CTO - Citigold Corporation

What people are thinking after the Half Yearly report? (released 16.3.10)

Im still learning and was wondering if someone could help me make sense of this...
Im struggling to figure out why the market reacted the way it did after the release of the report?
I would have thought with things like...

"Revenue increased over 30%
Gross profit up 13%
Operating Activities generating positive cash flow"

"Production up 86% on previous 6 months.
New mine site management team producing results."

"the Company considers it appropriate to commence planning to re-activate the Charters Towers “City” mining area."

"Citigold is planning a material increase in gold production for the 2010 calendar year, with current gold production forecast to be 50,000 ounces for the period. This should see the Company become cash flow positive and profitable for calendar 2010."

would have caused some kind of positive reaction. I am assuming I have missed something... something BIG.
Any help you can give would be greatly appreciated by this newbie.

 

It depends on what was promised before these statements James. If a company says they will be in operation and be producing XX oz au per year and then fail to achieve it then it's not good. CTO have promised and failed. Best thing they could do now is to say they promise nothing.

 

Hi James and welcome to the CTO thread....i think to have a genuine understanding of the last half year report you probably need to go and read the last 6 half yearly reports....after you have read them you will come away with the feeling that CTO management are always upbeat about there production estimates, and consistently fail to deliver.

While the bits from the last half yearly you have quoted sound ok...they really need to be read as part of a whole, like 3 year report..and that report wouldn't read so well.

Anyway from memory my rough figures calculated that they need to produce at least 6000 ounces for this first quarter 2010 to have a realistic chance of not going bust within the next 12 months....assuming no fresh injections of cash and failed rights issues and cap raisings etc etc.

What the last half yearly showed (from memory..its late and ive been drinking) is that CTO at current (record) production levels are burning 2 million a year, so with a million cash should be in big trouble in 10 or 12 months time if there production don't consistently hit new record highs.

CTO always has been a big punt and now its actually showing that in the SP...seriously if your keen to have a bit of a punt on something GNS would be a far better choice IMO.

 

CTO could go either way but IMO they wont actually go bust and into receivership because they have no or little debt and own outright all their fixed and mobile plant. more likely scenerio would be if things went bad they'd mothball the mine like they have done previously.

they have had some SERIOUS cash burn putting in the infrastructure (declines & access drives etc) which has depleted their cash pool seriously ( about $6mil a quarter i think) which takes care of any gold sales they make.
i have held a substantial holding of CTO for the previous 4yrs after after buying in at an av of 15c/sh on the advice of a geologist mate of mine

kicking myself i stayed in for the long term & didnt sell out fo 55c/sh in 2007, IMO CTO management are being ultra conservative at the expense of their shareholders although this possibly may not be as bad as the current share price indicates.

i totally agree that to date managements forward estimate statements of 50,000ou+ have been rediculous and quoting a potential 50mil ounce resource when your JORC is only 10mil is thinly disguised ramping....

HOWEVER... i've decided to hang in for another 12m before making a final decision after considering the following things:
1) they have no debt
2) they own all their own plant
3) they do have a 10mil JORC
4) the main infrastructure is in (decline, vent shaft, access drives etc)
5) chinese investment to speed up 'city' reef developement
6) management have been made to look fools, if they dont pick their act up they face a shareholder revolt, plus managent hold large stock parcels themselves so its in their own interest to increase production... THEY BETTER BLOODY START SOON THOUGH!!!!!

i'm hoping thats enough to get the SP back up to a decent price so i can either lock it in as a long term investment or dump my holding without taking a big loss.... time will tell!

 

@ Bandicoot 76. Thats right. Because they have virtually no bank Debt they can't be forced into receivership.

I think they are making kind of nieve mistakes. Going for broke on a huge capital raising issue and making that issue dependent on a large number of shear holders purchasing up to a certain maximum number of shares when there was a huge risk that the SP would be lower than the issue price during capital raising was simply dumb. However what they are implying is that they are completely confident that they are now certain to be cash flow positive at Warrior. And that as such the SP is likely to rocket. Perhaps they thought it would do so just by making the announcement. If it had capital raising would have been easy.

Management seem to be very consistently making the same mistakes. They are asking shareholders to be patient but consistently jump the gun themselves by overestimating production and underestimating time to achieve it. The smart thing to do would have been to wait until after publishing their fist quarter 2010 production results, given that they will be above 5000 ounces, and then announce a possible joint venture and a capital raising. Or better still give it another six months and let some capital build up in the bank watch the SP rise and then raise capital. That would be even fairer to existing share holders. Actually having written it down like that limiting the number of shares existing share holders can purchase during capital raising makes sense if you are sure the SP will rise from an existing low level. It rewards patient long term holders.

So these guys are not strategic in any sense in their communication with shareholders. That in addition to the Dubai thing at least partly explains the share price. However that does not mean they do not know how to mine.

