The irony being a producer is that the market will asses its fundamental (profitability, cashflow, dividend , EPG growth, PEG, etc). Whereas as an explorer, market may look ?more? into exploration success, blue sky, resource definition/upgrade, etc and the market may even forget and forgive the high expenses as normal progression to become a new producer.
For CRE, Five campaigns have been completed under OPA with Barrick. So far only the first campaign (first gold pour in 23 Oct 2009) produced POSITVIE operation cashflow of A$ 4.854 m (refer to December quarterly 2009, Appendix 5B). The last four campaigns all produce Negative Operation cashflow (note operation cashflow instead of financing cashflow or investing cashflow). Hence they need to raise capital (latest oversubscribed Right issue of A$48M ) and borrow money from another company (ASX code : IDG). The first campaign produce the 2010 half yearly profit of A$898 K but the auditor gave ?the Going Concern? warning (refer to page 19 of the half yearly report )
The 2010 full year result also produced a net loss of A$8.75M (after 3 campaigns) and the Auditor also gave ?Going Concern? status (page 27). CRE also has 5 year loss history up to now and total accumulated loss of A$ 173 M (refer to the latest annual report ).
The last half yearly result was released o 15 March 2010. So in less than 2 week, we will have the latest half yearly result. You could make your own mind whether it is cheap and take action after considering your trading /investment style, plan, etc. Institutions took up the right issue for long term investments and not for short term. They could be attracted by [1] reopening of Summit underground Mine in few years time, [2] New management (Geoff Stanley, recently appointed chairman, old MD/CEO, Roland Hill has resigned as MD/CEO, Mark Tory acting as interim MD and comapny is searching for permanent MD) [3] Higher grades open pits will be mined (phase 2 of OPA and beyond).
Share holders can make your own mind when CRE will turn the corner and produce a profit and cashflow. (a profitable company with negative cashflow may go into administration. Remember the old profitable CopperCO Ltd with negative cashflow that went into administration and its assets bought by CFE (CFE made more than A$240 m from the asset sale of CUO in last few year).
Many Companies (including CRE) have used EV(Entreprise value)/Resource and EV/Reserves to measure "undervalue" nature among its peers. IMHO, this can be a good starting point or first screening tool. However , one (at least I) need to study the BFS (Bankable Feasibility Study) that have important FORECAST parameters such as cash cost (C1), total cash cost (C3), IRR, NPV, payback period, Grade of the resources, open cut/under ground mine, refractory/non refractory resourc, processing route, strip ratio, infrastructure, metals price , etc). Finally the ACTUAL cash cost VS forecast cash cost in the BFS (note some companies have lower cash cost than BFS forecast figure, eg SAR whereas NAV has higher cash cost figure than BFS figure. Refer to their ramp up periods/quarterly reports for details) . The management / Directors also play important role for the success of the company.
Had CRE been an explorer, the share price will probably sit at higher level. ( despite the recent flooding hence it reduced production to 15koz instead of 29Koz budgeted. Refer to ASX announcement on 4 March 2011 ?Operation Update?). Due to the following factors :
good drilling results from Apollo, Mary Mac, etc ;
potential of Summit U/G mine; uranium assets;
Gold resource of 2.1 Moz and reserve of 254k oz;
tight share holding with top 20 is about 92% of total share holding, (total share holding is about 1 billion, could be seen as negative);
the recent right issue (A$40M) at 11 c and total cash holding of A$30 M at the end of 2010 (December 2010 quarterly report], Hence no need futher capital for the next 2 to 3 years.
As always DYOR.
CRE Price at posting:
8.4¢ Sentiment: Hold Disclosure: Held
