CNB is currently a hidden gem with minimal media attention. We are sitting at only 17.5c per share mainly because not many people know about us. We're not that active on the forums and our media presence is limited.
So I thought I'd write in layman's terms, a summary of the amazing value proposition here. For me, this company is currently severely undervalued because of its highly experience management team and the projects they're working on. The story here is simple to understand and follow. At present, with $25-30M of imminent cash flow, I believe we should be at least 50c per share. The company will be transformed once we find the offset at Tick Hill, and at that point I can't see it being worth less than $3 per share. If we discover something similar to Hemi, we can easily go to $10-$15 per share. That is over 50x today's prices. Recent execution by management has de-risked the company and so the downside risk is limited. They know what the priorities are and has confirmed they are determined in delivering substantial shareholder value. It is a no brainer investment and remains a bargain at these current levels. With such limited shares on issue, once it re-rates, it will go up hard and fast and those late to the party will be scrambling for their tiny piece of the pie.
Management Team
There was an internal structure and a new team came onboard to take the company to a new direction. This new management team reunites the original team who founded Beadell Resources, which grey from a $15M IPO to a peak market cap of $800M and prior to that, Agincourt Resources, which grew rapidly before being acquired for approximately $450M. We are in good hands, in the mining game experience is what matters most and it's always good to back a team that has delivered exceptional returns for shareholders. They have a well-established track record for rapid growth and as of today we are sitting on a measly market cap of only $17M!Members of the management team are top shareholders and own 13.8% of the company. I like management with skin in the game as it obviously gives them incentive to take the company to where it can and should be. Their vision for the company is rapid growth and they are clearly not a lifestyle company as they even took a 20-50% pay cut during COVID. From past announcements it's obvious that they are measured in their approach and always seek out the best solutions for the company.
In total there are only 96M shares on issue, I would say 50% of these are tightly held by the top 20 shareholders and the rest by long term investors. This means when the stock price really moves, it moves fast! Management has expressed their desire to maintain a tight capital structure and with almost $3M in cash (in the coming weeks alone), there is no fear of dilutionary capital raising any time soon. We are in an enviable position with absolutely no debt at all.
Projects
Lets now talk about the exciting projects. I've only included the main ones the company is currently focusing on.
Tick Hill gold production
Tick Hill in Queensland was one of the richest and most profitable gold orebodies ever mined in Australia. It's been untouched for over 20 years and for the first time Carnaby is utilising modern exploration techniques and technologies to explore it.
Feasibility studies of the project shows net cash flow of $25-30M over a 13-month period with negligible pre-start capital of only $355k required! We have already secured $6M from the sale of tailings (with most of the cash coming in the next few months). The rest, at least $18M (and possibly much more depending on gold price), will come from mining. We'll also be able to take advantage of the carried forward losses from previous years. Processing options for the development of the project is being pursued and we're in advanced talks with 3rd party owners of processing facilities and contract miners.
The company has also indicated that one possible option is to sell the whole project for immediate cash flow as opposed to producing over 13 months. This will allow us to fully fund all exploration activities and begin acquiring new promising projects much sooner.
Faulted offset search at Tick Hill
More importantly, and also at Tick Hill, is the search for the offset which the company has reaffirmed remains a company transforming target. Plans are already underway to commence drilling in the coming months. Management has confirmed the offset must be there given the geological structure, we just need to continue drilling, and now we have so much cash we can do just that. It will be a company transforming discovery indeed, just look at Spectrum Metals when they discovered the extension at Penny West. It quickly went from a shell company to being taken over for over $100M. Bellevue Hold is another example, the discovery completely transformed and kick started the company and is now worth over $900M. This shows the potential of our discovery and where it could take us as a company.
The Strelley Gold Project
This is a recent acquisition for the company and the company is very keen to start exploring further. Exploration is being rapidly expedited and it's easy to see why. Gold exploration here has been dormant for 12 years at a structural and stratigraphic setting similar to the large Hemi gold discovery by DEG. Outstanding historical gold exploration drill results. Huge potential to become a new and highly endowed gold province. For reference, the Hemi discovery took DEG to a $1B market cap - and they have 10x the number of shares we do!
Summary
- We are a fully funded explorer drilling in highly prospective areas
- We are a near-term gold producer with immediate cash flow incoming
- Cashed up and no debt
- Tight capital structure
- The company is focusing on projects that will provide the most shareholder value
- Tier 1 management, tier 1 location, tier 1 projects
With gold prices skyrocketing and hitting all time highs, I believe more and more people will be drawn to gold stocks and gold companies. CNB is currently one of the most undervalued companies on the ASX and once it gets the attention it deserves, all those on the sidelines will be wishing they had jumped in earlier!
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