Waiting for $20M financing to close

Oct 19th, 2009 – Comment

Century Mining has been having a heck of a time getting the Lamaque mine up and operating due to past management follies and difficulty in securing adequate financing.


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centuryLou:

Century Mining has been having a heck of a time getting the Lamaque mine up and operating due to past management follies and difficulty in securing adequate financing. What do you think of the prospects of CMM in getting Lamaque back into production and do you think it will be profitable?

Edwin

Hi Edwin,

Century Mining Corp. ( CMM TSXV) is under the direction of Margaret Kent and her management team. They have some gold production from the San Juan mine in Peru but as you have mentioned the big play is the Lamaque mine in Quebec.

cmmThe Lamaque mine has produced over 9 million ounces over its production history. What CMM wants to do is bring the mine back into production in 2010. The hook of course has been the ability of CMM to raise the $40M – $45M needed to get the mine up and running.

In September CMM announced that it had raised $20M with two companies through a private placement and in July they reported that a $25M gold forward agreement with a financial institution had been secured. Should the private placement close the proceeds would be used to boost output to 125,000- 150,000 ounces of gold per year at a cash cost of $450/oz. over the 11 year mine plan outlined by management. With gold trading on the spot market at over $1030.00/ounce those numbers work.

The three year chart shows the bounce off the hard bottom in late 2008 and resistance it is facing now at $0.20.

The three month chart gives us a better view of the resistance at $0.20 and support at $0.16. The MACD however is trending down suggesting that a reversal to the upside is still not before us.

cmm2The play on CMM is the outcome of the $20M private placement. Announcing the deal is great but what you want is the announcement that the deal is closed. The outcome provides a trading flex point. If the deal closes the stock should rise if the financing fails to close the stock will fall.

CMM is a junior mining company which generates some revenue from its operations but needs to raise money to move out of the shadows and into the light. For the risk averse wait till the $20M financing closes. Yes you will miss some of the upside but you will have taken out much of the risk. If you have an appetite for risk then this looks like a reasonable entry point.

Happy Capitalism!

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