here's my take

For what it may be worth, here?s my take.

I have been following CTO for some years. I had a substantial holding, but with share price deterioration my holding is now worth about 1% of my portfolio.

There is gold, no doubt. There is also a large deposit. Company management has tried to keep tight control, keep it in the ?family?, and have lacked expertise and capital to make a good go of it. They have tried to develop the mine on the cheap, and have not attracted interest from the big players because there is uncertainty about whether the gold can be mined economically. Getting the gold out is apparently about chasing veins ? so it needs to be targeted. Not a historically successful commercial method in Australia (unless you have a lot of men with lots of picks ? no good if labour costs a lot).

CTO say that they have been learning about the deposit and there are (new) methods to extract the gold economically. Now they need to make these ?new? methods work, and want capital to develop the mine (no longer can they try and develop and mine at the same time). No more capital raisings though ? share price too low and another capital raising would decimate it.

Is there a future for CTO? Possibly. I don?t know enough about mining to know whether CTO is right or wrong. But, the current quarterly production figures are probably meaningless ? 1000 or 4,000 ozs. When they focused on mining the veins the most they got up to was about 5,000 ozs per quarter. This was not enough, so the methods had to change. The latest quarterly says they are ?developing? the mine, so not chasing veins. This is probably correct.

But the ?Chinese? (? others) are now engaged. This is probably the first time outside mining expertise has really looked at CTO. If the Chinese walk away, then for sure there is no future for CTO. If they opt in, then ball game changes (they get a capital injection and it probably means that someone else thinks the gold is there and that mining it is viable). Time will tell, but I expect we will all know by the end of this year.

I may be alone on HC in thinking that CTO management is not shonky. I think they have been na?ve, inexperienced and insular. I think the CEO has faith in the company and its capacity to mine the gold (maybe blind faith). The CEO has a big family holding (if CTO is successful, the CEO?s holding is work many multiples of his salary). But they may be barking up the wrong tree (or digging in the wrong neighborhood).

So my take? I am holding still. At 1% of my portfolio there is not much to lose, and much potential upside if CTO management is correct ? stranger things have happened.