CGX - Central Asia Gold

[jman2007]

Just sent these questions off to Michael Carrick:

1.) The recent Masbate Mineral Resource upgrade, which resulted in a substantial increase in the Indicated and Inferred ounces appears to be a re-modelling of existing drill hole data, using a substantially lower cut-off grade of 0.36 g/t. Can you please explain the rationale for using this new parameter, and the objective of the re-modelling?

2.) In the first 2 years of operation, I understand the ROM head grade will be in excess of 2g/t. Is it correct to suppose that during years 2-5, and throughout the remainder of the LOM, that head grade in the mill will fall below 2g/t, and will require a corresponding increase in daily milling rate to compensate for this? Is it also possible to give me an indication of expected ROM head grade during years 2-5?

3.) In regard to the high-grade vein system that was discovered adjacent to the planned Libra North open pit (incl 42m @ 10.5 g/t), what plans does CGA have to explore this area further with a focused RC drilling campaign?

4.) And finally, does the company intend to incorporate the Panique Resource into the global Resource figure for Masbate, which as I understand it is currently not part of?

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Got a very quick reply from Michael Carrick tonight!!

(Reads as follows)

"Thank you for your email.

I have only just got back to Manila from site and am pleased to say things are progressing really well.

My responses to your specific points are as follows:

1. Correct. The original resource estimate was done at $450 gold- the updated resource was done at $750 gold, which gave rise to the lower cut-off of 0.36g/t. Objective-more relevant and it will form the basis for the new reserve compuitation.

2. Yes - first two years approx. 2g/t. Initial throughput (first 2 yrs) 4Mtpa. Thereafter 5Mt pa +. New reserve is presently being calculated with a scoping study looking at a the feasibility of an upgrade to 7Mtpa.

3. Follow up drilling currently being done.

4. Yes we will - good results which we would expect will add to reserves.

If you would like to drill down deaper on any point, please shout and I will have the relevant technical person address it comprehensively for you."

Regards
Mike

[jman2007]

Quote: Originally Posted by jman2007 1. Correct. The original resource estimate was done at $450 gold- the updated resource was done at $750 gold, which gave rise to the lower cut-off of 0.36g/t. Objective-more relevant and it will form the basis for the new reserve compuitation.

[jman2007]

Horrible time to be trying to make positive announcements given the POG,

but anyway, probable Reserves increase by 54% to 3.03Moz @1.0 g/t, reasonably large dilution in grade though. If I rememeber rightly.. old Reserve figure was something like 1.67g/t?? Probably arose from using updated financial parameters such as a $US 750/oz
They still haven't incorporated the ounces from Main Vein/Boston area or Panique drilling into the Reserves yet. Hopefully should happen by end of the year. Should have about 7.8M oz in the book for Masbate now. Remember they use 0.4g/t as lower cut-off grade.

jman

[kennas]

Quote: Originally Posted by jman2007 Horrible time to be trying to make positive announcements given the POG,

[jman2007]

CGA have been making good progress with development of the Masbate project, as of now construction should be approx. 90% complete.

As ususal, CGA have gone practically unnoticed and the stock is now testing $2.00 on its characteristic low-volume basis. This would have been a great pick-up at 90c, I used to own this stock but clearly missed the signals in early December.

Haywood Securities will be loving this stock too, they made a lazy $1.25M through acting as the agent during the most recent placement to sophisticated investors, 20M shares issued at $1.25!

Another outstanding breakout gone begging!...

jman

[jman2007]

Poor old CGA Mining never really quite took off on ASF did it? ..

Nevermind, it's starting to shine through (again) as a great potential defensive gold stock - if the market continues to fall over (again). Thinly traded - actually rarely traded, since the vast majority is held by the top 20 (93% ??). Some definite similarites between CGA Mining and Perseus Mining, as both Ayanfuri and Masbate are large low-grade, bulk-mining operations. Bear in mind it has only taken CGA 2 years from acquisition to get Masbate up an running. Not bad at all.

Masbate looks to be becoming substansially de-risked in terms of construction and finance, first gold pour was a couple of months ago actually. Finance-wise, still probably A$20 million in the bank, courtesy of -the Canadian instos, who look to be heavily backing this. The mill is massive, current capacity is 4.5mtpa, but there is capacity to expand this to 6.5mpta as they have a spare ball mill in reserve, fella's love ya work . Hopefully Masbate can successfully ramp-up to its nameplate capacity of 200,000oz pa without any major difficulties, followed by a further ramp-up to 300,000oz pa by 2012.

More info here:

http://www.minesite.com/nc/minews/si...ntia/1042.html

Current Resource base is 7.8Moz @ 0.9g/t, with LOM currently at 10 years. The second link is a really interesting audio-visual presentation from the Syney Mining Club. Take note of the closing remarks, CGA are on the hunt for another similar size project in the Australasia region from July 1st 2009... jeez, are there any this big left in our back yard?! Lol!

http://www.sydneyminingclub.org/pres...GA/player.html

If this starts trading in the $1.20-1.40 range I have to say I would be tempted to pick up few, various broker reports on the CGA Mining website value the stock from between A$2.00-2.20 p/s, but in this climate these valuations may not be too relevant. No substansial re-rating has occurred on commencement of production, so perhaps the window remains open?

