China Goldmines Share Discussion Threads

[chestnuts] 28/8/2009 19:04

Giant

This deal stinks glad i sold out 1st thing yesterday, can't help feel management are taking back handers on this, they are so close to making so good and they bottle it at the last hurdle, Its also irresponsible to just sell the mines and not sell the company hey would have got so much for it, this is just like MCR, total incompitant management

[giant steps] 28/8/2009 15:30

What a disgrace, perhaps Anglo should block the deal

Prices bid 14p offer 15.5p

[urgentclick] 28/8/2009 15:26

What will be the new name for this Investment Fund? North Korean Resources maybe?

[fordtin] 28/8/2009 07:03

Morning Elban,

Why would an Australian company selling an Australian subsidiary to a BVI registered company be required to pay Chinese tax?

It's a totally different situation to GGG, where AIUI they are selling a Chinese registered subsidiary to a Chinese state owned entity.

It's a bit like saying I'd have to pay Japanese tax because I sold a Toyota to a German living in Belgium ;-)

[elban] 28/8/2009 00:58

Fordtin,

this is the relevant part from the GGG mine disposal (very similar circumstances).

"Principal terms and conditions of the Sale and Purchase Agreement

The consideration for the sale of equity and interest will be Rmb71M and
payment will be made in three tranches within six months. The first payment of
30 per cent being Rmb21.3M is to be made within seven days from the effective
date, being 5 August 2009. The second payment of 35 per cent being Rmb24.85M is
to be made within 3 months of the effective date and the third payment of 35
per cent being Rmb24.85M is to be made within 6 months of the effective date.

The Company will, under Chinese law, be obliged to pay approximately 35 per
cent in tax on the proceeds of the Disposal."


It seems to me that since the disposal of the GGG mine was taxed at 35% then the CGM mine will be as well. [Being equivalent to about $9m] When adding in the various other costs (as you mention) this gives a final value for the CGM cash held as about $20 million in total.

In my interpretation, the cash (etc) stated in the last quarterly effectively pays the tax. In your interpretation it is held (and retained) by the parent Company and there is no tax.
This makes a significant difference to the decision to hold or sell at 17.5p.
Both these interpretations are consistent with the rns - which I believe is shockingly unclear on this most important fact.

If my interpretation is true then the Directors have been severely at fault in not mentioning the tax liability.

[jennyj] 27/8/2009 18:20

chinese mafia said so.

[elban] 27/8/2009 17:38

Last month's quarterly update stated:-

"Outlook


As previously announced, China Goldmines has commenced exploring all possible
options to assist it with improved security and to fund the Company's central
development program.


The Company intends to execute its "Centralisation Plan" over the coming 12
month period and will proceed with its planning and feasibility approval study
towards a central concept in order to secure gold production targeted at a scale
of 100,000 oz's pa over the longer term.


The Company will proceed to downsize its current levels of operation and
continue production on a smaller scale in order to secure the operating
environment. In this context the Company's revised production target for
calendar year 2009 is anticipated to be in the range 15,000oz to 20,000oz,
depending in part on the Company's ability to securely mine its high grade ore."
------------------------------------------

I wonder what went on over the last 31 days that meant that it now became better to sell the mine on the cheap.

My cautious calc for if they ever hit their previously stated target of 150,000 oz was a value of £450 million. So I am well not pleased with this outcome. I expect that Anglo Pacific are absolutely livid.

[jcpete5] 27/8/2009 15:01

Cheers Stuart-will hold at mo-thxs

[stuart14] 27/8/2009 13:54

jcpete, think 35p tops, more likely 20p ish so neutral at the moment.

The big question will then be "can they do anything with it"

[fordtin] 27/8/2009 13:53

I think I've found some of the 'missing' cash.

Arrangement fees from the placings seem to have absorbed a fairly large chunk.
From the $71m raised, the company only received $66,886,411


Directors remuneration, national insurance, travel expenses etc. account for $10.85m

which brings it down to $56.031m

However, foreign exchange gains of $1,909,520 for 2008 and $563,648 for 2007 increase the discrepency *

I'm still looking to fill the gap between $58.5m and the $30m loaned to the subsidiary

edit - * finally found the more recent exchange rate c*ck-up where they lost $15m by holding cash in sterling when most of the expenditure is in USD or RMB.

[muffinhead] 27/8/2009 13:38

management are toast...35p cash back as a special dividend

just watch gold go over $1000 now

best hope is for another bid eg. Sino Gold

[jcpete5] 27/8/2009 13:37

Cheers Stuart-so how much cash. Whats it mean in share price terms. Sorry don't have time to trawl for info-have FTO and ENK kicking off at mo. Trust u for info- THXS :)

[elban] 27/8/2009 13:15

I am certainly of the belief that they spent a whole load on infrastructure - which I thought was justified. They had a large unrealised currency loss - most of which I think that they actually realised just before sterling went abruptly the other way.
I don't think that we are looking at fraud here - despite the company rns statements being frequently misleading.

