5 reasons to buy cto, page-5

Here are my five reasons:

1. If the gold price goes up a lot, as it did in the 1970's, you get the most leverage to the gold price from CTO because the 10Moz resource is currently only $25/oz, and CTO might increase its resource to 50Moz (in which case you are buying gold in the ground at $5/oz by buying CTO shares). CTO gold is unhedged (because, being a narrow-vein mine, they are not able to get bank funding). Only BDG might even be vaguely close in value.

2. CTO is debt free and mining. So most of the risk is gone, but (because the mining has only just started) the share price has not gone up yet. The period just after a mining company starts production is always the sweet spot for buying -- and for takeovers.

3. All world asset markets are booming. Very few areas of value remain. On the ASX gold stocks, analysts usually only know Newcrest and Lihir -- which are fully priced. Below them there are bargains to be found. CTO is on the ASX 300 and rising, so it will be "discovered" soon.

4. Due to its history, CTO is particularly bargain priced. Due to improved performance and a string of recent accomplishments, the broker sentiment on CTO is turning around. At the moment, most brokers and analysts don't even know Citigold exists, or if it does that it has any gold (and I'm not exaggerating). It won't be this cheap much longer. Oh, and deep vein mining is on the nose in the investment community because of Bendigo's screw up, Emperor, and problems in South African mines (especially Harmony and DRD). But they will eventually realize that these problems do not apply to CTO and recall that 60% of the gold ever mined came from deep narrow-vein mines.

5. CTO is exhibiting professionalism, competence, and confidence. Good hiring practices of the last few years are bearing fruit. And CTO can cherry pick the work force of miners in Charters Towers who work in the district, because it can offer the smallest commutes. That mining momentum will eventually show up in the share price.

6. No problems with country risk, native title, debt, hedging, diesel costs (it runs on electricity), running out of reserves, NIMBY protesters, etc.

7. Takeover-proof. The Lynch family holds about 15%, and by my count there is about another 25% of the shares that just will not get sold into a takeover bid. So a bidder might gain control of the company, but could never get the 90% of shares required to join it to the rest of their operations. So the bidder would be forced to always run CTO as a separate company, and our shares would always be in Charters Towers deposit, not diluted over whatever mangy deposits the bidder had around the world. Like Normandy-Mt Leyshon -- Normandy could not take over Mt Leyshon completely, because 30% of the company refused to sell.

8. I've been over all the ASX gold shares with a fine tooth comb in the last three months, and I cannot find anything else that comes close in value (with the possible exception that BDG comes a distant second, if it has 11Moz and a decent chance of mining profitably). My analysis assumes an increase in the value of gold over the next decade, so I focused on resources and mining costs rather than mostly on the next five years dividends (like the mainstream analysts).

Yeah, that was 8.