Member Info for aprogerson

For students of long term POG action during past 3 gold bull runs we can expect 6-8x POG from cycle lows of $1,062 in Nov-2015 implying POG of $6,370 to $8,500 except that this time we have had unprecedented CB money printing with more to come as real interest rates remain deeply negative ... IMHO this points to an even higher POG as it preserves purchasing power whereas currencies continue to devalue.

There is an argument that DXY strength undermines POG, but POG has been rising strongly despite rising DXY. Students of dollar devaluation since it came off the gold standard in 1971 may also notice that DXY has just strongly reversed down off this downtrend earlier this week implying significant dollar weakness ahead. There is a multi-year Head and Shoulders pattern from Oct-2014 now in play so if DXY drops and hits 0.90 it will break the neckline with a target down below 0.80. If this comes to pass then this will be a very strong tailwind for POG and some of my targets above may arrive quicker than we'd have expected in a 'normal' gold bull run typically lasting circa 7 years.

There is also lots of discussion by well known commentators pointing to enormous market leverage of paper gold/silver to physical metal being used to supress POG even whilst physical metal gets harder to source as CBs have been heavy buyers over the last 8-10 years notably Russia (think Crimea), China and more recently Turkey and other EM CBs. Also BASEL3 rules are now coming into force recognising gold at 100% value as a tier 1 bank reserve asset AND changing the rules on gold trading undermining the leverage available in the unbacked paper markets. Western commercial banks are currently actively unwinding their unbacked positions reducing shorts and favouring longs as physical metal gets scarcer.

The upshot I believe will be full price discovery for POG over the coming weeks (maybe months) which has been accelerating because of both rising inflation exacerbated by Ukraine/Russia conflict and NOT because of it.
AIMHO & DYOR
ATB APR

@RP Caracal are 'only' £15m and CLNs can be absolutely poisonous for low MCap entities borrowing large amounts of CAPEX. Again looking at Hummingbird they have an approved $100m debt facility with Corus bank at a modest 8.5% (with a 12m payment holiday) which they are now drawing down to build their 2nd mine. This is their second new build mine supported by debt with Corus so obviously works for them, does not dilute shareholders and can be funded from FCF from the new mine or partially hedged depending on the agreement and cost/revenue risk profile.

I'd chose debt over CLN any day especially as GCAT has a working mine producing FCF there is no good reason to use a CLN.
ATB APR

@SM Yes and a lot of PIs forgot how brutal being in GGP in the early days was before 'those' drill results & the 'second' deal with a Major after the first fell through. I've learn since then to be really sure of why you bought in, expect lots of volatility and be clear where your exits are. I also like small producers such as HUM, GCAT and AAZ with lots of development/exploration upside built in for little or no premium over output. Despite the POG volatility FCF is very good and being reinvested in growth without coming back to the investor for more cash. To my mind this drives production output growth into what should be a sector with rising sentiment and valuations, but here we sit as you say forgotten and definitely unloved ... load up whilst things are undoubtedly cheap is my strategy and try not to time it.
ATB APR

@Swamp Ditto I am also a holder of both. Discussion was around 'comparable' African producer, situation, AISC et al
... and funnily enough an ex-early GGP investor for my sins
IMHO GCAT is a cracking little gold miner/developer/explorer with lots of upside, but a lot of risk/unknowns to be worked through by an experienced BoD also on that journey so DYOR as risk/reward is not for everyone
ATB APR

@Daniel Agreed it makes little sense at first but GCAT is in essence a "Turnaround story" albeit with good potential growth.

Currently precious metal miners are hated with producers valued on very low P/E multiples based on production only with very little attributed to exploration or development assets and the production asset marked down heavily if AISC is high, reserves and/or LOM is low.

Remember GCAT current situation is one newly producing mine running at 8koz/annum given Q4 results and 3-4 year LOM given 24koz target. Effective AISC is huge given all spare cash and capital is being reinvested in the operation, exploration and/or growth drilling. This will change as planned milestone deliverables are reported and risk profile reduces.

GCAT is now MCap £13m with:
> End Q4'21 = 8koz/annum production, 30 year LOM & 670koz resources confirmed
> Added 2 projects for additional 1Moz resources with add 400koz under application
> Extensive process plant improvements WIP
> 13km expansion/infill drilling underway to increase main mine LOM & reserves
> Target end Q4'22 = 24koz production, TBC year LOM & 3-4Moz resources
> low $860 cash costs at main mine, but very high AISC as in turnaround mode

Hummingbird (HUM) is a good example with £52m MCap based in Mali/Liberia:
> FY2021 production of 87,558 oz & 2022 guidance range of 84koz - 89koz one main mine with 9 year LOM
> High AISC circa $1350/$1450 & history of operational issues plus country security issues
> $100m debt facility in place & now building new 100/120koz production mine target gold pour H2 2023
> DFS due in Apr-22 on 51% owned of another 3-4Moz exploration district scale project