[kennas]

Gee that's low grade jmann, I didn't realise that when I had looked at it before. I wouldn't have expected anything under 1 g/t would make it to mining. I suppose when you've got a 4-6mtpa mill you can make it work. No idea what they would go for in Australasia. They can buy PRU or AZM off me for $2.50 and 40c respectively if they like.

[jman2007]

Quote: Originally Posted by kennas Gee that's low grade jman, I didn't realise that when I had looked at it before. I wouldn't have expected anything under 1 g/t would make it to mining. I suppose when you've got a 4-6mtpa mill you can make it work. No idea what they would go for in Australasia. They can buy PRU or AZM off me for $2.50 and 40c respectively if they like.

[jman2007]

Actually while we're talking about CGA, another broker report appeared on the website which can be accessed here:

http://www.cgamining.com/releases/broker_reports.php

Generally it gives a very positive picture, and has labelled CGA as an outperform stock, with a target of AUD$2.30.

Actually how's this for a conspiracy theory: In the May presentation CGA mentioned that they were "...currently in discussions with another gold project that is ready for construction", so they're clearly in acquisition mode.

Remember that Oceana Gold have moth-balled their Filipino project, Didipio, until they can find another partner to help fund and develop the project through to completion. This has current Total Reserves of approx. 1.65Moz at 1.5g/t. Also, it also hosts significant copper credits, and is actually one of the highest grade porphyry copper-gold projects in the world.

Now CGA don't strike me as a group of professionals content to sit on Masbate for the next 3-4 years. They're movers and shakers, imo they'll retain it as long as it takes to reach steady-state production before selling it, retiring the BNP Paribas debt facility, returning a portion to shareholders as a special divvy and retaining the rest as a deposit towards their next development project.

They've been in the Philippines for 2 years now, they understand the Mining and Environmental legislative and political system - and there would have to be a clear synergy between a Oceana Gold-CGA Mining relationship. So why the hell not then?

I say watch this space closely.

[kennas]

Quote: Originally Posted by jman2007 Ok, so the Mineral Resource statement probably wasn't the best example to use to get my point across! I admit it is a little confusing to follow the logic, and understand how this is actually economic, but I'll give it a shot. Basically, the original 10.5 year mine life estimate CGA were originally using came from an April 2006 Resource and Reserve report on Masbate. This report outlined an initial Probable Reserve of approx 2.3Moz at 1.5g/t using a cutoff grade of 0.7g/t. The gold price used was $US450/oz. In October 2008, an updated Probable Reserve of 3.03Moz at 1.0g/t was released to the market, applying a more realistic gold price of US$750/oz and a lower economic cutoff of 0.4g/t. Remember however, during its initial 2 years of operation, the mill will be producing gold at an average headgrade of 2.0g/t. So basically they'll be high-grading it generate cashflow asap. Cash costs are predicted to be approx US$450/oz throughout the LOM. Ok, so basically what has happened is that with the new Oct08 parameters applied, particularly the updated gold price, a greater % of material now qualifies as ore - or the "money making part" of the project. The tonnes have been bulked up, but with that comes a corresponding dilution in the overall grade, which is reflected in the expanded Ore Reserve. Remember there is still a high-grade "core", or component to Masbate, of 2.3Moz at 1.5g/t, which if the worst came to the worst and the POG went off a cliff, could still be mined profitably (unless the POG really crashed!!). Another factor which allowed such a low economic cuttoff of 0.4g/t to be applied, is probably the stripping ratio, which reduced from 3.43:1 to 1.03:1 as part of the Oct08 report. Cheers!

[Miner]

Quote: Originally Posted by jman2007 Actually while we're talking about CGA, another broker report appeared on the website which can be accessed here: http://www.cgamining.com/releases/broker_reports.php Generally it gives a very positive picture, and has labelled CGA as an outperform stock, with a target of AUD$2.30. Actually how's this for a conspiracy theory: In the May presentation CGA mentioned that they were "...currently in discussions with another gold project that is ready for construction", so they're clearly in acquisition mode. Remember that Oceana Gold have moth-balled their Filipino project, Didipio, until they can find another partner to help fund and develop the project through to completion. This has current Total Reserves of approx. 1.65Moz at 1.5g/t. Also, it also hosts significant copper credits, and is actually one of the highest grade porphyry copper-gold projects in the world. Now CGA don't strike me as a group of professionals content to sit on Masbate for the next 3-4 years. They're movers and shakers, imo they'll retain it as long as it takes to reach steady-state production before selling it, retiring the BNP Paribas debt facility, returning a portion to shareholders as a special divvy and retaining the rest as a deposit towards their next development project. They've been in the Philippines for 2 years now, they understand the Mining and Environmental legislative and political system - and there would have to be a clear synergy between a Oceana Gold-CGA Mining relationship. So why the hell not then? I say watch this space closely.

