The news this week came as a bit of a surprize, but it did sort out the company's finances and management. the new team is much more professional and they do have the experience to better explore the system. However, the company does have a mining lease and so it should be expected to do more that just drill holes, as an exploration lease. The funds will dry up pretty quickly if they don't get some profitable mining underway. So let's consider what the new team is saying. In the presentation to shareholders this week we were told:
"The Crater Mountain Gold Project got sidetracked in the last 3-4 years by trying (without success) to develop a small-scale mining operation and taking on a debt burden to do so."
OK their gamble didn't pay off. I think we were all hopeful that the gamble would pay off, even though deep down it was always going to be nearly impossible for wheel-barrows and hand-held tools to produce enough gold from the High Grade Zone to pay even the Director's salaries. That is, not unless the walls of the second adit were dripping with gold. So what happened to the second adit? Recall that becasue of the extraction by artisinal miners, the first adit was superceded by the effort to dig the second adit (in the 4th quarter of 2016). But the quarterly report in March 2017 said the following:
"There were logistical issues during the quarter that resulted in delays to the completion of the 2nd adit. The Company now expects that the 2nd adit will be complete in the next quarter."
So far that's all we know. The company has not explained what the logistical issues were and the new team owe shareholders an explanation of what happened to the second adit from the 1930 level. Hopefully there will be a quarterly report in the next week or so which will shed light on the progress that was or wasn't made with the second adit. After all it did occupy about 6 months of time, effort & cost alot of funds. They should report the distance that was completed and some features that were found, plus any problems encountered. On page 16 of the presentation to investors, it says that within the next 6 to 12 months the company will:
"Complete metallurgical test-work and detailed mine planning on HGZ and if successful
commence mining via 1930 level adit for commercial gold production using the existing plant."
That is not good enough. I think the new team needs to gain shareholders confidence by demonstrating that they are more accurate and transparent in their reports to shareholders. They should start by honestly explaining, and pretty darn quickly, the progress made with the second adit, rather than including it in a report in 6 to 12 months from now.
Having made that point, I do hope this new team will now turn the company around. The potential for this mine has been there from the beginning. This mine could be really, really big and the share offer of 1c per share may be an absolute bargain. We are relying on the new team's knowledge of geology and mining skills to do what they are good at.
CGN Price at posting:
1.7¢ Sentiment: Hold Disclosure: Held
