China Nonferrous Gold Share Discussion Threads

[mattjos] 17/3/2022 18:00

Hari, there are always negatives & possible negatives with every single investment, always. No such thing as a dead-cert in business.

£23.5m Mkt Cap here … fgsake, we are a 40koz producer & not some penniless explorer.

I do not have a problem with debt that is for productive purposes.

Can you imagine what sort of a mess this would be in were the original IPO management team still in charge?
There'd be about 10Bn share in issuance and I very much doubt the mine would even be constructed yet, let alone in production.

With CNIM's backing, we've built a significant Gold mine with good LOM and plenty more resources right on our doorstep.
The interest costs on the debt are a fraction of the profit margins from the operation, when gold was much lower.

We're pretty much now running the mine per the mine plan & the KPI's outlined in that mine plan.

For me, this is now the time to move ahead with Phase II but, I'd be looking for ways to achieve it incrementally using organic cashflow whilst keeping the KPI's per the mine plan.

More like 40koz --> 60koz --> 80koz over a 24 month timeframe rather than trying to go from 40koz to 80koz in one big leap.
Stagger the CAPEX according to the cash generation of the mine.
Yes, it's a bit more of a conservative approach but, it should not require CNIM's backing as has been the case to date and is the sort of approach that lenders are going to like.

Having said all that … CNG might just as easily RNS Phase II Go-Live out of the blue, any day & take everyone by surprise.
It has to be done at some point because even with the long LOM, current rate of extraction/production is inadequate to achieve payback in that LOM.

Meantime, Gold price will have its inevitable impact on the mkt cap soon enough.

[hari] 17/3/2022 15:52

"We're now clearly on the path to the next recession and the next gigantic bout of QE.I expect Gold to hit $2,200 in the next couple of months"Positive for Gold and ppl hold gold stocks . But unfortunately that will be a gloomy period for the world economy . I guess with further QE be positive for the market again .A vicious circle , how will it be broken?

[hari] 17/3/2022 15:36

MattjosAt this price I see no risk but only reward going forward .I look at it as almost a safe bet Without fear of losing my money .Increase in Gold will also support investment case here However the large debt plays on my mind which impacts the time we will see larger gains .I am struggling any other gold play with debt showing the valuation we think it may deserve based on cash flows / profits etc . However I see decent valuations once the debt has been vastly reduced or paid .CNG , well it could be another year before we come below $300m . Then I worry about the renegotiation of existing at higher rates when these expire again . Then I worry about debt reduction not reducing as much during the year of mine expansion So could be 3-4 years until debt is paid down , then I expect to see big rises Oh I forget what is LOM here?There is room for further asset expansion which will extend this .Do you agree or think about any of that ?

[mattjos] 16/3/2022 21:46

I honestly cannot think of a better environment for Gold than right now.
The FED is hiking into a Yield Curve that is already inverting.
Rates are barely above 0% while inflation is surging & with China going back into national Covid lockdown (most curious the timing of these new cases), expect inflation to continue surging as Supply contracts & therefore Real Rates will plumb new depths.
These are the fertile breeding grounds for a stunning Gold bull market.
Plenty of leverage in the P&L here and plenty of leverage on the Balance Sheet. All leveraged on the fulcrum of the Gold price.
It's a great macro & company specific setup for CNG and with much, much less than 20% free-float, any modest buying will have an outsize impact on the mkt cap.

[mattjos] 16/3/2022 11:08

given how sensitive this is down here to even a sniff of buying, I look forward to a 1-2m+ buying day

[mattjos] 13/3/2022 11:10

Anyway, I remain persuaded that the price of Gold has a lot higher to move this year& we should see at least $2,500.

It still does not seem to have dawned on most people that events of the last month have completely altered the world economy & that Gold is, once again, moving towards being the most highly prized form of 'money'.

I see some in the media are speculating that Putin will have to sell some of his gold reserves in order to keep funding his war machine. I expect him to do quite the opposite and we'll see him selling his commodities, oil & gas in exchange for physical gold as payment ie. he will be buying yet more to add to Russia's reserves.
That could well be the catalyst necessary to destroy the false Paper markets in Gold and true price discovery for the metal will emerge, as a result of gold de facto becoming the new commodity currency.

[mattjos] 12/3/2022 20:18

I really don't understand why people seem so concerned abut CNIM's presence here.