[jman2007]

Quote: Originally Posted by Miner Dear Jman Looks like market behaved reading your posting and CGX shot up. Good work and yes this space will be under watch

[jman2007]

An article about Didipio in the Philippines, may have some relevance here.

"Strong Interest in Joint Venture for Didipio, says Oceana"

New Zealand Herald Article, 22nd June 2009

http://www.nzherald.co.nz/grant-brad...ectid=10579878

The Didipio project has been put on hold while the company re-examines the scope of the capital required to move it out of "care and maintenance".

Vice-president of corporate and investor relations Darren Klinck said several potential joint-venture partners had expressed "very strong" interest in becoming involved.

The company, which has three mines operating successfully in the South Island, said when it parked operations at Didipio it was doing so to protect and preserve assets. It had by late last year spent about US$70 million ($109 million) developing the mine but was caught by skyrocketing costs and then by paralysed credit markets.

"We expect the capital [cost] will be significantly less than it was a year ago but those are internal studies that are going on right now. There's always bumps in the road when it comes to mining companies."

Investors have been concerned about the company which is listed on the New Zealand, Australian and Toronto stock exchanges and has seen its share price take a rollercoaster ride during the past year.

Klinck said it had convertible bonds worth A$155 million that matured in 2012 and 2013 and around $16 million in project debt. "It's definitely an issue that's come up in the last nine months but it's not debt that needs to be refinanced right away."

Production from its Macraes open-cast mine and nearby Frasers underground mine, along with its underground project in Reefton put it in the top five gold producers in Australasia.

The company expected to produce between 280,000 and 300,000 ounces of gold this year, up from 183,000 ounces in 2007. It would also put more resources into the Macraes site, about 100km north of Dunedin and Reefton.

ABN Amro Craigs investor adviser Peter McIntyre said Oceana's New Zealand operations were performing strongly but it faced a challenge in bringing down debt and finding a joint venture partner at Didipio.

"The concerns we have are all around Didipio - it's been money down a big hole to this stage. There's never any real doubt about the New Zealand operation - they're extremely profitable for them."

[kennas]

It's been a while since CGX stated they were after an acquisition. Wonder what's on the cooker? Looks like nada to me.

This came on the radar again for me while reviewing the Gold Stock Comparison chart which gives them an EV to Oz Au price of $48 which is less than some explorers and half most other producers. Looks very undervalued by rule of thumb, even though it's made tremendous gains.

Exploration drilling at Libra looks pretty interesting. High grade stuff. Wonder when a resource comes out for that?

Why did they just do a $25m placement? This is pretty vague:

Quote: The net proceeds, in combination with existing cash reserves, will be used to fund further enhancements in the plant and exploration activities at the Masbate Gold Project and general corporate purposes.

[kennas]

Still hovering under that resistance area even after gold has gone sky rocket and they see to be on track to reach 200k pa as planned. With all seamingly going to plan I wonder why they're still on $46 an ounce when some junior explorers are on $60 plus and way way behind any sort of production.

On Proactive Investors yesterday:

Quote: CGA is listed on both the Toronto Stock Exchange and Australian Securities Exchange. The Masbate Gold Project is the largest gold project in the Philippines and was successfully developed with first gold poured on 12 May 2009. The project, which is currently ramping up to full production, has a total indicated resource base of 4.55M ounces, total inferred resource base of 3.22M ounces with a probable reserve of 3.03M ounces of gold. The project is currently forecast to produce over 200,000 ounces per annum. The 4Mtpa plant was constructed by Leighton Contractors Asia Limited (“Leighton”) without one lost time injury. The mining contract for the Masbate Gold Project has been awarded to Leighton, the largest mining contractor in the world. CGA is completing a scoping study for the expansion of the plant throughput at Masbate. CGA has a disciplined acquisition program focused on acquiring new gold projects with a substantial initial resource with the capacity to grow materially and where the development and operational experience of CGA can be applied to enhance shareholder value. Dual-listed gold producer CGA Mining (ASX: CGX, TSX: CGA) has achieved a record daily throughput at the Masbate Gold Project in the Philippines. A record daily throughput was achieved for 17 November 2009 with 17,123t’s milled (106 microns). This equates to a feed rate of 713dt/h. Design for the plant was 4mtpa (500t/h or 12,000t per day) at a grind size of 150 microns. CGA produced 29,751 oz of gold and 15,898 oz of silver from Masbate during the September quarter from an ore blend consisting largely of softer oxide and transitional ore types. The mine is currently ramping up to full production. Steady state operations are forecast to produce over 200,000 ounces per annum. The total indicated resource base at Masbate is 4.55M ounces, with a total inferred resource base of 3.22M ounces and a probable reserve of 3.03M ounces of gold.