Cluff Gold Share Discussion Threads

[taffer87] 17/7/2012 10:22

NCP - Site Visit Field Notes (I am only posting extracts)

HIGHLIGHTS
 SITE VISIT| In late June, we visited Cluff Gold's (CFG-T; Not Rated) Kalsaka
mining and processing facility and its Sega project, both in Burkina Faso. There,
we met with Cluff's Mine Manager and his senior management team to discuss
Kalsaka's mining operations and near-mine and regional exploration potential
on the Kalsaka and Sega properties.
 BUILDING A PIPELINE OF FEED FOR THE KALSAKA PLANT| With Kalsaka oxides
exhausted by the end of 2012, Sega oxides are expected to feed the plant for
1.5 years, beginning in January 2013. Thereafter, transition material from Sega,
plus additional transition material that Cluff believes it can find at Kalsaka, will follow. There is also the potential for Cluff to acquire additional nearby projects with oxide resources.
 PLANT RE-FITTING AND OPTIMIZATION| Cluff is undertaking capital expenditures
to ensure that it can process stockpiled transition ore at Kalsaka, and Sega
oxides and transition material.
 EXPLORATION POTENTIAL| Near-mine and regional exploration potential for
additional oxide resources exists on the Kalsaka Shear and parallel structures. Also, there is considerable potential for discovery of sulphide resources below some of the existing pits at Kalsaka, and to find additional sulphide resources at Sega.
COMPANY PROFILE| Cluff Gold plc is a mining company with gold production in
Burkina Faso, a development project in Sierra Leone, and exploration projects in
Burkina Faso and the Cote D'Ivoire.

FIELD OBSERVATIONS
KALSAKA RUNNING OUT OF OXIDES - NEXT UP ARE SEGA OXIDES, THEN...
Kalsaka is an open-pit heap leach operation and will be mining the last of its oxides in November 2012.
On May 23, 2012, Cluff completed the purchase (announced February 3, 2012) of the Sega deposit from Orezone (ORE-TSX; Not Rated) for $15M in cash and 11M shares of Cluff, which amounts to 6.5% of the outstanding shares of Cluff (4-month hold period, orderly market transaction clause). The purchase valueat the time was approximately US$26.5M. Sega is located approximately 25km to the north of Kalsaka
and its ore will be trucked to the Kalsaka processing facility. Using a 0.73 g/t cut-off, which reflects the cost of trucking, the oxides at Sega currently amount to approximately 155,000oz in situ, or about 120,000 recoverable ounces which represent approximately 1.5 years of current production levels at Kalsaka.
Cluff is fast-tracking the permitting process and engineering, and expects the rollover from Kalsaka oxides to Sega oxides to occur in January 2013 and to be seamless from a gold production standpoint.
Cluff estimates that the capex required to bring Sega into production is approximately US$10M. This would include a mobile 250tph crusher at Sega and a third stage crusher at Kalsaka, plus the construction of a new 25km road from Kalsaka to Sega.
NCP COMMENT| Sega gives Cluff another 1.5 years of oxide feed for the Kalsaka heap leach facility.
Cluff clearly needs to be thinking about what comes after Sega's oxides are exhausted. We have heard that Cluff is looking at Goldrush Resources Ltd.'s (GOD-V, Not Rated) Ronguen (300,000oz of oxides) and Riverstone Resources Inc. (RVS-V, Not Rated) (750,000oz of oxides/transition) as potential acquisitions.
TRANSITION MATERIAL IS ALSO AN OPTION
Tests done at Kalsaka's column leach testing facility show that Kalsaka's transition material has similar leach characteristics to its oxides. Currently, only approximately 10% of remaining reserves at Kalsaka are transition type material. These have been stockpiled and will be processed starting in 2013 when the third stage crusher, required for Sega material, will be operational. The transition material requires crushing down to 10mm versus the current crush size of oxides of 25mm. Very little exploration has been carried out in the past for transition ore at Kalsaka, and Cluff believes that there is great potential for finding transition ore beneath current oxide reserves. As well, Sega has a further 27,000oz of transition material which could be processed at Kalsaka's heap leach facility.
NCP COMMENT| Normally, crushing down to a smaller size (from 25mm to 10mm) would result in a higher usage of cement for agglomeration. However, transition material is more competent than oxides and could be expected to actually use less cement for agglomeration despite the smaller particle size.
SULPHIDE POTENTIAL
Exploration for sulphides at Kalsaka was previously nonexistent, given the oxide resource and the dedicated oxide processing facility. However, several exploration holes have intersected sulphides below the current pits at Kalsaka (e.g. 16m of 4.73g/t). Cluff believes that the exploration potential for sulphides at Kalsaka is substantial, and has budgeted an 8,000m, US$1.44M program to drill-test sulphide potential below the K Zone and the East pits. As well, Sega hosts approximately 300,000oz of Indicated and Inferred sulphide resources, at a 0.5g/t cut-off.
NCP COMMENT| Sulphides cannot be processed at Kalsaka's current processing facility and a separate CIL plant would need to be built. A future CIL plant could be located wherever a substantial amount of sulphides are found. Should further exploration work find significant sulphide resources at both Kalsaka and Sega , a CIL plant could conceivably be constructed halfway between the two deposits to processore from both.