Just how many more examples do they need to see of CNIM backing Pakrut, before they start to see CNIM as not just a 'bad' majority shareholder.

[mattjos] 12/3/2022 14:09

I really have no idea is my answer.

I believe two things have slowed it:


1). The early running of the mine did not produce the expected/forecast quantity of Gold & that was due to the Refining stage of the process - it fell well short & the company has repeatedly confirmed that. However, more recent detailed updates now show they are achieving the expected efficiency, particularly after they chartered the plane and bought back the Chinese staff who might otherwise have been stranded in China.


2). China has a much more restrictive approach to containing Covid than we do & the management of this company are Chinese - they have to toe the party line on this topic & this has undoubtedly had a negative impact on the speed at which things have progressed.


With the mine now in steady-state production and achieving the overall efficiencies, we have a strong cash flow. I very much doubt that management had expected the price of Gold to be anything like as strong. The mine plan had $1,250 as the ave. Price. It’s 50%+ higher than that.


In order to release CNIM from it’s obligations that are backstopping the debt here, the business needs to clearly demonstrate that it is a strong viable independent entity. I believe we're at that point.

[hari] 12/3/2022 13:11

I assume there is reason this has not been already started , gone quiet on that front and it should really be accelerated

[hari] 12/3/2022 13:09

Mattjos,Thanks for that , you are full of knowledge Do you know the how long it would take to complete and the cost for phase II expansion ?Funded from cash-flow or debt ?

[bazboa] 12/3/2022 08:53

I would second that. Thanks mj for your thoughts and research on CNG.

[wanobi] 12/3/2022 08:33

some very interesting observations there Mj, many thanx for sharing them, Cheers Wan :-)

[mattjos] 12/3/2022 00:45

Given the now increasing focus on Gold and how it's use is increasing as an alternate currency to the US$ in trading between nations that the USA deem 'unfriendly' (or whatever term you wish to use), the recent RNS here is surely noteworthy:

"China Nonferrous Gold Limited (AIM: CNG), the mineral exploration and mining company currently mining the Pakrut gold project in the Republic of Tajikistan, is pleased to announce that the Company has authorized its subsidiary, LLC Pakrut, to enter into a Gold Doré sale agreement with Daye Nonferrous Metals Company Limited ("Daye Nonferrous" or the "Buyer"), for the sale of up to 600kg of Gold Doré ("Sale Agreement").

The Sale Agreement supplements the agreements with the Tajikistan Government which collectively covers the majority of gold anticipated to be produced at Pakrut for the calendar year. In 2021 the Company produced a total of 1,249kg of gold bullion, 1,199kg of which was sold to the Tajikistan government on similar terms, and 50kg was sold to Daye Nonferrous (see announcement dated 07 September 2021).

This is Gold that will be purchased by Daye NonFerrous Metals, direct from the Pakrut mine & therefore not through the London or Singapore exchanges, thus escaping the official 'counting' that goes on of just now much physical Gold China is amassing into its national reserves.

The USA is now also upping its aggressive stance towards China, since it believes that Russia will simply increase its trade with China as a means of bypassing USA sanctions.
Productive Gold Mines around the world are going to grow in strategic importance as ever greater trade is conducted outside of SWIFT and not involving the US$.

Golds' significance as globally recognisable & fully-fungible alternate currency to the US$ & to fiat currency is now rapidly increasing.

With this agreement now in place and the RNS further stating;

"The terms of this new Sale Agreement remain in force until 30 December 2022, after which the contract may be renewed. The Gold Doré to be sold under this agreement is to be produced at the Company's Parkrut gold mine in Tajikistan and gold purity is to be at, or above, 99.95% with each bar weighing approximately 400oz.

I think it only adds to the imperative to advance the mine to Phase II & therefore increase its productive output.

Recent events are clearly resulting in the process of revaluing physical Gold, both in terms of it's reported fiat value and its strategic importance to nation states.

The local costs for the mine will be denominated in Tajik Somoni .. this just fell 15% against the US$ this week. That's a noticeable reduction in our costs.

