north american roadshow and capital raisings

My observation and comments:

[A] The road show slide pack provides an excellent picture of CRE operation and future strategies.

It seems the statement +A50m of operating cashflow from phase 1 operation to December 2010 and forecasting about A$30 to 40m free cashflows per annum are very ambitious. In my assessment, the probability of achieving the above statements are very remote/small based on the last two campaigns under OPA (ore purchase agreement).Refer to the December quarterly report (page 5), the cashflow is + A2.3 m (this is the first campaign) and March quarterly is not out yet and today is the last to lodge the March quarterly. ASX announcement on 11 March successful Completion of second ore process campaign indicated the gold produced was 22658 oz this March quarter compared to 27251 oz produced in the December quarter. Hence the cash cost (C1) will most likely to increase beyond A$841/oz (December quarter and will not be surprised if it is above A$1000/oz) and the cash flow maybe just near break even or just positive. Need to be confirmed by the March quarterly. Due to the past 2 quarters with OPA, the cash flow is below A$3 million each, hence it is highly unlikely to achieve the +A50m cashflow for phase 1 operation (till December 2010).

[B] The half yearly report and Auditor Report
The half yearly report and its BRR (board Room radio) present the first half yearly profit of A$ 898k. It is the first profit in the past 9 years as an explorer and a gold producer. It seems the company has turned the corner by having OPA [ie by using Barricks Granny Smith Mill (BGSM) instead of its own troublesome Barnicoat mill. For further details, refer to the OPA agreement, ASX announcement 15 Jun 2009]. Unless share holders read the auditors going Concern comment in the section 2 (page 20) of the half yearly, no share holders will know that it required to raise more capital. I copied the Auditors comment below.

The financial report had been prepared on the going concern basis, which contemplates the continuity of
normal business activity and the realisation of assets and the settlement of liabilities in the normal
course of business.

The consolidated entity has experienced net cash outflows of $5,129,000 for the half year ended 31
December 2009.

As at 31 December 2009 the consolidated entity has net current assets of $12,315,000 which includes
$7,145,000 in cash and cash equivalents, inventories of $14,512,000 and convertible notes of $4,971,000 which were repaid or converted on 1 March 2010 (repaid $4,500,000; converted $500,000).

The scheduled repayment of the convertible notes and forecast operational and capital expenditure arising from the mining operations at the Laverton Gold Project are expected to be met from operational cash flows, existing cash resources and additional short-term financing and/ or capital raising.

During the half-year to 31 December 2009 and the period to the date of this report, the directors have taken steps to ensure the consolidated entity continues as a going concern. These steps have included:

i) the signing in June 2009 of an Ore Purchase Agreement, with subsidiaries of Barrick Gold Corporation, in relation to the purchase by Barrick Gold Corporation of Crescents Laverton gold ore and its batch treatment through Barricks Granny Smith Mill;

ii) the signing in August 2009 of an agreement to acquire Barrick Gold and Carbon Energy Limiteds assets in the Laverton region, thereby boosting Crescents gold inventory to over 2.1 million ounces of Measured,Indicated and Inferred Resources;

iii) the commencement of mining and haulage operations from the Companys Laverton Gold Project;

iv) on 22 January 2010, the Company completed a placement of 26,615,000 shares to raise $5,323,000 million equity. The shares were placed at a price of $0.20 per share and include one option for every two shares issued. These options expire on 15 January 2013 and have an exercise price of $0.30 per option;

v) the marketing of a $15,000,000 convertible note issue, the indicative terms of which are interest at 9% per annum, 24 month term, convertible at 30 cents per share. The final terms and conditions of the convertible note issue are still subject to negotiation;

vi) the negotiation of a $7,000,000 finance facility. It is currently proposed that the facility will have a maturity date of 15 June 2010 and that interest will be charged at 12% per annum. The final terms and conditions of the facility are still subject to negotiation.

The timing difference between the ramping up of mining activities and the receipt of proceeds from gold
production has given rise to temporary working capital deficiencies. The amount and timing of working capital required will be dependent on various factors which are not in the control of directors including future gold prices, gold recovery and processing costs. The consolidated entity has repaid or converted
$5,000,000 of convertible notes on 1 March 2010 (repaid $4,500,000; converted $500,000).

The ability of the consolidated entity to continue as a going concern is dependent on:

i) the finalisation and receipt of proceeds from the $15,000,000 convertible note issue by 31 March
2010;

ii) the finalisation of the $7,000,000 facility in March 2010;

iii) the receipt of the projected net cash inflows from the Ore Purchase Agreement with Barrick.

The directors have reviewed the consolidated entitys overall position and outlook in respect of the
matters identified above and are of the opinion that the use of the going concern basis is appropriate in
the circumstances.

However, if the consolidated entity is unable to achieve successful outcomes in relation to the matters
discussed above there is significant uncertainty whether the consolidated entity will be able to continue
as a going concern.

Should the consolidated entity be unable to continue as a going concern, it may be required to realise its
assets and extinguish its liabilities other than in the normal course of business and at amounts different
from those stated in the financial report.

The financial report does not include any adjustments relating to the recoverability and classification of
recorded asset amounts or to the amounts and classification of liabilities that may be necessary should
the consolidated entity be unable to continue as a going concern.


[c] Raising capital
It seems the capital raising is mainly from convertible note and bank loan facility (from Auditor report). It will be nice if retail share holders can participate in the capital raising via SPP (share purchase plan) or right issue.


as always DYOR.