OPTIMIZING THE KALSAKA PROCESSING PLANT FOR NOW AND FOR THE FUTURE
Initiatives currently undertaken include:
 A jaw and cone crusher were installed approximately 6 months ago to process the hard oxide material of the K Zone II pit, and to process stockpiled oversized material.
 A 250tph mobile crushing plant will be added at Kalsaka to process the stockpiled transition material (at a higher throughput rate than the abovementioned circuit) and this plant will then be moved to Sega where a crusher will be required.
 A third-stage crusher is required to crush transition ore down to 10mm, so a short head crusher will be added to the Kalsaka circuit. This will be used to process the remaining transition ore at Kalsaka, plus
any new transition material at Kalsaka and Sega oxide and transition material.
 Reagent costs comprise approximately 50% of total processing costs at Kalsaka, and of these nearly 78% is for cement for agglomeration and 17% is for cyanide. Cluff has decreased cement costs 25% by moving to bulk cement deliveries (from 40kg bags), and decreased cyanide costs 10% by switching suppliers to Samsung in Korea (KRX:000830; Not Rated), from DuPont (DD-NYSE; Not Rated) in Texas).
 A mill and gravity table were installed to recover residual gold contained in the slag, which was previously thrown on the heap to be leached and poorly recovered.
 A third lift is planned on the heaps at Kalsaka to process crushed Sega material. Depleted first and second lifts are currently being condemnation drilled before the lining on the second lift is laid.
NCP COMMENT| Cluff has taken several steps to reduce costs at Kalsaka, while taking necessary steps to ensure a seamless rollover from Kalsaka to Sega material at its process plant.
SEGA SOCIAL ISSUES
Upon visiting Sega one sees the significant amount of artisanal miners (locally called "orpailleurs") and the communities they attract. As well, there are permanent residents (farmers) who would need to be relocated. The distinction is more than superficial as the artisanal miners are easier to move. They lead an itinerant lifestyle and mine illegally, so they have a much lesser stake in any one geographical location,
and much fewer rights than the permanent agrarian residents.
NCP COMMENT| Kalsaka senior mine management has operated the Kalsaka gold mine for numerous years and has a lot of West African operating experience, so we believe that it is has the capability to deal with these kinds of issues. Cluff has engaged an experienced consultant to assess and develop a relocation program. As well, it plans to mine first those pits around which there is the lowest population
density.
EXPLORATION POTENTIAL
NEAR-MINE EXPLORATION| As previously discussed, there exists significant potential for discovery of sulphide resources below the current Kalsaka pits, especially the East and K Zone II pits. As well, there exists the potential to discover satellite oxide deposits along strike of the existing pits, and between the pits, especially to the west of the K Zone I pit, and to the east of the K Zone I pit towards K Zone II (possibly linking them up).

