Playing The Numbers
SOMEBODY IS BUYING A LOT: Trading activity in CDY common shares, analyzed to be for a positive, single-minded client seeking to accumulate shares in Cassidy Gold Corp. occurred again on the floor of the TSE this past week.
In Q3 2007, under a similar trading pattern, a professionally executed buying program took more than three million shares off the floor of the TSE without mussing a hair, hurting anyone’s reputation, or, sadly, raising the per- share price.
Now, in 2008 YTD another very professionally executed buying program appears to be underway. More than 650,000 shares of the miner have traded. The same trade pattern earmarks are seen. The bid is for relatively small orders, never stretching for shares at higher prices and backing off whenever there are signs that the buying is causing share price to run away.
The professionalism evident in the trading discipline is remarkable. A total of 2,630,000 shares were traded since late October 2007. The cost is just slightly more than one million dollars. The result is an average price of $0.43 per share. That $0.43 average per share is the closing price today, up one cent per share from January 31, 2008.
January 21, 2008 the sky was falling! At least as far as the TSE Indices, the Gold bullion price, and the price of many wannabe miners’ shares were concerned. CDY shares evidenced serene stability and liquidity through this serious stock market tilt. INTERESTING!
SMART BUYER ON DOOTY? The similarity of pattern of the share purchases strongly suggests a single buyer. If so, more than four million shares have been accumulated off the floor of the TSE by a determined smart buyer(s).
A brokered private placement of 8,000,000 common shares of the Company (and warrants to purchase added shares) sold for four million dollars ($0.50 per share). This means that as many as 12 million shares (plus warrants to buy more) changed hands in the period. This represents more than 10% of the undiluted capitalization of the Company.
Someone out there is buying. They must consider it to be a bargain. The facilitating broker of the last private placement, Jennings Capital took shares on the placement. Jennings was the buyer or agent for the buyer in the Q3 2007 accumulations. Recently the smart buys are being done by broker Canaccord. It could be Canaccord for its house account, but more likely it’s Canaccord for a client. I suspect it is the same buyer who bought the majority of the private placement,
WHODUNNIT? Identification of the purchasers of the common shares issued by the treasury of the company under private placement terms is reported.
The purchaser of the largest proportion of the most recent issue (and a returning purchaser from previous placements) is Phoenix Gold Fund, an investment managed by Asian Investment Management Services (AIMS Ltd), from Malaysia. Asian Investment Management Services (AIMS Ltd), is a fund management and advisory business. It has assets under management that top USD 250 million, including a 100m USD portfolio managed for Soros Fund Management. Here is a paragraph lifted from its Phoenix Gold Fund’s January 2008 newsletter :
"However, this steep fall in the price of many of the smaller stocks, combined with the sharp rise in the gold price, particularly during the last quarter of 2007 and the first few days of 2008, has produced a situation where we are able to find many stocks that have already delineated substantial resources and where they are now trading at a fraction of the price at which we expect they will be the subject of an acquisition. If gold is now going to remain on the right side of $800 an ounce, we expect that many of the smaller gold explorers will soon be recognised as bargains and these stocks will again far outpace the bullion price."
Does this sound like a description of Cassidy at this time? You betcha boots! Is this the mystery buyer? Could be.
WHY BUY? Cassidy has accomplished something very few gold juniors do - actually prove potential of a mine. Most small companies sell off their discoveries long before they reach that stage. They sell to the majors. The majors are majors because they buy up the little guys for a song. CDY is somewhat unique in holding on as long as it has. To quote my favourite Geologist, Arte Johnson (From the old LaughIn show) VERRRRY INTERESTING!
The next step for the big boy investors in Cassidy may be to get the share price up. If the hundred million bucks or so needed to make a mine doesn't scare them off, they only need get the stock up to say, a couple of bucks. That is still well below value in the ground per share of the gold already evidenced. Then. if one assumes a 50/50 debt to equity mine financing one needs dilute only by 25 million more shares to get mining. Cassidy becomes a 125 to 150 million share company with a "nearly proved" nearly one Billion dollar ore asset in the ground. At that point the asset is getting ready to come out. Best of all, Cassidy has great potential to add mineable resources both downward and sideways at Kourassa. It has now done everything to justify having great credibility among investors and competitors.
Shareholders like Dundee and AIMS look for really big gains from LARGE investment opportunities. They are not satisfied with "chicken shit big moves" on small potential stocks. These funds have way too much money to look at multitudes of small holdings. They rely on technical expertise. Managers can only keep up with so many stock positions. The fact that these professionals chose to invest in Cassidy (some several times over) is, to me, vindication of my past expressed interpretations.
I see really deep and very patient pockets accumulating CDY shares. The question is - will they cause the stock to climb? Will they support in order to get the financing for the mine at least dilution? Or, will they use their accumulation to hold the price down in order to be the investors willing to put up the $50 million in equity to build the mine? I suspect they might become both - equity investor and lender for mine building.
