RE: Q4 and 2012 results out-lookin good! Thyfish - wish I could share your enthusiasm for CRK's prospects for the the year. I too was excited by the Press Release on the financials. But then I took a deeper look.
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Here is what concerns me:
- "All in" costs for CRK were $1562 per ounce in 2012, that number dropped to $1438/oz in 4Q. [still pretty darn high!] That said, 1Q13 is gunna be ugly - 60 day MA of POG is 1641/oz, but no one has gotten over 1620 in a month and unless things rally fast, the last month's worth of gold could get sold under 1600! Point is I suspect that margins are going to be under pressure. Also remember that 1Q is the "rainy season" down under - the time when we have lost production for various reasons.
- If one reads the Auditor's report that accompanies the Annual report filed on SEDAR one finds a very disturbing addition: existence of a material uncertainty that may cast
significant doubt about the Company’s ability to continue as a going concern. - That concern about "going concern" and the concern over a lack of 1Q cash flow seems borne out in CRK's later filing today looking for an additional $25M in cash! [At what point does Luxor stop pouring cash down a hole in the ground?] When does the cash bleed end and and the company go cash positive where it can service its substantial debt?
- The future of CRK lies with its ability to GROW. Unfortunately it has no growth on deck other than the Cosmos underground that has been in development for what 4-5 years? CRK had another NWT project on the books for 2013, but canceled it when the PEA or table top study showed the economics didn't work out.
- So now the "hope" lies with a renewal at Stawell. Take a look at that PEA - lots of problems there. A) The project has no permits! An attempt was made to permit that pit in 2000, but the Ministry declined the application. There are houses on two sides of the pit! B) the PEA shows various strip ratios for this open pit but it looks like they fall in the range of 3:1 to 4.5:1! Pretty high- meaning a lot of waste rock moved around = high costs! C) Head grades from the Pit are expected to be about 1.5 gpt and the number of recoverable ounces only 150,000! At 1500 POG these ounces are marginal and won't be adding HUGE cash flows to the CRK bottom line. If growth for growth's sake is your desire then this project fits the bill - if Cash Flow is what you look to invest in then CRK doesn't have plans that would fit that bill. D) On the surface Stawell looks like it is low CapEx to get started, just $5.1MM, but it has a CapEx requirement of an additional $12M in year 1 and a total life of mine CapEx of 23.9M! Where is CRK gunna get the cash? E) The project plan for Stawell is contingent on the permits ultimately, but so far it looks like it would not be in production until late 2014 at the best.
So the bottom line is that the only thing that bails CRK out this year is a substantially higher POG! That makes CRK a buy only if you think it is a good proxy for the POG.
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I'm just sayin'