I don't even really blame the management. If they had purchased such a mine in another country then they probably would not have had all the problems that have set them back so hard this year.

There have been suggestions on here that the thefts had the collusion of the local authorities. I certainly think that things were being made difficult for CGM and that the announcements were not representing the fact of life on the ground.

The circumstances now evident are probably the reson for the resignation of board members a couple of months ago -- something hat would not be obvious from the last update (which was beginning to look more positive).

[stuart14] 27/8/2009 13:00

Good Question. No idea.

[fordtin] 27/8/2009 12:58

Hi Stuart

if all the money was spent on the mine, why didn't they include all of it in the loan to the subsidiary? How was the transfer of funds outside the loan agreement accounted for?

[stuart14] 27/8/2009 12:51

jcpete, they've sold the mines and become a cash rich investment vehicle.

Fordtin, I'd assume they've spent all the money on infrastructure, underground tunnelling, security etc.

These guys have been opaque for years, but the fact they raised so much money at 125p kept me going, plus their new chairman was ex Standard Chartered Bank and allegedly a good guy.

[jcpete5] 27/8/2009 12:40

In very simple language-could someone explain what is going on please

[fordtin] 27/8/2009 12:15

Hi GS,

I'm not sure what I'm looking at yet.

I've got a few well submerged shares which are a residual 'free carry' left over from a trading punt a few years ago. There's not much hope for them recovering to their former value for several years (if ever) but as you've probaby seen from the figures I posted earlier, CGM could be worth a fresh punt. However, I would like to know where all that money went before risking any more of my hard earned.

[giant steps] 27/8/2009 11:59

fordtin, are you observing a black hole in the accounts ?

[fordtin] 27/8/2009 11:55

Since Feb 2006 CGM have raised us$71m via placings.
If they only loaned us$30.3m to the Australian subsidiary and they only have us$7m in cash&bonds, where did the rest go?


28 September 2007
China Goldmines plc (AIM:CGM) today announces the proposed placing of 25,025,416 new ordinary shares of 1p each in the Company principally with institutional investors at a price of 120 pence per share (the "Placing") to raise #30 million
forex @ 28/9/07 ; £1 = us$2.02070
£30m = us$60.621m

7 August 2007
The Company announces that it is placing 900,000 new ordinary shares of 1p each in the Company with institutional investors at a price of 140 pence per share (the "Placing") to raise #1,260,000
forex @ 28/9/07 ; £1 = us$2.03720
£1.26m = us$2.567m

07 February 2006
#4.5 million (before expenses) of new money raised for the Company * Placing of 7,500,000 New Ordinary Shares at 60p per share
forex @ 7/2/06 ; £1 = us$1.75670
£4.5m = us$7.905m

[lq7u0] 27/8/2009 11:17

CGM have always been highly ambiguous in their statements to market. Never any costs per production ounces, always in tonnage etc. RNS written like this on purpose. Is cash included or not? it's deceptive at best. Have taken the hit this morning and am now out. Good luck to remaining holders and very worst to directors. China is welcome to them.

[fordtin] 27/8/2009 11:15

Elban,

this statement looks pretty clear to me

"The net funds available to CGM following the Disposal (of at least approximately USD20,650,000)"

N.B. the current cash & securities already rest with the parent company

[datahead] 27/8/2009 11:14

well its must be some clearly cause even keeping $10m aside they will still pursue investments ??? picking up on small buys now - kept my holding 155,000 but to be honest i would have got out at 25p plus

might avergae in now

[elban] 27/8/2009 11:11

fordtin,

"* Repayment of the Shareholder Loan - the intercompany indebtedness in the last
unaudited accounts of WES for the six month period to 31 December 2008 owing to
GRV was USD30,300,000. This is anticipated to be extinguished fully with the
repayment of USD26,300,000 and a write off of the outstanding balance,
resulting in a loss of approximately USD4,000,000."

It seems unlikely that they would write off the outstanding balance if there was another few million in cash coming across as well.

I am still not sure which of us is right - they really have written the rns in a fashion such that the most important point - ie how much cash they will be left with is open to debate.

[weemonkey] 27/8/2009 10:47

I suppose the concern here is what exactly they intend to do with that cash

the admission here is that they think the investment (the mine in china) has been a poor one .

Will they be any better at investing in other assets? or will the cash simply be burnt on bad investments and you end up with a Starvest (SVE)