Opportunity In Crisis Investing

Thanks Erelation, appreciate your data.

I think it's a good time to slowly accumulate some gold investments and have started to look at all these possibilities. Below is the latest media announcement by LionGold that is found on SGX website. I think this is critical information and wish they will strike much gold soon. Regards


Signature Metals Q2FY2014 Update:
Drilling program successfully identifies substantial extension to gold deposit

Highlights:
 Exploration drilling by LionGold’s 77% owned subsidiary, Signature Metals
Limited, successfully identified a 200m extension of gold mineralisation at the
Obenemase Deposit in Ghana

 Diamond drilling returned excellent results with multiple thick high-grade gold
mineralised intersections

 Excellent progress was achieved in the first stage of the Scoping Study that is
assessing the potential for underground mining of the Obenemase Deposit
and several other nearby deposits


Project summary
SINGAPORE, 31 October 2013 –
LionGold Corp Ltd (“LionGold” or the “Group”) acquired a 77% interest in ASX-listed Signature Metals Limited (“Signature Metals”) in April 2012 following a successful off-market scrip takeover bid. Signature Metals owns 70% of the Konongo Gold Project in Ghana. Its concessions cover 16 known gold deposits within a 12km long trend in the world-class Ashanti Gold Belt. Under the directive of a new management team,

Signature Metals announced in the March quarter 2013 a change in operational focus in the interest of optimising capital expenditure
and to fast-track an assessment of the potential for underground mining of the multiple high-grade sulphide-related gold deposits at the Konongo Gold project. Site activities are currently focused on an aggressive exploration program that has continued into FY2014.

Hi, Erelation,
You had earlier pointed out some negative issues that could be of concern to Liongold shareholders. It is good to know such issues but we need to look at these issues with an objective and positive mindset. For example how would such issues affect the profitability, share price and survival of the company (if they are valid) and how could we gain from such a situation. It is to be noted that these issues relate to the past BEFORE the stock even reached a high of $1.75. When the stock market or individual stock hits its bottom end, there will always be no lack of fearful reasoning and concerns; and those with negative mindset would always advocate against investing and thus missed out on golden opportunities to make money. Such behaviour is not unusual. Hence, the best opportunity to buy is always at the time when the majority simply has no courage to buy.

You raised the question on why insiders are not buying Liongold shares at the current depressed price, Based on reports that shares belonging to insiders were forced sold by banks, one can only deduce that insiders would have gotten cash strapped and just have no money to buy.

The current “problems” that Liongold has got itself into, have adversely affected its future prospects to a certain extent. Group CEO, Nicholas Ng has already stated that Liongold is now at a “significant disadvantage relative to other resource and mining companies given the abundance of opportunities to acquire undervalued producing gold mining assets which are complementary to our existing operations.”

The link below provides investors with some interesting facts on Liongold –
liongoldcorp.listedcompany.com/misc/Lion...heet_October2013.pdf [Investors Factsheet Oct 2013]
Fortunately, Liongold’s resources have already grown to a grand total of 7 million ounces of gold and its Australian Castlemaine Goldfields is in production phase with current year’s output reaching about 50,000 ounces. The management had intention to raise the Group’s gold resources to 10 million ounces, reserves to 2 million ounces, and production to 200,000 ounces per annum by the end of 2014, through acquisitions and organic growth; and a fund raising exercise was initiated in August 2013 to raise a total of slightly over S$200 million from a placement issue of 180 million shares and 135 million warrants. The fund raising was aborted following the recent collapse of its stock price.

To get a feel of the company’s current asset value, one must consider the likely outlook for gold prices over the next few years. Using Castlemaine as an illustration, the production cost here is around US$1,000 per ounce of gold. If the company sold all its annual gold output [50,000 oz] at an average price of US$1,300 [Profit of US$300}, its profit would be – 50,000 x $300 = US$15 million. (or contributing 1.5 cents to Liongold EPS). Every $100 increase in the gold price would result in an additional profit of $5 million. If gold price was to rise to its record high of US$1,900, its ADDITIONAL profit would be US$30 million (or additional 3 cts EPS). In the event that Liongold Group can achieve an output of 150,000 oz of gold a year, its earnings may well reach US$135 million or EPS of 14 cts (before dilution) should the price of gold move to US$1,900 level and Liongold’s production cost remains at US$1,000..

It is to be noted that Liongold made acquisitions of gold miners in 2012 when gold price was in the US$1,500-$1,600 range. Market Vectors Gold Miners ETF (GDX) was then trading at US$40 - US$50 range; the price has since slumped to the current level of around US$24. Hence, Liongold acquisition in 2012 would have also suffered a significant contraction in investment value.

As at 4/10/2013, Liongold has –
· Issued Shares – 941,186,540
· Warrants – 250,893,523 convertible at 1:1 to mother shares @ $1.1717
· Convertible bond: $20 million @ 9% due 2015

Conclusion:
I hold the view that it is only a question of time before gold would rise to test its last record high of around US$1,900. Having the benefit of hindsight – seeing gold tumbling to its current price towards production cost level – I still prefer to invest in gold miners ETF as the downside risk is lower and the margin of safety is better. In the event that gold retest its record high, there is good likelihood that the ETF would also retest its record high. Liongold has higher risks but also higher gains. It is for each risk takers to decide.

