Numbers Again

If the company numbers can be relied upon, then the projections made years ago are falling into place. The production rate of ~10g/t @ ~700tpd. can be assumed.

We haven't seen any move by the company to start producing at that rate, since Komis is not exactly in production. The delay has been lengthy with few details as to progress. The tailings impoundment area is supposed to be ready for October this year, which seems an awfully long interval.

The damage inflicted by the federal government is long term and costly to shareholders in terms of share dilution and opportunity cost. And to consider that you would have to pay taxes for them to vandalize the project.

The original intent was to have Komis production along with Lloyd mine production. Some extra production is coming out of the EP Zone, which seems to be preceding the implementation of Komis. Why they bulk sampled the Alimak zone is a total mystery. Evidently the historical grades did not match results.

With the increase of cash from operations, you can assume that the processing rate has increased, along with a larger inventory.

So you can assume that the company will eventually produce ~82koz./year

Cost of revenue would have to increase to approx. ~$18m per quarter and Cash From Operations would have to climb to ~$9m. per quarter.

The projected gold price for Q1, fiscal 2013 should be the long term inflation-adjusted average, which I suspect would be ~$1800/oz., or better. Q1 fiscal 2013 starts in May. I presume we'll see an increase in production then, but the company gives out no guidance on that.

Right now, the company is likely to produce gold somewhat below that for Q4, fiscal 2012. Q3 was a disappointment, as the company could easily produce enough gold to pay for operations & development and pay a quarterly dividend. (for reasons discussed, such as presenting a qualitative change to calculating the dynamic hedging in place held against non-yielding gold stocks.)

Using the 34-week EMA of $1670/oz. CDN as of the close on friday, is a very conservative price, since during February the gold price was trading much higher. The $CDN gold price has lagged the $US gold price owing to the forex appreciation of the currency.

Since the company absolutely insists that they will produce 45koz. for the end of the year, you can assume that they will produce approx. ~13koz. for Q4, a significant increase over Q3.

So far, mine expansion for the Lloyd mine remains an open question mark. How much information are they withholding on this key development? Why would they be so anxious to mine an ore shoot and spend many millions more drilling off the property and taking a Soil Gas Hydrocarbon survey over the property?

What I find unusual in reading comments about the company online is that shareholders are under the terrified impression that the company will require financing to carry out their plans, because there isn't any money. Don't they read the news releases? Don't they follow the numbers?

http://markets.ft.com/Research/Markets/Tearsheets/Business-profile?s=GBN:CVE

Market Conditions

The important change to anticipate is the collapse of the housing asset price bubble in Canada, and along with it, lower short-term interest rates. A 3-month treasury bill yield below 0.5% will ensure very strong gold prices in terms of Canadian dollars, thus also ensuring parabolically advancing internal rates of return for gold mining companies, and the inverse for any other $CDN dollar denominated asset. The Canadian Central Bank is still very far behind the curve on bullion diversification and has very little in the way of bullion reserves.

Miners will have underperformed partially due to Canadian-listed gold mining stocks lagging as interest rates in Canada have defied the global norm of near-zero, and historically low long term rates. It must be remembered that Canadian-listed gold mining stocks form the majority of listed gold mining stocks in North America, thus fall under the aegis of Canadian interest rate regimes.

Certainly Canada's Snow-White bankers have enjoyed spanking the dwarves of the gold mining industry, who have been just as anxious to drop their drawers for the privilege.

supersize: http://www.flickr.com/photos/11747277@N07/7051115065/sizes/l/in/photostream/

stockcharts.com

-F6