Ann: Maiden Ore Reserve Estimate, page-23

I have followed this thread for many years and have been interested as to how things would pan out. The warning signs for me was an MD acting like a cowboy using company funds to support the share price. Now if these funds were coming from free cash flow, then a good move but when the funds are funds raised to construct a ming plant then the ALARM bells were ringing loudly. CDU had a MD who thought he was smarter than the market and if this latest resource estimate is accurate then he and his mates should be doing time behind bars and I hope shareholders do their best to make this happen. There are too many cowboys out there that are only in the game to line their own pockets, hence the reason I trade forex and only have one stock which I am down 66% on. That stock is HGO and even though they have 70% of their production hedged at AUD $7700 ton or AUD$3.52lb I am expecting them to announce a capital raising and have been seriously considering exiting HGO over the last few days and waiting for the announcement. Now the reason why HGO are valued at $25M is they had the normal teething problems trying to control costs and get the plant to nameplate capacity when they started up, requiring numerous capital raisings at constantly lower prices and thus very dilutive. 3 years later they are starting to turn the corner but are now doing a cutback to access high grade ore and their new super pit. The risk with HGO is whether they can generate enough free cash flow to complete this cutback up until 31 March 2016 when it is due for completion even with its 70% hedges at AUD$3.52lb.

Why do I bring all of these points up about HGO on the CDU thread you might ask! I have consistently been amazed at the naivety of a lot of share holders that believe that once the plant is constructed that it would be spilling out truck loads of cash. The biggest risk of any mining operation is commissioning and the cash draw down utilised whilst the plant tries to get to nameplate production and profitable prices as per the companies feasibility Study. I have been trading shares since 1990 and have lost count of how many companies have gone under after financing an expensive new mill just to find that administrators are eventually called in when the company runs out of funding options. It appears that this has been occurring on a more regular basis over the last 7 years as the resource boom brought out all the cowboys who in a commodity bull market could make money but in a bear market these cowboys are found out for what they really are. There is no substitute for good management! CDU are in an even more precarious predicament because the spot price for copper is only AUD$2.93lb ($US2.13lb). Thank god for a US 5c rally last night is all I will say! Analyses that I follow believe copper may be heading to US$1.85lb before a bottom may be found. How would CDU perform if copper traded below US$2lb when they are in the commissioning phase? My prediction is they will bleed copious amounts of cash and their share price will only be a shadow of their former glory like HGO's. By the way, HGO shares have had a consolidation and if you look at the price they were trading at on commissioning with copper prices as high as US$3.50lb they were trading at around $2.50 a share. HGO have been profitable for over 12 months have had brokers recommendations as buys with targets as high as $1 but continue to trade towards new all time lows (currently 17c) and a market cap of $25M. Be warned, it could get a lot worse for CDU shareholders. How much confidence do you have in your highly paid board???