RE:From the new research report (company sponsored)Cerrado's production costs are so high that current profitability is entirely dependent on the value of gold. The management team anticipates a drop in production costs, but will this drop be sufficient and sustainable to ensure funding for the development of MDN and its other projects?
Is this drop in production costs the result of an increase in gold grade or an improvement in the production process? In other words, will this drop in production costs be temporary or constant and permanent?
Cerrado made the bet that it could start mining a deposit with a reduced budget and that the profits generated could allow it to invest in its facilities, the renewal of its reserves and the development of its other projects. This strategy never achieves efficiency and only defers the costs of building a suitable plant. Will the profits be sufficient not to consider additional financing?
Cerrado's current financial situation destroys its chances of being able to finance its needs through bank loans. Consequently, it will have to issue new shares on the market.
Cerrado’s current concerns about investor interest and market capitalization are entirely related to this need to secure this funding. And if Cerrado fails to convince investors that share ownership dilution will have far more positive than negative consequences, the issuance of the next shares will be at a much lower price than the current SP. In that event, announcing such financing after the markets close will not give you any chance to sell. A nice big gap-down is to be expected ...