Buy-backs would be good if:1. The SP is low.2. It won't affect...

Buy-backs would be good if:

1. The SP is low.
2. It won't affect earnings much by losing that cash (if there's low opportunity for high returns from re-investment). (1 & 2 being related, since a low SP means you lose less cash doing the buy-back, so it should affect future earnings less)

Buy-backs are good in the long term if the company will remain strong. Eg. if Chatree can still run for 10 years, and then grow too, without the need for this cash (and without needing to raise funds later).


But now there is costly short term debt damaging our future - high interest, fees and dilution too. They need to be solved before dividends or buy-backs are reasonable. Right now there's fair odds of a raising to fix up those debts...



"is that a buy-back makes sense if it is earnings enhancing, provided the company has surplus cash"

Buy-backs are never 'earnings' enhancing (in absolute terms), but can be EPS enhancing (if shares on issue are reduced by 10%, but future earnings are only reduced by 5%). It's a balance between: dividing future earnings by less shares, but sacrificing future growth (due to the lower cash balance available for re-investment into the business).

So you have to calculate: how many shares can you buy back, but how much future earnings will be sacrificed. If the SP is low, you lose less cash doing the buy-back, so it's more likely to make sense.

"From a tax point of view, institutions usually prefer buy-backs rather than receive dividends, on which they pay tax."

A successful buy-back is likely to cause capital growth for residual holders. Similar to buying a company that retains all earnings to grow the company, instead of paying out dividends.


"It amazes me that you can process 1 tonne of ore to extract 1 gram of gold, and make money. The ore has to be transported, sometimes kilometres, crushed and put through various processes. All to get 1 part per million!"

It's a couple of km from Quartz to the plant. Not even 1g/t, but 0.6g/t previously, and 0.8g/t soon. But it's a simple question: can you mine, transport, process, royalties etc for less than $42 per tonne? (0.6g gold is about $42) If another resource is higher grade, maybe they just have to do it for <$100 per tonne, which would allow the mine to work in more expensive locations (remote, Western).

It can work with 0.3g/t if the resource is large, vehicles are large, and the government allows heap leach.