01-July-2021:  First Gold Poured at Karlawinda

• Gold bars weighing 12.0 kg (386 ounces) were poured in the first smelt on site on 30 June 2021.
• Optimisation of the three-stage crushing circuit to deliver the most suitable product size for ball mill feed in laterite ore is continuing. The crushing circuit has run at in excess of 1,000 tonnes per hour (tph) (6.1 million tpa at 70% availability) at times during the 6 days of start-up operations to date.
• The 7.5MW ball mill has operated at an average of 91% availability during start-up as final testing, inspections and alignments are completed.
• The ball mill has achieved a throughput of up to 480 tph (4.25Mtpa) on an ad-hoc basis during the 6 day start-up period. This is encouraging as 4.25Mtpa is the budget throughput for laterite feed used in generating expected long-term throughputs of:
  • 4.5 – 5.0 Mtpa in oxide/fresh blend; and
  • 4.0 – 4.5 Mtpa in fresh rock.
• Run of mine (ROM) ore stocks continue to build with in excess of 450,000 tonnes of ore now on the ROM pad.
• Ramp up and optimisation activities continue across crushing, processing and plant services areas.

[Disclosure: CMM are in my Strawman.com virtual portfolio, but I do not currently hold any CMM shares IRL.  Also, in August last year, Capricorn (CMM) awarded MACA (MLD) a five-year contract for open pit mining services at Karlawinda.  I do hold MLD shares.]

24-June-2021:  Ore Processing Commenced at Karlawinda

The board of Capricorn Metals Ltd (CMM) is pleased to advise that it has completed construction of its wholly owned Karlawinda Gold Project and has started continuous ore processing.

Commissioning activities were completed to plan over the last three weeks and culminated in the ball mill and crushing circuit being ready for full operations in the last week.

Processing has commenced with low grade ore and will transition to run of mine grade ore over the next week as the operation moves to steady state. The project is now building gold in circuit and is expected to pour first gold in around one week.

Capricorn Executive Chairman Mark Clark commented:

“The commencement of continuous ore processing at the Karlawinda Gold Project is a significant milestone for Capricorn. It is the culmination of a huge effort from our construction team and key contractors. We now look forward to transitioning to full steady state operations and turning the project in to a profitable, long life business.”

--- for the full announcement, click on the link above ---

[I do not currently hold CMM shares, however they are in my Strawman.com portfolio and I do follow them closely because of the pedigree of their board members and senior management - most of them being ex-Regis Resources (RRL) and Equigold (which merged with Lihir Gold in 2008 in a transaction worth $1.2 billion, and Lihir was subsequently taken over by Newcrest Mining, Australia's largest gold miner (NCM).]

The following is an OLD (2018) straw, however I've just added a heap of new stuff to the end of it.

24-Sep-2018:  Capricorn Metals (CMM) is now in play.  Regis Resources (RRL) has made a takeover offer priced at 11.4c/share.  CMM closed on Friday at 5.9c, so the offer is 93% higher than Friday's close.  Understandably CMM is rocketing up today.

Please note that while the offer is currently unanimously supported by the CMM board, it is still subject to shareholder approval, including CMM's substantial shareholders.  Therefore, this deal may or may not proceed, and if it doesn't - there could well be downside from here.  

See CMM's announcement here.

And RRL's announcement here.

Regis reserve the right to terminate discussions (and withdraw their offer) if they can not secure the support of Hawke's Point, who own 18.9% of CMM.  Hawke's Point are not currently supporting Regis' proposal.

For CMM's latest corporate presentation (at the Precious Metals Summit in Beaver Creek, Colorado, last week), see here.

Disclosure:  I do not currently hold any CMM shares, and after looking at these announcements, I decided to stay on the sidelines with this one.  By the time I read them, CMM had already risen 50% today, and there is downside from here if RRL can not get Hawke's Point onside.  Read the RRL announcement for further details.  I do hold RRL shares.

16-Oct-2018:  Update:  On October 1st, CMM announced that Regis had not been able to secure the support of CMM's largest shareholder, Hawke's Point Holdings (who own 18.93% of Capricorn Metals) and had decided to withdraw their takeover proposal and cease discussions with CMM.  That announcement can be viewed here.

The accompanying announcement by RRL (Regis Resources) can be viewed here.

On October 3rd, CMM announced that Heath Hellewell had stepped down as their board Chairman but would continue as Managing Director of CMM.  Ms Debra Bakker who was an independent Non-Executive Director of Capricorn has assumed the role of Non-Executive Chairperson.  That sounds like a better arrangement.  It is usually better to have an independent Chair rather than have the MD also chairing the board.

22-Mar-19:  Update:  The CMM board has now been rolled and the MD has quit.  So has the CFO (Chief Financial Officer) - see here for that 6-Mar-19 announcement.  One week later (on March 13th - 9 days ago) their new management released a "Company Update" which suggests to me they would like to sell Karlawinda, or the whole company, rather than proceed with the development themselves.  (I still don't hold CMM).

