Opportunity In Crisis Investing

Hi Observer2,

I still like CNMC despite it's a small mining company. More good news coming out...its expansion of production facilities appeared to be very well-timed. US debt problem expected to surface again next year.

21 Oct 2013 - Press Release

CNMC Produced A Record 1,526.09 Ounces of Gold Doré Bars1
From A Single Gold Pour

The board of directors (the “Board”) of CNMC Goldmine Holdings Limited (“CNMC” or the “Company”) refers to the Announcement and is delighted to report that the Company’s Sokor Gold Project has produced 1,526.09 ounces of gold doré bars in a single gold pour, which is the highest production output on record for a single gold pour since the start of the Company’s gold production in July 2010. As compared to the previous record of 1,311.33 ounces of gold doré bars produced from a single gold pour on 30 September 2013, this reflects an increase of
approximately 16.3%.

In line with the Company’s strategy of ramping up gold production, the construction of a third leach yard is underway. In addition, installation of a second gold de-absorption processing plant are in progress (please
see attached photograph).

These new facilities are expected to be completed by the fourth quarter of 2013.

Observer2 - The global financial system is designed for smart people with the know how and network , hence the global rich/poor gap will continue to widen. I believe many professionals make big money from trading commodities, including gold, but retail investors are only part time amateurs.

Copper, iron etc have wide scale industrial usage, but how do we know what level is the fair value of a precious metal like gold , or even it’s production costs as they vary from mine to mine ? ( ie the production costs of crude oil depends on whether they are drilled from land or deep water ) Anyway, here’s why Buffett hates gold.

www.nasdaq.com/article/why-warren-buffett-hates-gold-cm267928

Hi, Erelation,
I think it is better to focus on the big picture over the next few months now that US tapering has been delayed. According to the gold chart, gold was heading towards forming a double bottom or towards a new low. The delay in the tapering has interrupted this downtrend.

CNMC must increase its gold output substantially if it is to benefit from any big run up of gold price. Have you been able to get any data on its current production cost as well as its probable or proven reserves?

Hi, Relaxing – The production cost of a commodity, be it metal, palm oil, etc., is just a good reference point that one could use to gauge the extent of the possible downside risk. For example, if the production cost of a commodity ranges from $500 to $1,300, we know that once the market price of the commodity drops below $1,300, the high-end producers would be producing at a loss. The lower the price dips, the greater the number of producers would be affected. Those producers with poor cash flow would risk folding up its operation if the price remains depressed for too long a period (which could also lead to a shortage of supply of the commodity). The seriousness of the situation could easily be seen from the number of producers retrenching their staff and appealing to their respective governments for help/intervention before the eventual closure of their business. If the commodity price were to ever drop to $500, virtually all producers would be in serious trouble and no government is likely to just sit idly by and do nothing to save the industry and their economy.

Question: When is the best time to enter the market? The obvious answer is – AT THE MARKET BOTTOM. However, CONVENTIONAL THINKING tells us that – NO ONE KNOWS WHERE IS THE MARKET BOTTOM. So, it is - “Que sera sera, whatever will be, will be“.

On this issue, I would adopt the UNCONVENTIONAL THINKING approach, which is – EVERYONE KNOWS THE MARKET BOTTOM AFTER HAVING MISSED IT. Hence, it makes sense for us to prepare for the market bottom. The time of entry would best depend on INDIVIDUAL COMFORT LEVEL taking into account each individual’s resources, risk tolerance, knowledge of the industry and business cycle. In any crisis, we should bear in mind the market truth that – “MARKET REACHES ITS LOWEST LEVEL WHEN BAD SENTIMENTS, NEWS & FEAR REACH ITS HIGHEST LEVEL.” This knowledge should help us build up our confidence and courage to buy when others are fearful; and also to anticipate possible governmental intervention in the market leading to turnaround situation.

Warren Buffet may be one of the most successful investors. It is inappropriate for us to waste our limited time and resources trying to emulate his way of life and be trapped in a dogma – which is living with the results of other people’s thinking. He dislikes gold and has his reasons. It is foolish of others to blindly follow him and adopt his thinking and biasness. There is a saying – “ God chose the foolish things of the world to shame the wise; God chose the weak things of the world to shame the strong.”
Hence, wise and successful investors can also make foolish mistakes, especially if they become arrogant.

Hi Observer2,

I am not too sure whether the Gold will be heading for a double bottom or lower low as there has been several changes over the past weeks.

China's credit rating agency has downgraded the USD which resulted in the big jump in gold price after it hit the US$1251 level with strong buying volume.

Technically, the trend has turned bullish and the 1251 may well be the higher low.

