Core Gold DMMIF

RE:Its dire but there is opportunity

[edx]

Talked to IR.

I want to stress one point that was made to me - asset sales comprise an integral part of their going forward strategy. There is either expressed interest (no DD yet) or due diligence happening (or will occur shortly) on every project in the company portfolio (even Copper Duke), including some potential for the entire company itself. I was very clearly told there is no buyer right now for the company and nothing firm on any individual properties right now. But there is at least expression of interest on everything. Maybe those are all vultures. Maybe not. But at least there's interest and if there's interest there's hope.

It seems obvious to me that they want to plug their liquidity gap by selling some assets. If they could get $10-$15 million for Jerusalem (for example... maybe a pipe dream given the company's current situation; the vultures might choose to wait until auction), they can bring their AP down to become current and get by until the end of Q2. Loan repayments will still be a problem starting July if they cannot bring ounces produced higher and they can't raise more than $15 million in asset sales. 

I was basically told the reason they are considering going back to the upper workings (which need dewatering) rather than continuing to try at depth right now is because:
- they know the grades are higher and the veins are thicker
- in some cases the veins at the current levels they're working in are on the lower end spectrum of Zaruma grades. In other cases the grades are high but the veins are on the thin side, which means that mechanized mining resultings in a lot of dilution and waste rock being milled. I was told that the lack of skilled hand held miners was a significant problem because the veins can be very narrow down at depth.
- they are still having difficulty following the veins. it's obvious they're not terribly good at this yet. Hopefully it's like diggin the main decline where they get better over time.. of course they don't have a lot of time to work with.

So the bottom line to me is fairly clear. They need to make some significant assset sales (I think Jerusalem and Copper Duke are what the company would ideally like to release first as they are the least developable assets in the portfolio given the company's present situation) to get the balance sheet in order. If they can do that, they will have bought some time to get producion ounces up.

What I find most dissapointing about all of this is that Nick @ VRIC and Bob/Nick/Naomi at PDAC did not let on any of these problems. I think this is pretty material stuff. It's one thing not to disclose information frequently. It's another thing to go meet management in person and have them tell you something that doesn't reflect anything close to reality.

Haven't sold any shares. I'll probably wait until the end; this is one of those situations where a buyout could happen at any moment or one solid asset sale puts the company's finances back on level footing. I knew the risks here and was prepared to accept a 100% loss. I don't think Bob is letting this go down that route, even if he has to basically shut down Zaruma and wait for legal action (from creditors) as a means to buy time to sell some assets.