REGIONAL EXPLORATION| Geochemical and geophysical anomalies, and limited drilling have identified potential satellite oxide deposits along shears (K Zone and Gougre Shears) running north-east and parallel to the Kalsaka Shear which hosts most of the current mining activity.
SEGA EXPLORATION POTENTIAL| Orezone had previously identified numerous geochemical anomalies on Sega, in addition to the deposits included in the current resource, and had completed scout drilling on 11 of them with numerous intersections of gold mineralization. Cluff plans to follow up on these results
with its own exploration work, and believes that considerable exploration potential exists. As well, Cluff plans on following up on an interpreted regional scale asymmetric fold on the Sega property, which has not yet been properly explored on its lower limb.
IMPACT
 Despite running out of oxides at Kalsaka at the end of this year, Cluff is taking steps to ensure that the Kalsaka heap leach facility continues to produce gold for years to come. Sega is the first piece of the puzzle, with transition ore from both Kalsaka and Sega likely to follow.
 Cluff is likely looking at acquisitions of nearby oxide resources to further fill the oxide pipeline.
 Sulphide potential at Kalsaka and Sega could ultimately result in a CIL plant close to the "centre of gravity" of future sulphide resources.
 Plenty of exploration potential exists for additional oxides on parallel structures near Kalsaka and at currently-identified prospects at Sega.
 Finally, one must not forget that waiting in the wings is Cluff's Baomahun Gold Project in Sierra
Leone, with a 2M ounce Indicated resource grading 2.5g/t, and another 0.9M Inferred ounces grading 2.8g/t. Cluff will perform a feasibility study before the end of 2012 with first gold pourexpected in 2014.

[fitton] 13/7/2012 21:13

The only good thing is that Mr McGloin has some very good contacts in the city.Options at 62.75p. This company is being lined up for a takeover.There is no way Cluff will be independent this time next year.

[pineapple1] 13/7/2012 16:45

Optionsgate........lol.Very appropriate.

[amargosa] 13/7/2012 16:25

Mind you, I've seen worse; I know of one company where the directors promised to take only 10% of the company as shares - oh, and by the way, they were to get them without even paying for them and without any performance targets attached!

[zangdook] 13/7/2012 16:07

So they couldn't find a candidate who would agree to work for his employers' interests unless he was given the right to buy 1% of the company at today's price any time from 3 to 10 years from now (or sooner if theres a t/o)? So whose interests would he have been serving otherwise?

We have great confidence in Mr McGloin's broad depth of technical skills and knowledge of the financial markets

But not in his character and trustworthiness, evidently.

[amargosa] 13/7/2012 11:54

We need to wait an appropriate time for the stink to die down following optionsgate.

[jdk14] 11/7/2012 19:33

should have got the resource update last month!

[ukgeorge] 11/7/2012 12:19

should get the resource update this month, something postive to look forward to

[nottud] 11/7/2012 06:39

Neither the RNS nor the company reply to fitton specify whether there are any specific targets that have to be achieved by the company before the options can be exercised. e.g. annual profit has to increase by X% from date of grant. A window of 3 to 10 years is normal and I believe is defined by HMRC rules. Some more information about the terms of scheme would help but I am not sure how shareholders are able to get this information.

[pineapple1] 11/7/2012 00:22

Yes thanks for posting Fitton.

[jdk14] 10/7/2012 23:05

Thanks for posting that.

[fitton] 10/7/2012 22:13

As I mentioned earlier, I did ask the question about the share price and option price.As it is in the interests of the smaller shareholders I have posted the reply.I am sure the company will not mind the reply being posted as it gives a clear explanation behind the granting of options and timing etc and puts across the company view.

Thank you for your inquiry.



Mr McGloin joined us as an Executive Director in April 2012, and was appointed Executive Chairman on 28 May 2012. As part of his remuneration package, which was recommended by the Remuneration Committee, it was agreed that he would be granted a certain number of options to ensure that he is properly incentivised as a director, in a similar way and scale to other board directors within our peer group. These options were granted to ensure that Mr McGloin is properly aligned to the interests of shareholders, and this is especially the case given that his total remuneration package is more heavily weighted towards share based payments compared to that of the previous chairman.



Pursuant to the Rules of the Company's Share Scheme, the exercise price for any options issued is determined by the closing price of the day immediately preceding the day on which the options are granted, which is typically held shortly after the director's joining date.



When Mr McGloin joined the Company, the Company was in a close period as we were approaching our 2011 and Q1 2012 results releases, resulting in the delay of his options. Subsequent to those releases, several members of the Board were visiting our operations in West Africa, which further delayed the grant. It was only upon their return that we had a small window before we enter another one-month close period for our upcoming H1 2012 interims results and the Board was in a position to grant Mr McGloin's options.



