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Condor Gold (AIM: CNR; TSX: COG). Following discussions with its advisors relating to US Executive Order 13851 and sanctions imposed on the Nicaraguan General Directorate of Mines by the United States Treasury Department on October 24, 2022 (the "Sanctions") and an internal review of its current and future planned operations, the Company confirms that it is the Board's current view that the Sanctions are unlikely to have a any impact on its current Nicaraguan operations.

There might not be any legal impact but the psychological effect it's had on some shareholders is there to be seen - the SP is down 8p due to what can only be described as panic selling. As ever we drop in a lift and rise on a much slower escalator. I suspect we have bottomed out again but Condor's usually small volumes have a disproportionate impact on price.

What I also noticed was the negative spin put on the BFS by some media reporting. I don't think this headline helped the SP this week:

'Condor Gold receives underwhelming results from study at La India
Wed, 26th Oct 2022 11:52
(Alliance News) - Condor Gold PLC on Wednesday saw shares drop after a feasibility study at its La India project produced disappointing results.'

https://www.lse.co.uk/news/CNR/condor-gold-receives-underwhelming-results-from-study-at-la-india-b8faotswefueiwj.html

It may well be that a good chunk of the selling was due as much to the misrepresentation of what is actually going on in Condor vs. the targeted sanctions news. Add two bits of nonesense together and you get a panic.

It may take the next RNS to get things moving again.

It's starting to look like a few people have played the news for all its worth today. It looks like a few have simply established a lower entry place than where they were.

It has, although I do think that the psychological effect will still be to diminish the enthusiasm of U.S. entities to heavily invest in Nicaragua.

Reuter's precis of the actual sanctions:

'The two sanctions announced on Monday target Nicaragua's General Directorate of Mines, a unit of the Nicaraguan Ministry of Energy and Mines that manages most mining operations in the country, and Reinaldo Gregorio Lenin Cerna Juarez, a close Ortega confidante, Treasury said.

Under the move, any property they have in the United States would be frozen and any U.S. persons are prohibited from doing business with them.'

It does indeed look like they are a lot narrower than some reports suggest.

The Chinese will always try it on, even when they are told at the outset it will be rejected. What will be going in our favour will be their willingness to give the third finger to Sleep Joe. It might not add a lot to the SP but politics being what it is, they will seek advantage from the action. All I can really see happening is the Chinese and Russia have a greater influence in the country and the U.S. less. It seems to be the way the world works these days. Another unintentional step in the slow decline of America.

I do think that a position statement from the company is called for. The market, at least for now, seems to think that the Biden news is price-affecting. Whether or not it it expected to have any deep longer term effects remains to be seen, but I do think an opinion, one way or the other, from the board would be illuminating.

Does this impact current strategic thinking or not? Will it significantly change the timelines in place until the end of last week?

As ever, with lightly traded CNR, the market reaction today is knee-jerk and ill-considered. However, it's hard to argue 'no implications' so we just have to work out what they might be. I doubt they will be positive, at least initially, though I also doubt they will last. U.S. political actions across the world are becoming less and less effective, almost in tandem with the speed with which its national debt grows.

In a CNR sale scenario it will no doubt reduce the pool of potential acquirers. Were CNR to be put on the block today it would reduce the interest, which of course would reduce the chances of an auction, and likewise reduce the chance of a multi-bagger exit. With this looming over us the prospect of the Chinese coming in and attempting a low-ball bid increases. Unfortunately, this looks like a three digit exit no longer looks possible. The U.S. Democratic Party are notorious for their war-mongering positions so its just more of the same. In being willing to pick a fight in every direction everyone loses. Unfortunately, CNR is caught in the cross fire again.

A low-ball Chinese bid will be rejected. MC/JM have been in it too long to give the company away so I guess yesterday's move will force a build-out scenario , whether they want it or not. It will be a case of 'Where will the money come from?' U.S. based funding won't happen so we are potentially looking at Asian funds, perhaps from China again. My guess is that project finance it will now cost more than last Friday, and may even take longer. With such an attractive resource I'm sure it will happen but as to when and at what cost is anyone's guess.

Condor has got through past difficulties before, tougher than these, so I'm sure it will pull through this one. Nonetheless, if we are being realistic, the 125p exit price is looking beyond reach. Even an 80p exit is now looking like a stretch. Being stuck in the middle of a political tussle is not good for anyone, let alone for business.

Thanks Joe. 'Another fine mess you've got me in to'. And I thought Trump was bad......

