As I write this Gold is at $1,343/oz -up $98.60 in the last 30 days according to Kitco. At $1,343 gold, it is virtually certain that all of Century's ounces in the ground covered by 43-101 reports are economical to mine and that number is certainly going to grow as the Bedard Dyke ounces are added.
So we have about 6 million ounces and in the past 30 days the value of those ounces increased by almost $600 million!! and yet here we sit with a market cap of $165 million.
The value of our company has increased by $600 million in one month because an increase in the price of gold virtually all flows to the bottom line when it is mined. Our 6 million ounces have a cash flow potential of $4.2 billion if we assume cash costs of a much higher than forecast $643/oz.
6,000,000 x (1,343 - 643) = $4,200,000,000
That doesn't seem to matter to those selling their piece of the company at 45 cents, because to them, the company is apparently not worth $165 million.
Even if we never get past 1200 tpd, using production05's numbers, that is 4,890 oz/month or 58,680 oz/yr. Add 24,000 oz from San Juan and we are at 82,680 oz in 2011.
At today's gold price and an average cash cost of $643, 2011 cash flow will be $58 million. So even at a lowball production level of 1,200 tpd for all of 2011, we are trading at 3 times 2011 cash flow. If we meet our forecasts, we are closer to 2 times cash flow. (100,000 oz @ $543cash costs)
Some day when the market realizes that we can maintain production of at least 1200 tpd and can therefore generate the cash flow above, there is going to be a serious re-valuation. Those that are jumping ship to catch a faster moving train will be scrambling back to get onboard. If we can show that we can meet our 2011 year-end production forecast of 2,000 tpd, then the share price will be many multiples of where it is today.
I've always said that the only two things that matter to me are the price of gold and Century meeting its forecast targets for gold production. The price of gold is moving higher and I believe will continue to do so. I can't imagine Century not being able to maintain production of at least 1,200 tpd when Bedard Dyke and the North Wall are in production, but I expect that it should be closer to 2,000 tpd by late 2011.
The share price will eventually be reflective of our assets and cash flow generation. We just need patience.
10 comments:
Carib,
I just hope that all the others I hold will race far enough forward that I can triple my stake in CMM before the first of the year. I've been on board this company now for a measly 1.5 years, and have been fortunate enough to show a modest gain on my investment to date. Being a firm believer that when everyone in a company benefits, the company itself becomes a juggernaut, I have never understood the greedy fools who settle for pennies instead of supporting the facts.
At the same time, years of investing have taught me the truth of the idea that markets, in the short term, are illogical, emotion-driven schools of baitfish. Most of the money I have lost over the years has been a result of impatience or panic. Yet, when I look back over it all, the panic was meaningless, and companies with strong assets always move forward.
This company will, at some point, outshine most of its neighbors. The level of perseverance and dedication I see on the part of our current management to bringing this company online will pay handsome dividends. It sure would be nice to see Bay Street give a little recognition where its due, but whether they do or don't, Century will roll on. Five years down the road, you'd better believe there will be some sour grapes among the short-termers who didn't hold a core position.
GLTA
By the time they get a new 43-101 completed i'm predicting gold prices will be $1500 or north of that. Therefore, 6,000,000 x (1,500 - 643) = $5,142,000,000
Or if costs are more controlled, 6,000,000 x (1,500 - 543) = $5,742,000,000
I hope! :)
We have no clue how much they move from category to category....or how much they might add to our total ounces. I have heard twice now that a new 43-101 is due out in early 2011...
What I meant to say...is that it could be 6mn+ ounces when the new 43-101 comes out with a large movement to the P&P category (hopefully)
The new 43-101 will definitely expose CMM as a extremely attractive takeover target for a major.
There are simply not a lot of 6 mil / 4 g/t plays that are ALSO in very mining friendly political jurisdictions.
There are even FEWER that will also be producing 100+ oz / yr with complete infrastructure for 200k+ oz already there and ready to go.
If I were CEO of Agnico I'd be making a offer NOW to try to steal us.
Luckily, the majors are always too slow and always overpay after the big revaluation run has already occurred. Look at how much GoldCorp paid for Andean (ridiculous) as a bet on UNPROVEN hopeful "to be found" future resources.
