Like the rest of you holding CGT I am disappointed by this news...

Like the rest of you holding CGT I am disappointed by this news (particularly given the substantial paper loss I am now sitting on).

Unfortunately I can't see this news as anything other than significantly negative for the long term viability and profitability of CGT as well (as noted by the board in this quote:

"The Board has therefore determined that it is necessary to curtail activities outside of the core focus of accessing and mining the Mako Lode in the Llanberris compartment in order to demonstrate whether or not there does exist at the northern end of the prospective Ballarat goldfield sufficient mineralisation to sustain a profitable modern mining operation."

Unfortunately whether CGT lives or dies now seems to depend on the outcome of the Mako Lode, which they are going to focus all of their efforts on. Even if the Mako Lode does deliver the anticipated grades, this must mean a few things:

1) forecast future production won't be the 40-50,000 ounces in 2012 that we had been assuming (given that mineralisations outside of this node do not in fact have grades closer to 4 g/t as had been expected). This probably relates to the "nuggety" ore type that is known to exist at Ballart;

2) if the Mako Lode doesn't deliver, then the mine is a dud based upon CGT's model as a low cost, small producer (it would only be viable if large tonnages were being run through the mill, which would dramatically reduce margins); and

3) a capital raising looks likely if the operation wants to expand beyond the Mako Lode.

I am hoping someone can come up with some positive news as a means of countering what I've said, but I am struggling to come up with any on my own.

In the short term I am going to hold in the hope that it has been oversold and possibly sell on a bounce.