For those that have travelled to Russia & ever stood on the roadside and held your hand out for a lift (it's how folk get around in Moscow), the chances are it will have been a nice chap from Tajikistan in his Lada that will draw up next to you in about 30 seconds & take you where you are going for a cash payment.
The car may not be to Western standards but, I've done it many times, always enjoyed the experience & never had a problem .. the point is, a huge number of Tajiks live and work in Russia as they can earn more money there, which they then send home to the family in Tajikistan.
25% of Tajikistan GDP comes from Tajiks sending money home. It's huge part of the economy.
In 2019 migrant Tajik workers sent over $2.5Bn from Russia to Tajikistan.

The recent sanctions on Russia are having an immediate and outsize impact. There is less work available to the migrant Tajiks & the Rubles they do earn is now worth less than before.

One of the unintended consequences of recent events is that Tajikistan is going to get hit really hard financially & societally.

If i were the Minister responsible in Tajikistan, I'd be pushing CNG to get a shifty on with Phase II and the likely increased employment it will create & I'm guessing Daye Nonferrous Metals will similarly be keen to purchase greater quantity of physical gold from Pakrut.

Anyway, we have a strong and rising gold price, local salary costs just went down (in terms of our functional currency) & the Gold we produce recently took on a whole new importance in the world.

[mattjos] 11/3/2022 10:22

some volatility in the Gold price day to day but, still clearly in the breakout channel from 4th February and well above $1,900

[elpirata] 10/3/2022 16:07

Ha! well i've picked up a total 185,000 so far around this level inc.a 50k & 10k today, note the offer has dropped this afternoon - anticipating a material sell?

[wanobi] 10/3/2022 15:14

soz Mj, don't have L2 so I can't see you at work,,,, but, thanx for heads up.
Cheers Wan :-)

[mattjos] 10/3/2022 14:40

that's just me on Bid .. am trying to keep the price sat down for the time being & narrow the spread back under 6p to buy

[elpirata] 10/3/2022 11:19

Yep, 6.1p to buy and about to firm

[wanobi] 10/3/2022 10:28

do I see the green shoots of demand for shares here? Cheers Wan

[mattjos] 09/3/2022 20:56

something like this but, please, anyone welcome to add comments and make suggestions to my model/assumptions/figures:

[mattjos] 09/3/2022 10:36

For 2022, I have modelled:

40,500oz production
Ave. of $1,911/oz for Gold this year
Giving $77.3m Revs
Operating Costs of $37m
Giving Gross Profit of $40m (52% Gross Margin)
Admin costs of $17.7m
Operating Profit $20.9m
Finance Cost of $10m
Profit before Tax $11m

Current Mkt Cap is $28.4m

That's surely cheap on any sensible metrics

[mattjos] 09/3/2022 10:21

now 5.7 to buy

[mattjos] 09/3/2022 09:33

5.311 are all buys

[mattjos] 08/3/2022 22:11

At $1,925 Gold ave. for 2022, i have $9m Profit before tax pencilled in.
Mkt Cap is, how best to put it? Farcical?
Still dribbling more in on cheap Bid every week

[mattjos] 08/3/2022 20:16

Many of the Junior Gold miners are still at/near long low prices.
The larger cap producers have moved first, as is usually the case, given their deeper liquidity & wider awareness amongst analysts, funds and investors.

CNG is at the 'minnow' end of the market.
£21.5m Mkt Cap, no covering analysts, no coverage whatsoever by the House Broker, concentrated equity ownership in a Chinese entity, a significant o/s sum of debt & a 'Stan' location.

We do rather have more red flags than green ones but.....

All the minnows tend to hang around at a start of a sectoral Bull-Run.

( am also invested in AAZ & other than the location, it ticks just about every box you could wish for: Debt free, paying a dividend, huge resource base, small equity issuance etc but, that too is stubbornly lingering near its recent lows).

We've endured the 'war' sell off & now the larger caps are all moving upwards into uptrends, price of Gold is near all time highs .. our time will come.

The market will not ignore a 40k producer for ever, no matter how obscure the entity, folk will find it.

CNIM continue to act in a very respectable & supportive manner towards their toddler (CNG) & I am yet to feel it necessary to question any of their decisions to date.
I remain persuaded that CNIM still firmly intend to see this toddler grow into a far bigger regional PM mining entity and, in so doing, hugely reward their patience and support.

Am assuming the recent selling has been purely reflexive, given events in Ukraine/Russia & perhaps a desire for liquidity but, markets soon adjust to changed dynamics & wars come to an end at some point.
Meantime, the gold price (with a guaranteed 'market' buyer for our output) is doing wonders for the cashflow.