become more down trodden and unloved. I guess if one were looking for a contrary indicator you might arguable find one there. If you were looking that is...

 

[explod]

My sense from this thread is that CTO as a stock would be hard pushed to become more down trodden and unloved. I guess if one were looking for a contrary indicator you might arguable find one there. If you were looking that is...

How about a look at the price chart for the last four years. If you want them maybe on this next down wave you will get them for 6 cents. With gold and other gold stocks going the other way you dont' need this thread to tell anything.