Bottom line is GCAT is not alone, but you do get a lot for your money with current MCap £13m and target production 24koz if cash cost is $860 then real AISC should be low $1,000/1,050 area implying future FCF circa £15m at $1,900 POG .... so really cheap PE less than 1 with other 2 projects thrown in for free!
AIMHO & DYOR ATB APR

@PP a strong retracement was always very likely after an almost 20% move up by $340 from $1,730 to $2,070 in just 6 weeks. If I may add/amend your list
> If we get further inflation and muted interest rates - very good for gold as real interest rates drop further
> If we get further Covid - good for gold
> If we get market panic = choppy for gold in beginning & then good for gold as safe haven
> If the USD and global fiat blows up - extremely good for gold even if dollar goes up
> if Russia demands payment for oil/gas in gold = extremely good for gold (1oz =1k barrels has been mooted)
> Bond market wakes up and discovers large capital losses = fast rotation into gold
> Markets revert to mean gold holding of 1.5% vs. 0.5% now = very good for gold
> If downright deflation takes hold = not bad for gold as CB debt/GDP ratio increases so sovereign defaults more likely
> if last 3 gold bulls runs repeat into strong CB tightening = extremely good for gold as average 6-8x whilst we have only doubled so far in the bull run to date
> Market disruption coming from large scale Chinese or other property market defaults = good for gold as safe haven and no counterparty risk assuming physical or miners are held
> If true gold/silver price discovery were allowed when leveraged paper market is reduced = moon rocket as everyone chases physical (think musical chairs but with 100-200+ 'chairs' per ounce)
> Breton Woods 3 based on partial gold backing fiat/SDRs = $30k to $50k gold anyone
AIMHO ATB APR

Brutal 50% retracement to $1,913 so far today where it could bounce or back down to 61.8% retracement @$1,891.
Retracement based on intraday high/lows namely $2,070 high @8-Mar-22 up from $1,720 low @28-Jan-22.
ATB APR

Brutal 50% retracement to $1,913 so far today where it could bounce or back down to 61.8% retracement @$1,891.
Retracement based on intraday high/lows namely $2,070 high @8-Mar-22 up from $1,720 low @28-Jan-22.
ATB APR

@PP Thanks for the Heads Up ref the StockBox interview dated 23-Jun-2021 ahead of their RTO end Jul-21 https://stockboxmedia.com/interviews/caracal-gold-ceo-introduces-the-company-ahead-of-their-ipo/

Interesting that $5m was invested post GoldPlat since Kilimapesa restarted in Aug-2020 with first gold Sept-2020. generating $3.8 revenue from 8 months of gold sales following 18m shutdown under GoldPlat plus an initial $1.2m from German investor prior to the RTO .
ATB APR

@PP My reading on the capital structure is that GCAT have raised the £2m in Feb-22 to accelerate Phase 3 development to 24koz/annum production with my best guess earliest Sept-22 & latest Dec-22 steady state.

Given RNSs to date, my expectation of what will drive the SP above warrant triggers 2p+ are confirmation of:
> Nyakafuru Reefs 400koz JORC resource upgrade to 1Moz ... application already made!
> Kilimapesa infill & expansion drill results expand current 600Koz JORC and especially resources considered as reserves ... WIP so Q1/2
> Kilimapesa 1koz gold production Q1/2 ... plant throughput confirmed Dec-21
> Kilimapesa 2koz gold production Q3/4 ... Phase 3 acceleration and £2m capital raise Feb-22
> Kilimapesa 2koz gold production steady state by end Q4 ... takes a while to stabilise
> Kilimapesa plant capacity increase commissioned ... 2nd ball mill & more CIL tanks installed
> Kilimapesa heap leach facility online to take lower grade ore so increased ROM grade to main plant

AIMHO& lots of positive news flow expected as production capacity & output ramps up
ATB APR

@PP remember that we have a large number of outstanding warrants that will likely be exercised as the SP rises to 2p+ but will also bring in £10m capital to the BoD. Also Align note £750k cash BEFORE £2m cash raise in Feb-22 implying circa £2.50m cash after dealing costs at end Feb-22.

Check Align Research report which targets 4p undiluted and 2.73p after dilution effect of these warrants.
http://www.alignresearch.co.uk/cpt-company/caracal-gold/

I don't see GCAT going back to market for new funds as the warrants will provide circa £10m cash as phase 3 development plays out into a rising SP to reflect improvements.
ATB APR

@devil thanks very clear and concise analysis
Agreed absolutely bonkers and to paraphrase WB ... markets can stay irrational longer than use poor PIs can stay solvent
ATB APR

@Itsyou Thanks and good to know as it 'should' help insulate GCAT from some/all the fuel cost increases. So my assumption of $860 cash costs at Kili look reasonable everything else being equal @Mar-22
ATB APR

@olderandwiser I am suggesting $860 cash costs of production (plus add fuel costs minus further efficiency savings= zero?) for Kilimapesa and expect FCF to be recycled into production & resource growth at Kilmapesa and to get a new mine started at Nyrakafuru development so no idea what GCAT AISC will be.

