the quarterly had better be good..., page-13

In a CTO presentation a few years back, shortly after BDG downgraded itself from production to exploration status, CT remarked that CTO was able to retain its high sp while its peer's sp (BDG) suffered as a result of "an interesting decision". It's beginning to look like eating humble pie time soon for CTO.

What's interesting though is that the market seems to be punishing both BDG and CTO equally, despite BDG having made great strides in production in the last 6 mths. The comparatives are telling:
- Both CTO & BDG claim 10M oz gold in the ground;
- But neither could convert these claims into JORC-compliant reserves;
- BDG sp is approx. twice that of CTO;
- But CTO has approx. twice the shares on issue;
- BDG infuriated the instos shortly after in its last capital raising at 80c ps when it self-downgraded; and
- CTO disappointed instos repeatedly with unrealistic forward-looking statements over the last 2 years.

There is one significant difference though. BDG managed to avoid going down the path taken by GDR/ORN because BDG's last capital raising did not result in any dilution. In fact, it was value-adding when the sp crashed. Regretably, CTO carried out regular small capital raisings that resulted in dilution and decreasing sp over time. If CTO doesn't produce the 50K oz, it's next two capital raisings may well end up a debacle like that experienced by GDR/ORN. A capital raising at 1c ps is not unthinkable if all management credibility is gone and what's salvageable is only the elusive gold in the ground.

ML needs to bear in mind that investors have long memories. Yet another boast by ML looks like coming back to bite him: "that CTO has never had any share consolidation". Well, Mark, what's the point of having 1B shares on issue if they're worth less than 10c each? Better to consolidate to reduce the numbers and increase the sp tenfold. Looks more respectable that way.

I believe the Board of Psivida learned a similar lesson when they eventually did a share consolidation at 40:1.