Since we're all into rampant speculation to pass the time, I thought I'd give it a crack!
There's been a lot of talk about a JV. Given we've already farmed into this project (80/20 split), a further JV at the moment doesn't make sense to me. Our market cap is ~10m and any JV partner would want a controlling stake in the project. You'd want to go into any JV negotiations from a position of strength to get the best outcome for shareholders. Surely you wouldn't sell your golden goose for pennies on the dollar. Surely they'd first want to confirm a discovery and then partner up to develop the deposit. The cost of developing a project could flush out current the 20% interest. Although they're a private company, so it's hard to tell how deep their pockets are. Cohiba management currently has market cap-based performance incentives (From memory ~mcap 200m). They'd never achieve that with a JV without a drill hit on a potential deposit.
For me, the secrecy around hole 8 is interesting. Management announced planned drilling for hole 6 and 7 and the rationale for each but didn't for hole 8. Instead, it's just a paragraph in the quarterly without a location for the hole. They announce the depth it is at, at the end of September quarter, but the late October horse well drilling update makes no mention of hole 8 at all? Weird! But we did get directors buying on market throughout October (Probably in an effort to stabilise the share price more than anything). Read into that what you will.
Furthermore, hole 7 achieved its purpose of proving the orientation of the bluebrush fault, why would you not immediately start stepping it out? They state an "aggressive step out program" but then are non-commital regarding timeframes. Statements such as "in the future" didn't inspire market confidence. Was it their plans and early visuals for hole 8 that caused them to be non-committal to the immediate step out following hole 7?? Or do they need to wait for assays to step it out? Any thoughts here would be great.
On the flip side, if they're super bullish on hole 8, why not release it to the market? The company clearly needed to raise cash, if the visuals are positive, why not release and try and raise capital at a higher price that is less dilutive to current holders? Can be a chicken and the egg thing as well. The fact that the market knows a company needs to raise cash can keep a cap on the share price even in the setting of releasing positive results. From previous small-cap companies I've invested in, it's common that SPPs have a cut-off that's already passed. It stops traders from buying in, pumping the price, and getting cheap shares to later dump them for a profit. Better that shares go into the hands of long-term holders. Looking at the dates, SPPs take time to implement, so they'd want to have it all wrapped up by xmas. Easier to raise money from holders before they go blow it on a summer holiday.
I've liked that management has given more detail at the completion of each hole, both with host rock and mineralisation depths/density. So I guess that takes time so we'll just have to wait it out. In the past, Cohiba has often drilled wedge holes if they like what they're seeing, so the next drilling update has the potential to be a meaty one. The AGM is next week, sometimes companies will put out an update just before it, otherwise they get bombarded with a million questions. Overall, I'm sure we'll have a clearer picture by xmas.
This is all pure speculation, and definitely not investment advice, but it's kind of what's been running through my mind for the last couple of months. I'd be interested to hear what everyone else thinks. More than happy to be wrong.
Raz
CHK Price at posting:
0.6¢ Sentiment: Hold Disclosure: Held