Afterwards they could stay while Cassidy uses the supernumerary cash flow to explore the rest of the concession. Cassidy’s permits are in the fairway that is situated between a profitable mine to the south and two to the north. They soon may be seen to contain a mine in progress as well. Owning shares acquired at a very good price in a company that has room for great growth appeals. How does Cassidy fit in the picture?
In mid Q4 of 2007 Cassidy announced calculations accounting for the continuing delineation of the first project, called Kourassa. The deposits are a cluster of accumulations in proximity to Guinea’s principal highway. The known accumulations occupy an area that is only between five to ten per cent of the total area that CDY has rights to explore and, if economic, to mine for profit.
The Company has very highly regarded expert opinions expressing that the ores can be efficiently processed to yield 96% of the contained precious metal. A study to determine potential profitability was initiated in late Q4, 2007.
Drilling underway is intended to "flesh out" resources that, if confirmed to strict standards, will enhance mining profit projections. CDY will resume exploration as soon as possible. Past drilling already demonstrates that some deposits extend to coalesce with others. This makes mining possibility more profitable. The accumulations extend to unknown depth. Logically, some can be expected to be richer at depth.
RESOURCES IDENTIFIED NOVEMBER 2007: CDY’s press release dated Nov. 8, 2007 informed shareholders of resources recognized by Cassidy’s highly conservative consulting engineers. The report filed bears the name of Coffey Mining Pty Ltd. The resources reported at Kourassa total 940,000 ounces of gold with average grade of 1.95 grams gold per ton when using a cutoff of 0.7 g/t (i.e. the cutoff is $21 per ton dirt at current gold price).
The resource calculation is conservatively cautious and does not include potentials indicated by drill holes that tested gold in widely spaced holes. As an explorer, it is illogical to me that extensions of the recognized trends are not projected into these numbers. But I rely on their caution to allow me to speculate that the indications are for more than one million ounces of gold resource to exist at Kourassa.
The detailed report was filed with Public Company Information Regulator, SEDAR, on Dec 21, 2007. The name RSG Global, is now a division of Coffey Mining Pty Ltd whose name appears on the report. In the past I have claimed RSG uses excess caution especially in regard to intervals with higher gold readings. "Capping" is a cautious engineer’s insurance against reporting optimistically high readings caused by "nugget effect". Previous reports included calculations with and without capping. I may have been too much of a gadfly. Here is an excerpt verbatim from that report :
"The outcome of applying the high grade capping process was that relatively few data were capped (generally less than 5 composites), although 18 data were adjusted for domain 110 at Sanu Filanan. The capping has resulted in a substantial reduction in mean grade for some domains, although this was generally based on the adjustment of relatively few data."
Sadly, Sanu Filanan is one of the principal rich localities ah well, big sigh, engineers!
THE CONSULTANT’S CONCLUSIONS, (paraphrased and abbreviated) :
1. Cassidy has delineated resources of gold that merit consideration for mining.
2. The quality of the work and assaying done is very good. There is no cause for concern about the resource existing,
3. Cassidy should reduce its concentration on pinning down the resources at Kourassa and resume exploration of its very large tract of highly prospective permits.
MY CONCLUSIONS :
* Cassidy has attracted the attention of investors who appear very knowledgeable, Some are continuing to avail themselves of opportunities to acquire shares at these very low prices. All have the capacity to invest large sums;
* Cassidy now has the hard evidence needed to attract possible joint venterers, and/or company acquisitors under terms that are solidly beneficial to shareholders;
* Comparisons with recent deals suggests that the Kourassa project alone, as is, would fetch $160 to $300 million ($1.60 to $3.00 per share) "on the street". Additional value, several times that amount can be imputed for the exploration potentials;
* Cassidy’s management has expressed intentions to follow the consultant’s advice to concentrate on exploration of the additional potential of its holdings. Exploration news makes markets move!
* Cassidy’s management expresses intents to promote the company now that it has reached a "comfortable" basis of "bragging rights";
* The company has started a campaign to make the company known to added investors at "gold shows" and venues arranged by brokers who recognize the inherent value and by extension, the potential for extraordinary share price advances;
* The company will outshine its competitor counterparts by reason of having the resource solidly pinned down with added properties of equal or better potentials;
* The financial expertise resident in the larger shareholders better guarantees that dealings with third parties will be beneficial to all Cassidy shareholders. The seeming unsatisfied appetite for shares provides good liquidity prospects for other shareholders;
* The existence of more than one major investor better assures that no single party will steamroller small shareholders;
* World economics, fears of slowdown or recession will serve Cassidy in two positive ways. First, Gold is likely to continue to hold or build on its value if dollar fears continue. Second, slowdowns may reduce the cost to equip and operate mines.
Cassidy appears to be ready to have its share price climb to new highs.
Keep the faith!
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