Monday, August 18, 2014

California Gold Mining Pokes the Mother Lode

Today I noticed California Gold Mining (CGM.V / CFGMF) making its way across the financial landscape.  It is based in Canada but explores projects both in Canada and the central California Mother Lode.  It is good that the management team is qualified in geology and mining engineering but it's hard to tell from their bios just how much time they spent away from mining when they worked in finance.  Adding value in mining means bringing projects to maturity, not just raising capital.

The Canada project has a 43-101 mineral estimate and PEA.  The technical report's indicated resource grades at less than 1g/t Au are not all that attractive.  The PEA from 2013 concludes that the negative cash flow of -$43.3M from an expected five-year mine life makes the project uneconomical.  They would need a gold price over $1800/oz to make it attractive.  That's a long way for the spot price to climb from here.

The California project has some legacy exploratory data but I do not see a 43-101 report for this property on their website.  I also have doubts about the distance of the site from water sources (specifically the Merced River), assuming they plan to separate ore with heap leaching.  Finally, the photos of hilly topography make me wonder whether there is room on site for a mill and tailings area.  Those elements need flat terrain to be viable; changing the topography through engineering will add cost to the project.

I don't think I even need to look at the financial statements for this one.  The stock trades at about a nickel given the uncertainty of the above projects.  I track junior mining companies because someday I'll find one that deserves to be in my portfolio.  California Gold Mining isn't there yet because I need to see development of a mine plan and not some idle poking around the Mother Lode.

Full disclosure:  No position in California Gold Mining at this time.