Taken a small position in Liongold. At current level, downside risk should not be too drastic. If we got it right, it should be back to ard 50 cents level - at least.

Hi Observer2,

Thank you for your analysis.

I do agree that holding GDX ETF can be a good approach to investing in gold and mining company. My only concerns will be the exposure in USD as it is priced in USD as well as having connection to the western financial network.

Another interesting thing about Lioncorp is it's asset in Australia.

1. 13.2% of Unity Mining Limited already producing 50,000 ounces of gold per year, and Dargues is targeting output of the same quantum annualised by 2015.

HENTY:
- Quarterly production of 11,607 oz gold at cash cost of $1065/oz including royalties, with all-in sustaining cost (AISC) of $1335/oz, (13,212 oz gold at AISC of $1175/oz in June 2013 quarter).

- Exploration drilling has extended Darwin South mineralisation; results include 8.35 m at 19.4 g/t and 6.2 m at 14.8 g/t
- Drilling also continued to identify high grade zones within the envelope of the Read Zone

DARGUES:
- Access road complete; mining contractor mobilised to
commence portal development
- Bendigo plant to be re-tasked to support Dargues project; crush & grind equipment to be relocated to NSW, gold concentrate to be processed at Bendigo
- CBA mandated to provide $45M gold loan funding package
- $19.7M cash in bank, with an additional $11.2M held in bonds


2. 18% stake in Citigold Corp
- Citigold's gold deposit is currently the largest and highest grade in Australia.
- 11 million ounces of gold (342 tonnes) Inferred Mineral Resource* - JORC compliant.
- Mineralisation is 25 million tonnes at 14 grams of gold per tonne.
- September 2013 quarterly has seen FIRB and Citigold shareholder approval for $100 million funding deal. This funding should see Citigold grow into a major gold producer.
- Initial target of 50,000 ounces per annum allows the company to be self sufficient with adequate cash generation and target 330,000 ounces per annum full production rate
- Work on the refurnishment in the Central area commenced and it is anticpated this work will run until the end of Calendar 2013.
- Production increased to 1,761 ounces for the quarter wit cash costs lower at $569 per ounce.


Maybe the management have overpaid or they may have some doubt with regards to those deal but it does seems that the above two investment are pretty good assets.

Current price will be a steal if we are looking at the longer horizon with potential to go back to above $1.00 if the management at Unity and citigold can execute and implement their project well.

This is going to further reduce the overall cost of production at Australian Castlemaine Goldfields as its Ballarat gold plant has a capacity of 600,000 tpa.


In September 2013, LionGold signed an ore processing agreement with Australian-listed A1 Consolidated Gold. Up to 450,000 tonnes of ore (up to 150,000 tonnes per year) from the A1 Gold Mine would be processed at the nearby Ballarat gold plant over a three year period. The agreement could nearly double the current throughput at the Ballarat gold plant, which had been processing between 150,000 to 200,000 tonnes of ore annually. The arrangement may be extended upon agreement for a further three years through to December 2019. In conjunction with the processing agreement, LionGold will subscribe to new A1 shares at A$0.116 in two tranches, which together represent about 19.9% of A1’s enlarged share capital.

This was an extract posted on SGX announcement by SPDR Gold Shares today. Thought it was a good piece of information for those interested in investing in Gold....

World Gold Council’s Feldman: Case To Own Gold Remains Strong Amid Long-Term Inflation Risks.

WGC’s managing director of investment worldwide discusses the outlook for the yellow metal. Kevin Feldman is managing director of investment worldwide for the World Gold Council. Prior to the WGC, he held positions at BlackRock, where he was head of iShares Marketing, as well as Barclays Global Investors, Vanguard and Charles Schwab & Co. His expertise includes global ETF and U.S. mutual funds markets, in addition to marketing, product strategy and general management experience for the World Gold Council. HAI Managing Editor Sumit Roy recently caught up with Feldman to discuss the gold market.
HardAssetsInvestor: Are institutional investors still interested in gold? I ask because assets in ETFs like GLD are still declining to new multiyear lows, even this week.

Kevin Feldman: I think there were two very large macro risks that a lot of institutional investors perceived coming out of the [2008/2009] financial crisis. The first was that quantitative easing would lead to inflationary effects. The second one came in 2011, with all the risks related to concerns about the eurozone breakup.

Additionally, there had already been a fairly strong gold market leading into 2008/2009, which was much more anchored to fundamentals—things that we’ve been studying for years, such as the rising middle class across Asia and the huge demand for gold there. That, combined with the two macro risks that people were trying to hedge against, really had a lot of capital flowing into gold in the period from 2009 to 2012.

What we saw this year was a more risk-on-oriented footing. Clearly, there has not been a lot of inflation in developed markets, and the euro crisis is on the backburner. What we’ve seen in terms of the flows this year from GLD and other ETFs is that most of the outflow activity has been very concentrated in that institutional space. And a lot of that more speculative money has now left.
But that happened during the first six months of the year. If you look at the flow patterns over the last few months, they’ve been moving up and down, but the very large outflows have abated. It’s really hard to time the market. Our view has always been, for most investors, it’s wise to just put it in their portfolio and leave it in for the duration.