Or to put it another way.

'What makes you interested in the investments of billionaire Jim Mellon?'

;)

Agreed. Agreed. Agreed.

The appointment is sending out a clear message to the market that there is some serious money to be made in Condor. JM as an investor may be one thing but an appointment as the company's most senior officer is another scale altogether. His reputation as someone who knows what he is doing is now far more at risk. If, and I think he has, he is about to catch a major upswing in value his reputation as a switched-on investor will be amplified even more. I'm guessing that we are now seeing new investors come in.

Incidentally, we don't talk much about any silver CNR has but I'm watching that particular market and it looks like we could be fairly close to a structural silver short squeeze. It may be marginal to Condor but every little helps.

It will be interesting to see which way the MMs go in the next couple of days. Bored or panicked investor selling vs. a managed move to free-up shares. As per my earlier posts I'm more inclined towards the former rather than latter, but I have seen the MM tree shake many times over the years so I can't dismiss it. Nonetheless, as you suggest, 150k shares is not much to work with.

I'm not positing a reserve currency / commodity pricing discussion, but I do think that we are moving into another 'Great Reset' situation as far as currencies are concerned. Bretton Woods back in 1944 set the tone until Nixon's removal of gold convertibility of the USD in 1971. This has lasted over 50 years but the stresses are now everywhere to be seen. U.S. Fed policy on interest rates is unhelpful to everyone else, who effectively have to follow suit if they want to stabilise their own currencies.

I don't this China will play ball for much longer. The U.S. has 8k + tonnes of gold and China has circa 2k of official reserves. Most analysts believe that its actual reserves are between 16k and 40k, multiple times the U.S. If, as and when (it will be politics that determine timing - I'm keeping an eye on Taiwan), China could overnight announce a gold backed CBDC. This would likely promote chaos, especially in the U.S., with a forced ejection from reserve currency status.

I really think it's in everyone's interests to agree a new reserve currency system before China forces the situation. Ideally gold/commodity backed.

If it is a large order coming through, the usual MM practice is to shake the tree. We know Condor is pretty illiquid so to meet an order they would have to free up some shares. If they increase the price to attract sales, given that the BFS is now out and Condor is in play, it may well attract even more investors. The company is pretty much de-risked from a financial perspective (local politics aside) so any signs that the price is about to start a run up would probably encourage more buying. So, to free-up shares it's probably worth dropping the price, perhaps triggering stop losses, which might encourage a bit of panic. Ideally, the whole exercise is carried out under the guise of a general market rout so it's just seen as part of a broader market reaction.

Whatever the case, today's near 10% drop doesn't make much sense unless (former) Condor investors really do believe that gold is going down even further. They also have to believe that the risk of further declines outweigh the risks of missing out as and when a bid appears.

It's always fun to speculate on the apparently opaque world of the MMs. As for those who actually sold today, maybe they were simply panicked with the prospect of higher interest rates having a negative effect on gold, and ultimately Condor's future NPV.

Maybe it is a simple Occam's Razor situation and that a small number of investors simply wanted to cash their chips in, and don't care about future prospects.

When we will catch a bid is unknowable to anyone outside the 'insider' ring, which will be the vast majority of those of us posting on this board. But I do believe that there is a 50:50 chance of something happening before spring next year. This could be next week, or next March; I don't know. What I do know is that I want to be in when it does happen, and not regretting it on the basis of panic driven gold and equity markets. My sense is that pressure on the FED, both U.S. internally and externally, will force the bank to control the DXY increase. If and when it does make a move I think we'll see gold bounce back (in USDs. It's fine in GBPs) along with global equity markets.

I certainly would not want to be out when those markets do change, especially if a bid comes along around the same time.

Now that's what makes sense to me...

At least that was my initial reaction when I saw the small wave of selling this morning, and the drop in price. However, when you helicopter out and look at the situation, we have a broader situation in play:
1) We have a currency crisis unfolding, primarily driven by the Fed's policy on raising interest rates to control U.S. price inflation. Last Friday's UK borrowing budget further inflamed an already difficult Cable situation, not that Labour's policies are much different. They just want to borrow and spend in different places. The currency crisis has spilled over into UK equity markets which thinks that the BoE will increase rates to 'steady' the GBP. Higher rates equals lower net incomes, dividends and therefore valuations.
2) Gold has taken a big dive since mid-August, dropping from nearly $1800 to not far off $1600. Again, the Fed is responsible for this. Promising higher U.S. interest rates will attract money from all currencies, including gold, into the USD. The DXY is standing at 114 tonight vs. 96 in early January. The Fed is basically killing everything in pursuing a one track policy of higher U.S. interest rates. In forcing the U.S. into recession it will likely pull the rest of the world into one, stimulated by effectively exporting its price inflation everywhere else. If ever there was a strong case for an independent reserve currency, this is it.

