They are very quick to reply
Hi Dale,
I will try to explain some of our actions for you, and hopefully you will understand the rationale behind them.
Management is very much in this for the longer term and this is evidenced by the fact that management owns a large percentage of shares in Crocodile Gold, and provided most of the initial investment into the company this time last year. The team behind Crocodile Gold are all experienced in the gold mining space, and have experience with start up operations.
It is very important to understand that we are in the start-up phase, which is by nature a speculative time to invest. However, we have made considerable progress in the past year, and we believe we have significant upside going forward. It is important to note that the problems at the mill were not only unexpected but not something we could have anticipated, and they do not change the quality of our assets. Unfortunately the previous operator did not maintain the mill to its best when they began having financial problems (i.e. using makeshift parts that were not direct from the manufacturer). We had problems earlier this year with the crusher, and then several other problems presented themselves. We decided it was best to inform the market sooner rather than later that we would not reach our expected production instead of trying to play catch up, realizing later in the year it might not happen, then telling the market then after all the news that is coming - commercial production, numerous exploration results, development at Cosmo and Tom's Gully, etc. We have resolved these mill problems and we expect that any down time going forward will be scheduled. It is mining, and mininig is not an exact science, so unfortunately issues can occur that are beyond our control and we must do our best to resolve them as we are doing.
Regarding the capital raise, we needed to raise money for several reasons, one of which is that we have a final property payment of AUS$15 million due at the end of June. That coupled with the fact that we had problems at our mill, and thus lessoperating cash flow, mean that we were in need of raising some cash. We had interest over and above the C$20 million, however, we chose to limit it at that amount to reduce the dilution to our current shareholders. This financing was a bought deal financing, which by definition means the underwriters are responsible for filling the order and that they are confident there is enough demand to do this.
We had a cash balance of US$32 million at the end of Q1, but if you recall, we are also spending a considerable amount of capital this year (US$56 million) which includes our exploration program with a substantial amount of drilling and development of our two underground mines (Cosmo and Tom's Gully) which will help us achieve our production target of 200,000 ounces in 2011. It is expensive to get up and running, but this is all helping us build our company into a mid-tier gold producer.
Regards,
Ashleigh Clelland,
Manager, Investor Relations
Crocodile Gold