However FCF looks to be healthy so reducing potential call on shareholders to fund via issuance ... my expectation is that they may need some debt but this will be dependent on how fast they want to get to 50koz/annum production.
ATB APR

Apologies initial placing price was corrected to 0.95p which curiously is where we are sat today
ATBA PR

From original post @4-Mar-22 with a couple of updates:
GCAT joined LSE on 31-Aug-2021 with "638,951,276 Placing Shares completed in two rounds at a placing price of £0.01 per share, implying a market capitalisation of circa £14.5 million". Capital moves, SP and MCap since:
31-Aug-21 >> SP=1.0p issuing 668m new shares with 1,448m shares & MCAP = £14.5m with £5.5m cash raised
14-Feb-22 >> Issued 117m new shares. SP=1.05p with 1,565m shares & MCAP = £16.4m with £2m cash raised @0.95p
11-Mar-22 >> SP=0.95p with 1,565m shares & MCAP = £14m ... cash £no info
Note: LSE showing 1448m shares @ £14.9m MCap when additional 177m shares issued on 14-Feb-22 but GCAT Corporate presentation showing 1,615m shares in issue but no official statement of shares in issue as neither looks correct!
http://www.alignresearch.co.uk/cpt-company/caracal-gold/

Gold production:
Using a mixture of actual production @Kilimapesa and my forecast based on accelerated Phase 3 production to 2koz/month in 6 months as per RNS 14-Feb-2022. I'm assuming 24koz steady state production will be achieved a little later by end of Q4 2022 given profile to date:
>> Achieved Q3 2021 @1,550oz
>> Achieved Q4 2021 @2,088oz
>> Assumed Q1 @2.5koz +Q2 @3koz +Q3 @4koz +Q4 @6koz

Production Actual vs. Forecast:
Using GCAT actuals & my forecast figures above our annualised production rate looks something like:
> Q3 2021 @1.550koz so annualised production = 6.2Koz actual with MCap=£14.5m SP = 1p cost $980/oz
> Q4 2021 @2.088koz so annualised production = 8.4Koz actual with MCap=£16.4m SP = 0.975p cost $960/oz
> Q1 2022 @2.5koz (my forecast) so annualised production = 10Koz forecast with MCap=£XXm cost $860/oz
> Q2 2022 @3koz so annualised production = 12Koz forecast
> Q3 2022 @4oz so annualised production = 16Koz forecast
> Q4 2022 @6koz so annualised production = 24Koz forecast

Commentary:
GCAT MCap is flat since LSE listing & reboot 6 months ago albeit SP is static reflecting £2m cash raise and 177m extra shares in circulation. However gold production has gone up 30% in Q4 and is forecast to almost triple over the next 6 to 9 months from 8.4koz/annum rate to 24koz/annum rate. POG was $1,800 in Aug-21 and is circa $1,950 now whilst cash costs of production dropped $20 with another $100 costs taking savings to $120/oz expected in Q1 results in 6 weeks time.

By my calculations that is an 4x increase in production over a 15 month period and $120/oz cost reduction confirmed to end Dec-21 plus POG has risen by $150/oz since LSE listing implying $270/oz INCREASE in profitability/ounce for current gold sales whilst production throughput rises steeply which itself will drive down costs/ounce. We know costs will drop further as they scale up but is likely to be at least offset by rising fuel costs.

IMHO I've not seen many more compelling junior producers with significant near term growth opportunities in a very long time.
AIMHO ATB APR

@olderandwiser They confirmed plant throughput to enable 1koz/ month in Dec-21 but not 1koz gold production so that milestone has still to be achieved. We also know they raised £2m in Feb-22 to accelerate phase 3 which is to reach 2koz/month production which they estimate will take 6 months implying Aug/Sept-22. My 'working' estimate for steady state 2koz gold production is end Dec-22 which still seems reasonable.

I'll dig out my recent GCAT Valuation post and repost it as I had a couple of corrections and may help new & prospective PIs get their heads around what is on offer here.

As always feedback welcome as very easy to miss something when things are moving so fast
ATB APR

@cventer It is much better than that as cost was $860 projected back in Dec-21 for Q1 as main power connected in Nov-21 removing $100/month costs hence my prior analysis stating $860 cash costs for 2022 before further efficiency savings kick in from plant and also from scale as overall production ramps up ie fixed OPEX spread over more ounces
ASC is an entirely different matter and as GCAT are in growth phase pretty much a pointless calculation/metric
ATB APR

Dominic Frisby also writes for Moneyweek on Silver/gold who I know is keen on Altus who meet some of these criterion but who are are a small African royalty company but have there own mines under development as well.

US YoY CPI at 7.9% was 7.5% last month and 0.8% MoM was 0.6% looks like higher for longer
FED is now tightening which has been trigger/driver for last 3 major gold runs
ATB APR