Given the large share holdings that the directors have. Their technical experience in the mining industry and the removal of a certain amount of complacency they probably had due to the existence of a very wealthy sponsor (Dubai) now gone, some of the management mistakes they have made arguably could be overlooked. IMHOP an awful lot hinges on a good result for this quarter.

 

Well...the March share issue raised only one million so that puts development of the city decline on hold for now. Actually I think it is a good thing. Having just one decent quarter of production is not enough of a record to go to the market for more capital for further expansion. Lets see proved sustainable production growth and profitability from Warrior first. Further the one million raised is from people who paid a 20% premium over the market due to the depth of their faith in the mine and the management. I think it's a fantastic endorsement. Lets use it to keep Warrior going and to improve profitability right there. I just hope that the December 2010 quarter results were not a complete anomaly....
otherwise... :flush:

 

Out today :alcohol: at 0.135 for a 65% loss, a little over 2K gone, my biggest ever loss and im quiet happy about it....what a difference it made to the portfolio numbers.

Funny cos it turned out that at under 10 cents CTO was actually a great punt, that would of been very profitable in just a month or so. bye bye CTO thread and good luck to the holders.

 

I was just having a quick look at the chart for CTO. Now i am only a beginer when it comes to charting and someone such as kenna's will have a much better opinion. But CTO is in an uptrend from it's lows of feb... I have attached a chart, but it is looking inviting even for CTO. DYOR

Cheers

Trav

 

Very sad to learn about your loss on CTO and that too with 65%. I hope you would definitely compensate that few times more in other scrips.
Looking into your previous posts and this one I have a question (disclaimer : this is purely academic and I do not hold CTO) that a punter who invests money for short term.

To get 65% loss while selling at 13.5 cents the purchase price should have been at 22 cents or so. From Commsec it appears in last 12 months the highest price was 22 cents and lowest was 8 cents. That is very unfortunate to see you actually bought at peak rate. I have made such mistakes more often but I thought me the only one

 

I don't want to rub salt into the wounds, but the buy price is actually about 39 - a 65% loss means 13.5 is 35% of the buy price, so the buy price = 13.5/0.35 = 39c

 

Probably a case of a rising tide (gold price) lifting all boats, even CTO!

 

WRONG'UN strangely enough got it pretty well right....i first entered CTO around 2 years ago, average price around 0.385 .. strange that a piece of crap Goldie like CTO actually gets alot of attention on the forum. :dunno:

 

I can tell you that the Lynch brother's do not have a good reputation around Charters Towers. From what I can gather, a good deal of their mining equipment is being leased from *guess who*? Also I have heard that some underground headings that were developed didn't return good production but had to be stopped as they just happened to be heading into ground on which Citigold did not have the lease but which *guess who* had. I guess that is called hedging your bets

As far as the 10 million ounces are concerned, all well and good but the amount of mining development required (especially vertically which is not cheap) brings the price of production right up there.

My investigations continue but I would be careful with this mob.

 

It seems around a third of the posts are yours.... :

In other news CTO has so far been the only loss I've made out of all my investments. I learned a valuable lesson: delve deeper than the headline figures. As Sagmiller says, 10Moz are useless if it's uneconomic getting them to the surface.

 

long time follower, ducked back in at .092 today, token bet really,
will they every produce meaning for gold ? who knows

j c

 

Good luck!

The only real risk is if they have to re-do the JORC I think. Should stay a company until we eventually get the downgrade to 100k @ .0001 g/t.

I do wonder if the old drill results were sprinkled slightly.

 

cheers for the comments kennas!

thought it was low enough for a punt, so no doubt lower to come yet lol.

watching with interest in a lot of specs at present

j c

 

Going back to 31st December 07 .Post 99 on this thread.

Sometimes it is hard to move on when you fall in love with something.

Am also amazed that when investing in a stock, time is not spent reading all the way through a thread and evaluating the pros and cons.

Just

 

Talk about rough...just sold my 40,000 holding for 9 cents each....bought at average of 22...-$5,400. At least I'm out of it though..

 

Who knows why this stock is getting dumped. I have no inside information as to why and my guess is no else does either. At present they are producing 22k ounces a year and are almost able to break even at that production level it seems. This stock was, my guess is, purchased by a significant number of industry insiders and includes a fair bit of family money. After the huge roller coaster emotional ride including a major liquidation by Dubai investors it must be getting pretty tough to stay the course. I'm also finding it difficult. But I will wait and see what the next quarterly report shows. I imagine hardrock mining for gold at depth is not easy. It makes reasonable sense that expensive development work need to be carried out before efficiencies of scale start to tip the balance towards profitability. Since the last quarterly report the price of gold in Aussie dollars has been $1400 plus. Even if there is no increase in production for this quarter income should increase by 15%. In fact they could have a 15% drop in production and still have the same income as the last quarter when they were close to break even and even mentioned that they considered paying a dividend. I may be a mug but I'll wait and see and not base my investment decisions on short term market action. Anyway some one bought about 20 million shares not to long ago and in the process pushed the price up to nearly 15c. Either they knew what they were doing or they are feeling rather sheepish right now. I'll go for the former.