Just my two cents worth. Firstly you obtained your higher Gold price when the Brazilian Real's foreign exchange price collapsed. That could be considered a double edged sword however. I mean things can't be that fantastic in Brazil if it's country's currency heads that far South! Are there potential risks to shareholders?
At present, CAS wants to reach a production rate of 100K ounces for Borborema and 50K ounces for Juruena. I wouldn't be surprised if the new entity sets an even more ambitious target. Anyway, *IF* the new entity reaches this goal, you're looking at an annual profit of around AUD$50M, and I think in time that estimate will be conservative. As mentioned in my last post, that's going on grade, type of deposit and exchange rate. An updated opex figure for the two mines should be forthcoming when the two entities try and convince us on the merits of combining forces, so we will have a much better idea then on the real potential these two mines have.
What multiples would put on that annual profit figure of AUD$50M as a market cap? Four times? Even only at two times you still have a market cap of AUD$100M. But it'll be much much more than that figure if they reach production and they can show that Borborema is a long term project. Remember also Juruena's five year mine life is due to limited drilling at this point. That is a big Gold vein which has only had limited drilling to date due to money restraints.
Your focus... in my opinion ... should be on whether they (the new entity) can pull this off and get the two mines up and running. Because if they can, we will well and truely get our te-rating and both management's will be considered heros. If they can't however ... well ummm???
At the moment, it would appear that the market thinks they can't pull this off, or at least the risks are too great. CAS hasn't exactly been setting the world on fire over the last few years as far as achievements go. However, consider most of this selling is from disgruntled mum and dad shareholders would aren't privy to what the "inner circle" is up to. So are selling on emotion only.
Also, in my opinion, Stratex is putting everything on the line with this deal. So I understand the nervousness from their shareholders. Moreover, the actual Stratex personal putting together this deal are fully aware that their careers and reputations are at stake here. It really is make or break time. They will be putting their ALL into trying to have two producing Gold mines. As I said in my prior post, it's the potential figures and therefore dividend returns to shareholders that are driving managements to succeed on this.
I know it's hard not to be frustrated with a lack of information at this point. However, they cannot say too much at this point in time. Let's hope things are a little clearer with time and we can make a pragmatic decision based on the information in front of us, and not an emotional one based on too many unknowns.
CAS Price at posting:
12.0¢ Sentiment: Buy Disclosure: Held