It has been reported that central banks has been waiting patiently to accumulate gold at 1300 level and any drop in price will be well supported. This also coincide with the peak gold season in November for India market. There is a shortage of physical gold as compare to market demand and manipulation with paper gold price by the bullion bank have run its course soon.

For CNMC

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From its presentation slide, it does mention that they have JORC Compliance total resource of approximately 503,000 oz Gold, 1,259,000 Silver, 9,200 tons leads & 8,900 tons Zinc. This exclude any new discovery in the 10km concession area.

I can't find the cost of production. The industry average is about US$1200-US$1300 per oz of gold. Given that CNMC gold resources are open pit. It is supposed to have lower cost of production as compare to underground gold resource.

Technical wise, China Gold send a team to help manage, plan, design, construct, and oversee CNMC's gold production expansion programme. The completed construction of the second leach yard and that a third leach yard is underway will drive down the cost of production.

During the IPO, Chris Lim, CNMC's CEO, said the firm's cost of production is estimated at $450-$550 per ounce. To be safe, i will estimate it to be at US$1000 per oz, that give us a margin of US$300 per oz if gold price remain above US$1300.

Based on the US$300 margin for 503,000 oz of gold. The profit alone is US$150 million. This exclude the other metals like silver, lead and zinc. Of course this figure may change significantly if the gold price proven to be bottomed and head back to US$1900 level.

This compare to current market capitalization of S$95.8 million based on $0.235 share price.


Smart investor are in with exercise price of S$0.44

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The convertible loan agreement that was signed on 15 July 2013 appeared to have fund from smart investors and insiders. That convertible loan has an exercise price of S$0.44.

Mr Li Hung is the chairman and a shareholder of Eng Kong Holdings Pte Ltd and has over 30 years of experience in the container depot industry.

Fareast Securities Limited is a private investment holding company, incorporated in the British Virgin Islands and its sole shareholder is Ms Low Puay Joo.

Mr Aw Soon Beng is an independent director of Biosensors International Group Ltd, a company listed on
the Mainboard of SGX-ST.

Mr Ivan Chua Kim Boon is the managing director of fresh division of SunMoon Food Company Limited,a company listed on the Mainboard of SGX-ST. He is the nephew-in-law of Mr Choo Chee Kong, a Director of the Company.

Mr Lim Liang Yew Dennis is an oil trader in a multinational oil company and is the brother-in law of Mr
Choo Chee Kong, a Director of the Company.

CM Strategic Holdings Limited is an investment holding company and its sole shareholder is Mr Lee Chong Min, the managing partner of CMIA Capital Partners Pte. Ltd..

Two of the investors are related to Mr Choo Chee Kong, director of the company.

Hi Observer2,

Would like to hear from you about your opinion on the LionGold share as well. It is drop to 0.23 cents today well below the last placement price of more than $1.00

CNMC Goldmine Holdings
Oct 29 close: S$0.235
Voyage Research, Oct 29

CNMC Goldmine Holdings looks set to produce a very strong set of Q3 results, following announcements of record gold dore production of 1,360 oz in July and 3,420 oz in September 2013. In contrast, H1 2013 gold production was only 2,073 oz. CNMC's share price of S$0.235 as at Oct 28, 2013, suggests that the market may yet to have fully priced in the growth in CNMC's production (intrinsic value: S$0.800).

Assuming merely 1,000 oz of gold dore output in August 2013, Q3 FY2013 gold dore output may be more than 5,700 oz (or about 5,200 oz of gold, assuming 90 per cent purity). Such production in turn translates into US$1.5 million to US$2.6 million of net profit for CNMC based on a per ounce net profit of US$300 to US$500. Conversely, CNMC's net profit was US$0.1 million in Q2 FY2013, on 1,388 oz of gold output.

There is some upside risk in the estimation of Q3 net profit as unit costs have most likely been driven lower by economies of scale.

CNMC further reported recently that it produced 1,526 oz of gold dore in a single gold pour in October 2013, suggesting that the strong performance in Q3 is being carried forward into Q4. Our calculations indicate that CNMC need only produce another 3,350 oz of gold in Q4 to meet our full-year forecast of 12,000 oz - an achievable target given recent output levels, but subject to weather considerations.
According to CNMC's announcements, growth was driven by factors such as technical enhancements to the production process, more effective ore selection to yield higher grade ore for leaching and growth in operating leaching capacity.

CNMC's first leach pad of 70,000 tonnes of ore per leach cycle was commissioned on Dec 30, 2012. The second leach pad of 140,000 tonnes of ore per leach cycle commenced production in September 2013. A third leach pad of 70,000 tonnes per cycle is being constructed to achieve estimated leaching capacity of one million tonnes of ore per annum.
INCREASE EXPOSURE