“CMM is worth exactly $50m. No more no less, at least right now anyway”
The reason people hold these sort of stocks is because they believe the market has it wrong and that they are undervalued, that’s why I own CMM.
I have my little imaginings and I image that CMM will likely end up with mine reserves of over 1Mozs.
For me that’s worth more than $50 million on a long run basis even when funding and FUps are factored in. There is plenty of headroom in this valuation IMO and RRL’s half baked proposal wasn’t anywhere near full value. My $100 to $150 million value is also not full value either. This is just a derisked value range after funding is sourced assuming a share price of between 5 and 7cents. I think as a working mine this company can easily have double this value at some point in its life cycle.
As far as DRM goes you say
“DRM - has risen from the dead because of exploration success and an MD that has been able to do what many cannot, meet and beat targets.”
I don’t know what targets you are referring to. The company has been operating the Deflector mine for two financial years and has lost $89 million during that time. In the 2018 June quarter the company “may have” produced positive cash flow before tax of $3.5 million. Based on your EV of $166 million it would take almost 12 years to return the EV on this performance. So far Deflector has produced at a run rate of 65kozs and the forward plan seems to be 100kozs. That is just more jawboning IMO. As far as AISC goes I wouldn’t believe those either unless they can be maintained quarter after quarter. I suspect that they have been high grading that mine in a desperate attempt to stay afloat (could be wrong). When they can consistently produce free cash flow of ~$9 million per quarter they will be able to justify their current EV IMO. With DRM you are just looking at a transient short term overvaluation IMO. They won’t be able to sustain the performance required to match their current value, but the sophisticated investors who took the last placement will have made a good short term return.
My negativity on RMS is not over the top, I’m just telling it how it is against a chorus of people who are in denial about Edna May. Remember that past performance is not always a measure of future performance. All I’ve said is that I’m waiting for the December quarterly and the outcome of the EXU takeover before considering that stock again. It seems if you are able to change your opinion on things you can become quite unpopular. As you have learnt loyalty is not rewarded all the time on the stockmarket. I have immense capacity for patience, not so much loyalty, when I see an undervalued story.
I am actually pivoting a fair bit of my gold portfolio to development stories as I’m banking on that simple rule that development gets undervalued while cashflow gets overvalued so eventually once the developers get steady cash flow they will become revalued or takenover at a premium. Having said that I’m looking for quality and mine life because those two attributes have the abilty of smoothing out all sorts of operational risks. Unfortunately if you want quality (grade) and mine life in a developer you have to go to Africa. CMM for me is like a sovereign risk counter balance developer, it has the mine life but not the grade. Where the grade is lacking however it makes it up with the simple geometry and the consistent nature of the mineralisation.
You are also forgetting sentiment and the $A gold price. Both these things have the capacity to change for the better and then projects like this will go like hot cakes and you will be feeling like $50 million was a gift. Esh
CMM Price at posting:
6.8¢ Sentiment: Hold Disclosure: Held
(20min delay)
