China Gold Int (TSX: CGG) - Oh, now look at me and this opportunity

Interview with Jerry Xie, Executive Vice President and Corporate Secretary of China Gold International Resources Corp. (TSX: CGG, HKSE: 2099)

China Gold is a big gold producer, with a secondary focus on Copper. The company orients itself around organic growth of its two large main gold and copper assets. It does have however very deep pockets if required for M&A. What we found particularly interesting was the companies approach to value. They can buy large-scale projects, but will not overpay. Now given the relatively cheap cost of the money available to them, paying a premium would not be out of the question, which could give them a competitive advantage.

Founded in 2000, China Gold International has 2 main assets. Its main project is the CSH gold mine, one of China's largest open-pit gold mines. And the extremely large Development play, Jiama Copper Mine. CSH is located in Inner Mongolia, China, the principal product is gold doré bars with silver as a by-product.

In terms of measured and indicated (M&I) Resources, we're looking at 262Mt, averaging 0.60g/t gold totaling 5Moz of gold at 0.28g/t cutoff gold grade, based on the most recent 2012 Feasibility Study. If fully-optimised, investors are looking at 60,000t per day of ore. The life of mine stands at 11-years (as of 2012), with an estimated LOM CAPEX of US$213M, and an impressive AISC of US$713/oz of gold.

Over at Jiama Copper Gold Polymetallic Mine, in Central Tibet, China, Phase II expansion started commercial production on July 1, 2018. Jiama Mine’s Phase II consists of two series. Each series has a mineral processing capacity of 22,000t per day. The full design capacity of ore processing at Jiama Mine will increase to 50,000t per day. Total copper production in 2019 is expected to reach c. 132lbs, and the expected life of mine is 35-years, with gold and silver credits. According to China Gold's feasibility study, production is expected to grow to 176Mlbs of copper per year at full processing capacity.

While many gold producers share prices were buoyed by rising gold prices during 2H/19, China Gold International saw a slow and steady fall, now standing at CAD$1.06. The market cap is a sizeable CA$420, with 396.41M shares outstanding.

Xie claims the share price issue has been mainly related to marketing issues. A potential easy and cheap fix? He claims marketing on the TSX vs the HKEX is very different, and retail gold investors have either not been told the story effectively, or haven't been told it at all. So now what? Time for the company to step up its efforts.

Big changes for investors to look out for in 2020 will be cost-cutting and significant development of Jiama, maybe into optimised copper-gold production? Communicating effectively with the North American market will be important too.

The management team appears very competent. The assets are large, its is producing and sitting on a lot of cash, but the business strategy and marketing needs to be better understood by the market. China Gold needs to clearly communicate its strategy and focus to potential investors, and it needs to get the word out. This has the potential to be an exciting story: let's see how this develops, but this one story we are going to follow with great interest.

And a FREE 'Not A Mug' Crux Investor mug to the first person to guess the song name and artist featured in the title of this video! (One mug per household).

00:00 - Introduction
1:52 - Company Overview
3:32 - From Start to Finish: What Did They Set Out to Do? Why Do They Choose to Stay Public?
10:21 - Organic Growth and Restrictions to it: Project Overview
14:36 - M&A and Their Criteria: Can They Afford to be Aggressive?
23:13 - Share Price Dropped When Everyone Else's Rose: What Happened?
27:38 - 2020 Goals: Building Value and Regaining Control
31:26 - Possible Road Blocks and Concerns

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[robertdagge]

Great interview about a company I just started looking at. My concern is the low grades. The gold / copper mix might be good provided the copper does not drag down the gold now and vv in a few years when copper gets going. Main attraction is actually the low price in a market that is now heating up and in some cases already getting expensive.

[hartfordclub]

SO this is now 400% reutrn from video - who's invested?

[buttlesschap]

Love that 1434 book! The Silver Way: China, Spanish America and the Birth of Globalisation is a short but great read too that compliments 1434.

[joviatesc]

They have way too much debt. Their market cap is 300 million and the enterprise value 1, 3 billion. They have a very expnsive facility (1 billion something) compared with all what they are producing and selling. When it comes to resources theyarenot transparent enough in their website. Something is fishy here and the stock price so far tells that.

[jrj]

Why hasn't any management employee ever bought a share of stock in this company?Will the share price ever get low enough for Jerry Xie to buy some shares?Why are there no stock options, rights, etc. to provide management some incentive for getting the share price up?Why has the company done no acquisitions over the last several years, when mining stock prices were so depressed?Why does the company have no conference calls after earnings reports, to let people ask about the company?Seems to me that this company went from a entrepreneurial company, when the original owners found Jinshan, to just a company with salaried employees, not caring what happens to the share price or to outside stockholders.Wish China Gold would buy us out.Give me the same price you paid for Jinshan shares and I'm out.