SO, that gives us a chance to re-rate first, and then become the target much later for one hell of an epic ride.
For a 3500tpd mill to possess 1200tpd must be easy but wasteful
With Lamaque flats currently seems good for +-1000tpd with the help of our low profile equipment which has already been proven to be a productivity booster, it looks like we can mine that +-200tpd from BD and NW to make up for the 1200tpd with the miners's hands tied.
Do not get me wrong. What I mean is, as things stand, it doesn't seem to be too much of a challenge to get that 1200tpd from Lamaque, BD and NW!
As we may be paying top dollars for the new CEO, I do not think he will want the job if our demand on him is to deliver just 1200tpd from Lamaque! Come what may, I feel no honourable BOD, CEO, VP Operations, Mine Manager, Mine Superindentent and not forgetting our miners, will feel any job satisfaction if +-2000tpd is not delivered.
In conclusion, between 1200tpd and 2000tpd, I am inclined to believe that we will soon see the 2000tpd target achieved.
As such, if 1200tpd may be considered reasonably OK given a cooperative gold price of +-US$1300/oz, then I am certain we patient shareholders will be amply rewarded because I just can't believe that the 2000tpd will not be achieved soon. In fact I am anticipating 1200tpd-1600tpd end Q1/2011 latest, 1600tpd-2000tpd end Q2/2011 latest n +-2000tpd henceforth.
Many great points Carib and I agree with you. Gold should be able to hold these levels. I think we will see a $1500 price tag on gold futures in the not so far future. One thing that is bogging us down a little is the major gold holding ETF's. Investors love them as there is little risk and you don't have to put up a few 100k to buy the contracts. People that are risk averse prefer them as they can basically eliminate firm specific risk while still owning units in a open ended fund. None the less would you rather take no risk and make 15% return or buy a nice little undervalued stock and make upwards of 150%? Seems like a no brainer.....out of all the venture stocks we are watching right now CMM seems to have very little firm specific risk largely due to low public float numbers and since over 40% of this company is owned by very wealthy and respected Russian figures. If you look at the bid's and ask they are very weeks on both sides. People are just waiting but with little ask supprt means when we decide to move it will be in a rather fast way....at-least up until the mid 50's. As we speak gold futures on the NYMEX are trading close to 1400 in 12months. Which is not indicative of that later price but shows demand as there is quite a gap from the current AU price.
Many great points Carib and I agree with you. Gold should be able to hold these levels. I think we will see a $1500 price tag on gold futures in the not so far future. One thing that is bogging us down a little is the major gold holding ETF's. Investors love them as there is little risk and you don't have to put up a few 100k to buy the contracts. People that are risk averse prefer them as they can basically eliminate firm specific risk while still owning units in a open ended fund. None the less would you rather take no risk and make 15% return or buy a nice little undervalued stock and make upwards of 150%? Seems like a no brainer.....out of all the venture stocks we are watching right now CMM seems to have very little firm specific risk largely due to low public float numbers and since over 40% of this company is owned by very wealthy and respected Russian figures. If you look at the bid's and ask they are very weeks on both sides. People are just waiting but with little ask supprt means when we decide to move it will be in a rather fast way....at-least up until the mid 50's. As we speak gold futures on the NYMEX are trading close to 1400 in 12months. Which is not indicative of that later price but shows demand as there is quite a gap from the current AU price.
In April of this year Gold hit 85 cents a share and Gold was at 1150/oz. The company had yet to pour its first oz of gold out of Lamaque.
Today as Gold blasts through 1350 the company is pouring 3-4 thousand oz/mo out of Lamaque, is weeks away from a production increase from Bedard and a quarter or two away from a further increase from the north slope.
Yes its been slow .. Do you think its easy to get new mining equipment these days ? .. Find a Geotechnical consultant to complete the stability study required to mine a new formation ?
The raging masses are "always" late to the party. Fund managers are a conservative bunch for the most part who want to see the money first.. they will start the rampage after the stock breaks above a dollar due to release production and earnings information.
Some time in the near future .. Investors will be rushing in trying to pick this stock up for 1.50 before the price goes to 1.60.. and few will be selling. Around that time those here now will be heading for the exits the debate on this board will be "how do we find the next CMM"
Mike
Mike,
I certainly hope your crystal ball is in good working order!
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