Was thinking about recent comments re rigs from uruguay arriving...

Was thinking about recent comments re rigs from uruguay arriving back in Brazil and so decided to go back through the March Quarterly and try to get more of a feel for potential gold production and revenues in Q4.

Q3 showed ~32kgs of produced gold for sales of USD1.6m.
Gold produced ~20kgs gravity circuit and 12kgs from the leach ponds. There are currently 2 leach ponds available for operation; with a third one being built soon, and a fourth to then follow.

The quarterly is NOT totally clear, but p5 indicates that the second vat's first cycle was completed after the end of the quarter. on the presumption that this is excluded from the quarterly gold production then the 11kgs came from two cycles in Vat 1.

What this means for Q4 - and on the massive assumption that recoveries will remain consistent - then we are going to see two leaching cycles from Vat 1, two leaching cycles from Vat 2 and half a leaching cycle from newly constructed Vat 3 (so no contribution to production in the quarter). Vat 1 cycles average 6kg gold, whilst the first cycle in Vat 2 got 6.4kg. At 6kg per leach cycle this means 24kg of leached gold plus another 20kgs from the gravity circuit. or ~44kgs of gold. = possible revenue of ~2.3m from gold production.

the gravity circuit is producing tailings faster than the leach ponds can leach, even on a 48day cycle. no doubt why CGM are building more leach ponds. when the 4 are in play and on a 2 cycle per quarter routine then (at 6kgs per cycle) that is 48kgs of gold. plus the gravity gold and that would mean Q1 2013 is looking to potentially be double last quarter (Q3 2012) production.

Assuming consistent drilling revenue of US$1.9m per quarter then CGM is looking at about US$4.1m of revenue in Q4, rising to US$5.1m in first quarter of 2012/ 2013. Annualised this is ~US20m of revenue for 2012/ 2013. any strengthening of the US relative to the AUD in this time and CGM benefits. overall i say that this is a reasonable revenue stream for a company currently capitalised at AUD$35m!

There are some pretty large assumptions here - like rig utilisation remaining steady, gold recoveries remaining constant and gold processing times remaining steady. The quarterly also only advises revenues, and is silent on margins. It is one thing to earn US$20m a year, it is another if it (say) costs you US$21m to do so....

Coming announcements on assay results should provide some means to judge whether the company is going to be able to maintain current production percentages. We will have a clearer view on profitability end of Q4.

Still feeling confident as to the value proposition, although would prefer share price to be higher! news flow clearly needed to change current trend. glta