Thursday, April 30, 2009

Quick thought on upcoming Y/E financials

Of course, Century is all about the financing right now, regardless of what our Y/E 2008 financials look like. Nevertheless, I thought I would post a quick summary, as we are going into the reporting period.

We posted a net income of $.6M for Q3'08. The net income was $1.3M for the first 9 months of 2008. Of note, there was a $2.6M, one time, transaction gain in either Q1 or Q2 of 2008. Nonetheless, it means we have a $1.3M cushion to work with and still break-even for the entire 2008 fiscal year. It's possible, but it's going to be a challenge. Some of the loss incurred in closing off the hedged position (in 2008) will be booked in Q4 (some was previously booked in Q3 also). In addition, the gold price was relatively weak in Q4 (compared to other recent quarters). With San Juan having to support the entire company in Q4 (and for most of 2008) the leftover cash was insufficient to optimally operate San Juan. As such, both cash cost per ounce and production output likely suffered in Q4.

It is Y/E so it is possible to see Y/E adjustments also (i.e. adjustments to accounting accruals to better match expectations, which is something every company does before closing off Y/E). We also have new auditors this year. New auditors could sometimes bring new perspectives and maybe suggest new ideas. Century has also recently added a new Finance/Accounting expert (VP). He could have reommendations also.

Anyway, as mentioned, we have $1.3M to spare and still remain in a position to break-even in 2008. Even if we end up negative by a few million dollars for 2008, it doesn't really matter - we're all about closing off the financings right now. It would just be nice to show a net profit for 2008, especially with how challenging it was for us (and most companies) during 2008.

The Q1'09 financials will likely follow in the next 2 weeks to a month.

5 comments:

production05 said...

By the way, I read about all of the suggestions people have made on Stockhouse with regards to a possible merger partner for Century. You never know, but I personally don't believe it is any of those companies. I don't think the potential merger partner is any company like that. Century is not in a panic position. In my view, Century is not looking at this opportunity out of desperation. Rather, IMO, an opportunity was presented to Century which perhaps has the potential to expedite the company's growth strategy, while making Century a more solid company during this credit crisis period, and more attractive to institutional investors.

Again, Century is not in panic mode (we can take it or leave it, with regards to merger offers), thus it makes no sense for us to even consider any company with a market cap that is greater than ours. As such, the types of companies that make merger sense for us are micro market cap companies - ones that are severely undervalued relative to its cash position. Those types of companies will allow us to maintain our high upside potential, if Peggy negotiates the deal properly.

There are a number of undervalued sector companies with perhaps $10 - $20M US in cash. We are not interested in any of these companies (based on the NR). There are not a lot of severely undervalued sector companies that match well with the description on the NR, especially with easy access to $50 - $65M US (trading dramatically below cash position). However, there are at least 2 or 3.

If people are getting out of their share positions because they think the merger will be with the likes of a NovaGold, and thus not be accretive to Century shareholders, I would recommend retesting their logic to ensure they are comfortable. I guess anything is possible, but I think it is highly unlikely. Peggy and Ross now own about 5-10% of Century. This merger option is not a necessity for Century. Peggy and Ross are not going to risk the upside of their own personal shares.

Also, my guess is that some people are selling because they think that Century is not committed to the $65M deal. I didn't get that impression from the NR though. Of course, anything is possible until the deal is fully closed off, even though the lenders have already conditionally committed. I agree though, the NR was confusing and potentially contradictory. They did say that they are looking for a combination of the $65M deal plus 1 of the 2 other deals. This suggests that they are committed to finalizing the $65M deal. Where it gets contradictory is when they talk about the depth of available capital from the group of financiers:

"comprehensive agreement with a group of financiers for debt and equity financing for the Lamaque project, in addition to assistance with future capital requirements of the Company."

It sounds like this group has the potential to provide all of the $120 - 130M that Century is seeking. As such, I can see how one could get the impression that the $65M deal would get bumped for this.

Here is my guess as to what happened:

I think Century was just quoting the original offer that was presented to them. This group approached them to originally fund Lamaque, similar to all the other groups. I think Century is just giving us an appreciation of how much cash is available from this group.

Century went on to clarify the situation by stating this:

"Century also clarified that the three alternatives are not exclusive of each other, and any combination of the $65 million debt deal and one of the two additional deals could be completed to form a well-funded mining house capable of funding current projects and pursuing other potential acquisitions."

I think Century meant well, but did a poor job with the NR. If they haven't done so already, Century should place a direct call to both the international investors and to Union Securities to ensure everyone is on the same page. Century should also further clarify to the market of their commitment to closing off the $65M deal. They don't have to issue a separate NR, but perhaps they should include a note in the next NR they issue.

By the way, I also don't think that Century was suggesting that their intention is to replace the $65M deal with the merger deal (although they might have been demonstrating that they have the flexibility). Again, I think Century was quoting the original offer made to them by the potential merger partner. Additionally, by associating the deal with Lamaque, it allows us to figure out the type of cash that is available via the merger route (without actually stating an amount). We know it has to be in the ballpark of $50 - 65M US. I think Century was attempting to tell us that this company is worthy, and deserve a closer look.

Generally, I think this NR backfired. However, I think it was meant to provide valuable, and extremely positive information, to shareholders and to the market. It tells us that Century has very valuable assets and that Century is in high demand during these difficult times (while 99.9% of other junior companies would kill to be in our position right now).

Anonymous said...

Yes, the NR was confusing...been in CMM since 2004 and nothing seems to be simple for these guys...all I want from CMM now is for some clarity...I have over 100 plus stocks im my prtfolio and CMM seems to be the girlfriend I always take back after a break up...yes, I said it I am love with a heart breaker!!!!! This is the only stock in my portfolio with this kind of treadment that I haven't got rid off...why? because the returns are huge!!! To name a few, I bought NG (.40), GSL (.85) an NGX (.67) when the market tanked a few months ago but and the returns on those stock would pale in comparision to what CMM offered....The market wants to revalue CMM but is waiting for Mgmt to prove it can close the deal and deliver a workable plan for the mine....CMM has a torrid history and I think this is why the market is waiting for more clarity. This provide an opportunity for investors like myself, those who like to take a bit more risk, to get in at the ground floor before the big boys arrive.

Just my humble 2 cents.

P.S. Any questimate of when this deal will close off??...I am thinking around when 1st Qtr is released

Maxdude

Anonymous said...

Recent NR adds NOTHING to 24 MARCH NR --- CMM is buying time / investors will rearrange their chips in attempt to bolster/protect their positions // HOW MANY CMM SHARES NOW OUTSTANDING after recent DILUTIONS ??????

Anonymous said...

production, the company is from Eurupe, it has a share price approx. same as CMM, or lower, and cash to burn from sale of an asset. it is like dangling a red flag in front of our PK raging bull. they approached CMM and visited. PK had to contain the share price while they talk, or risk losing them. that's my theory. :)

rhump said...

It appears that CMM is going to be a late filer on the YE financials. What gives? I was hoping for a change, a significant change in the MO for this company, but I am loosing faith AGAIN.