So, our short term Condor investor sees a general market wobble, and a drop in gold, and decides to 'cash-in' on the recent revival. He or she probably thinks they can get back in before a bid is announced. Maybe they will; maybe thy won't. We don't know how close we are. What we do know is that MC is historically far more enthusiastic about selling than spending another 18 to 36 months getting the mine into production.

My view is that Condor is in serious play. It went into play the day the BFS came out. Unfortunately, macro events are buffeting all companies at the moment, large and small, with the smaller ones suffering more than the larger ones. My response is now to take advantage of a dip back into the low 20s and top up with a few more, even if it's only £500 I've got available. The macro difficulties may well have blown over in a few weeks time so it really doesn't make much sense to bail out at this time. (cont'd)

For me the magic number is not 12m or 14m, but 5m. If a mid cap or major thinks 5m is there then Condor is likely to be in play. 5m is traditionally the threshold at which the bigger fish get interested in swallowing the smaller.

All back of the envelope, but...

NPV of $87m translates into circa £75m at $1600 gold benchmark.
NPV of $205m is circa £175m at the $2,000 gold scenario.

Current gold is circa $1730, suggesting about a third uplift on the $1600 benchmark. Let's say about £100m.

With roughly 159m in issue we have a target price of around 62p based on an NPV model.

The even better news is that:
- Gold may wobble around +-$1700 for a few months but I doubt is will last too long. I reckon $2000 is a reasonable target, and even then will be undervalued relative to all the money printing that has taken place, and the price inflation we are all experiencing.
- This BFS represents only a small proportion of what Condor has available both above and under the ground. We really are in a situation where 150p+ is a reasonable talking point. Admittedly, not this year but roll on 12 - 18 months and I could see it as a serious discussion point.

In the meantime we have to wait for the rest of the market to discover Condor's potential. While 60p + is justified I suspect we'll probably peak around 50p before dropping back on day traders and others taking some profits.

All being well today is just the start of a steady incline to BFS valuations.

I don't have the time to go through the numbers, but even on the back of an envelope, the limited open pit BFS element easily sustains a fairly early uplift of 50%, even at the low end of the NPV calculation.

2023’s big trade is reputedly to short the USD. If that rolls out I think we’ll see gold bounce back, along with most other major currencies.

I've added to my Condor portfolio today but had to split it into smaller trades. When I tried it was impossible to acquire 10k + shares so I would expect a tick-up before long. Whether or not we are seeing a final chance to buy at these prices remains to be seen but it would not surprise me to see a bit of news driven turbulence ahead. It would appear that most remaining shareholders have a pretty tight grip on what they have.

RIP QEII

If I'm honest I don't think we will see a bid this year or, for that matter, about another year or so. I would guess that RIO are aware of Condor and its potential, but as with many organisations they may well wait until someone else makes an initial move. I'm currently invested in GB Group which saw a 24% increase today on the back of interest from a PE investor. This is expected to bring the company to the attention of others, who may also size it up for a bid. It would not surprise me to see CNR experience something similar - once you see one bus another two suddenly appear after it.

It also depends on MC's ability to get the message out. Despite what we think has been a longer than expected orphan period I think we are moving into a time in the company's development where MC is in his element. I think he'll flog the 'For Sale' message to death, albeit all the official talk will be about building the mine. Though I still think towards the end of next year is the most likely time for a serious offer.

The above is a rationalised view of what might happen. In reality anything can happen once the BFS is out there. After all, a prospective bidder will also be aware that the longer they take to get a price into the company, the higher the price will be. For me it's a simple trade-off between risk and value. The longer into the project we get, the lower the risk and the higher the valuation\sale price. Anyone who has Condor on its radar will know this already, but are probably unable to get sign-off on launching a bid until a BFS is out (A large mining corporate will have some clear rules on what they need before financing a project - probably a BFS in the case of a junior). The BFS in the public domain opens up a realistic possibility of a serious bid but by the time they get round to it we should have already recovered some shareholder value. Thus a bid will have to sensibly exceed whatever premium (on current levels) the BFS promotes.