I’d like to make it clear that I don’t really have a problem with Carpathian Gold (CPN.to) itself right now; after all, it’s only promoting itself as a corporate entity that wishes to survive, so it puts its best foot forward on a sketchy story and polishes it in order to shine the most amount of positive light its way.
Which is how capitalism works. Nah, the problem here is that the people buying into this story don’t have a single clue about what they’re buying. Listen up, folks:
1) As at end 3q13, before CPN explained to the world that it was facing a nasty cash crunch, it had a working capital of negative $102.524m (with very little of that in real cash) and on top of that, another $43m in long-term financial debt. The only thing balancing the sheets at that point was its declared property values (and if you think, for example, that its Romanian snafu is worth $50m, then jolly good luck is wished upon you) but as this isn’t an asset story, it’s a liquidity and (supposedly) cash generation story, what really matters isn’t some mutually convenient fixed asset value but the financial parts of the balance.2) At end 3q13, it had 694.17m shares out. That means today’s 12c share price gives it a market cap of $83.3m.3) According to its own Feasibility Study (that by way of a slight sidebar is looking a little long in the tooth, what with the changes in costs in the industry since its publication), at U$1,250/oz gold RDM has an after-tax 5% discount NPV of $172m.4) So therefore, even if we take a couple of giant leaps of faith, assume this perenially underperforming management team stops being crap and starts delivering 100% on its promises and then things go perfectly with operations at RDM, the NPV of the RDM project is less than the combination of the negative working cap and the current market cap. That’s without even mentioning the LT debt portion.
And as far as I can see, the only logical reason for this is that the people currently buying up CPN shares because they’re “cheap” and “it’s going to be a producing gold mine” do not have a single clue about the definition of the word “equity”, have never seen a set of financials open before them in their entire lives, if they have they didn’t understand what was in front of them, or in this case, just haven’t bothered looking. Quite possibly, three of those four can apply concurrently.
So anyway, scumbag promo sharks, take heart; there are still a whole bunch of idiot goldbug rubes out there, so all you need to do is wait for the storm to pass and it’ll be busines as usual. CPN shows that.