Along with the rest of our peer group, our share price has been depressed since May, driven primarily by the macro-economic environment, which has affected the broader gold mining sector. Consequently this has affected the exercise price for Mr McGloin's options, with the share price remaining below the 70p level over the past few weeks.



As the options do not vest for 3+ years, we believe we are strongly aligning Mr McGloin's interests with those of long-term shareholders by ensuring that his contribution is rewarded by the Company's share price growth. We have great confidence in Mr McGloin's broad depth of technical skills and knowledge of the financial markets and we believe he will be instrumental in delivering our long term growth strategy to unlock shareholder value.



We will continue to focus on growing our operations and exploration work, and we look forward to a recovery in the share price as general market sentiment improves. We appreciate your loyal following to date and hope that you will maintain your support for Cluff Gold and share in our long term vision for the Company, despite a challenging economic environment today.

[amargosa] 10/7/2012 14:19

IMV the 'discount' is associated with the funding that will be needed for the construction of the Baomahun mine in SL; until this is out in the open, there will be some concern over how much dilution there is likely to be and at what price. Most of the DFS delay seems to have been associated with permitting by the SL government (now resolved); I would not swap the CEO or the CFO for anyone, the new Chairman - tbd.

The slow progress on the exploration front has been something of a legacy associated with Algy Cluff, who didn't want to dilute shareholders too much early on before the cashflow came onstream from the producing mines; maybe he should have got on with things more quickly, but the end result is that CLF does not have that many shares in issue (despite recent placing), but now has a lot of drilling going on.

[sporazene2] 10/7/2012 14:10

tatser, the discount you are referring to is also connected with management. track record is not good and have not delivered. DFS for flagship asset is 12 months late, exploration at existing mines have not delivered and there has been a fair amount of dilution over the past two years, even despite a high POG

[tatser] 10/7/2012 13:50

I just started to do some research on cluff... But this one looks dirt cheap... Does the discount mostly has to do with political risk? Really thinking of buying this one heavily... Thanks for any input

[amargosa] 08/7/2012 22:09

I'm not sure about the take-over theory, the current management seem pretty dedicated to seeing it through on the major projects, having left other lives to commit serious time and energy to this Company. But you never know I suppose.

The move by the Company to incentivize the Chairman at this point (Shareholder Spring, Bob Diamond, WPP, etc) does seem somewhat crass; if he likes the idea of shares at 63p he could easily have been buying them on the open market for some time now without diluting the rest of us.

[john148] 08/7/2012 09:43

Don't think you will ever stop the excess's of Boardroom pay and bonuses etc but I take the view that as with Cluff Oil all those years back, sooner or later this company is going to be taken out and at price that truly reflects it's real value. I've been topping up here and there and will probably continue to do so at these prices.

[jdk14] 08/7/2012 09:07

If it's like his last company it will change name and then be flogged off.

I am as disgusted as everyone else with the option price but at the same time hope that he makes a lot of money!

I wonder how Macquarie (if that's how you spell it) feel about the option price!

[amargosa] 08/7/2012 08:59

How do they come up with a figure for options granted? Who authorizes it? Do they clear it with the major shareholders first? At what number of options would the shareholders revolt - 2m, 5m, 10m?

With Algy gone and the management showing signs of turning into pigs at the trough, should he allow them to continue to use his good name?

[jdk14] 07/7/2012 19:37

Come back Algy - please!

[sequoia] 07/7/2012 18:09

No point in investing on value anymore when prices are fixed for management
seq

[amargosa] 07/7/2012 10:01

The top management of these sorts of companies still don't get it. Over 1% of the company as options for this one man, who hasn't proved himself worthy of anything so far.

[fitton] 06/7/2012 21:12

For what its worth I have written to the company expressing my concern.

[corrientes] 06/7/2012 20:42

What do you expect when its everyone for himself in this jungle of unbridled
capitalism. If the people at the very top have no morals, why should anyone be surprised that lesser beings follow in their footsteps.

Until really severe punishment is meted out to the miscreants,nothing will change,and since the controllers are all in it together,I don't hold out much hope.

Roll on the 21st century or should I say,conversely,the 12th century,where the barons ruled the serfs, for that's we're headed. Welcome to science fiction becoming reality.