05-Apr-2021:  Update:  I just came across this "stale" straw from September 2018 originally.  Hawke's Point (CMM's largest shareholder at that time) blocked the Regis (RRL) takeover of Capricorn (CMM) by refusing to sell their CMM shares to Regis, so Regis withdrew and have never made a subsequent offer for CMM, despite the fact that Karlawinda would have been a nice bolt-on asset for Regis.  My own thoughts were that it was a value play for Regis back in 2018 and they saw upside in developing the project themselves, and now that the KGP processing plant has been modified (greater ore throughput capacity but at a much higher construction cost) and the share price has appreciated so much, it's not attractive to them any more, or not attractive enough.

Hawke's Point later mounted their own takeover campaign for Capricorn Metals (CMM) at LOWER price than what Regis (RLL) had offered.  Understandably, that lower offer was rejected by the CMM board, especially after Hawke's Point had been the one and only reason why the earlier offer (from RRL - at a higher price - which at the time had been unanimously supported by the CMM Board) had fallen over.

My last update above (on 22-Mar-2019) mentioned that the new CMM Board in March 2019 was keen to sell the project, or the whole company.  They wasted about 4 months going down that road, paying Macquarie (MQG) millions in fees to try to find a suitable buyer, but none emerged during that time.  Meanwhile, CMM had to renegotiate a new $100m debt and bank guarantee package with MQG after the previous agreement was allowed to lapse during the period in which the old board and management either walked out or were replaced when the remaining board members were rolled (and the lack of progress achieved on the KGP during that period).  It was not a happy time to be a CMM shareholder - and I was not one.  So much promise, and so little progress!

And then, on July 3rd 2019 the CMM Board released an announcement to the ASX saying that they had listened to shareholder feedback and now agreed that the best course of action was for CMM to go ahead and develop the KGP (Karlawinda Gold Project) themselves.  This happened to coincide with a number of ex-Regis Resources (RRL) people joining the board and management at CMM (further details of that below).

During this time, GR Engineering Services (GNG) were quietly dropped as the designated EPC (engineer, procure, construct) contractors for Karlawinda, and the new CMM Board expanded the capacity of the plant, at a significantly higher construction cost, and they raised fresh capital, a number of times. 

The MQG $100m facility was dependent on CMM raising the rest of the KGP construction costs themselves, so they did, over a number of raisings with mixed success, and existing shareholders (again, I was not one of them) were dilluted, as usually happens, as well as being asked to tip in more money themselves via a 1:5 (one share for every 5 shares held) retail entitlement offer in April/May 2019 which was 33% undersubscribed (they raised A$4.6m of the A$6.9m total they were aiming for).  The outcome for CMM of the institutional component of that entitlement offer was even worse - they only raised A$3.18m, a rather pitiful response really, considering the shares were offered at only 6.5 cents ($0.065) each and the share price had been over 8c and up to 9c during and just prior to the offer period.

Capricorn (CMM) did a 1 for 5 (1:5) share consolidation in late 2019, so their share price chart will show that their share price was up to 46 cents during that entitlement offer period in late April and early May 2019, but it was actually one fifth of that at the time because the chart has been adjusted for that 1:5 consolidation.

After that very poor result from the entitlement offer, they went on to raise $18.26m in July 2019 from two placements, and one of those was to Hawke's Point again, and at 6.5cps again, being a 27% discount to the last traded price of Capricorn shares at the time of that announcement (and a 24.5% discount to the 5-day volume weighted average market price of CMM shares at the time).  That's what I mean about ordinary retail shareholders getting severely dilluted.

They also added two ex-RRL Marks to their Board in July 2019.  The first was Mark Clark, with 28 years’ experience in corporate advisory and public company management. He was a director of successful Australian gold miner Equigold from April 2003 and was their Managing Director from December 2005 until Equigold’s $1.2 billion merger with Lihir Gold in June 2008. Lihir was subsequently acquired by Newcrest (NCM). He was closely involved in the development and operation of Equigold’s gold mines in both Australia and Ivory Coast. Mark was appointed Managing Director of Regis Resources in May 2009 and became RRL's Executive Chairman in November 2016. He retired as an executive of Regis in October 2018. Mark oversaw the development of Regis’ three operating gold mines at the Duketon Gold Project, which culminated in the project producing well over 300,000 ounces of gold per annum. In Mark’s time at Regis, the company grew from a small explorer with a market capitalisation of around $40 million to the significant gold producer it is today with a market capitalisation in the order of $2.5 billion (that was in July 2019, RRL's m/cap today is closer to $1.5 billion). Mark is well known in the industry for his strong financial stewardship and focus on delivering shareholder returns.  Mark Clark is now CMM's Executive Chairman and an executive director of the company.

The second addition to the CMM Board in July 2019 was Mark Okeby, who began his career in the resources industry in the 1980s as a corporate lawyer advising companies on resource project acquisitions, financing and development. He has a Masters of Law (LLM) and over 30 years’ experience as a director of ASX listed mining and exploration companies.  At the time of his appointment to the CMM Board in July 2019 Mark was also a director of Red Hill Iron Ltd (appointed in 2016) and previously has been a director of Hill 50 Ltd, Abelle Ltd, Metals X Limited, Westgold Resources Ltd, Lynas Corporation Ltd and Regis Resources Ltd. Mark joined the board of Regis Resources in July 2009 as a non-executive director and was a major contributor on the board that transformed Regis from a small gold explorer to one of Australia’s largest gold producers. Mark has a deep knowledge of the Australian resources landscape and the regulatory regimes around mine development and operation. He also has significant experience in the commercial and legal aspects of project development, financing and corporate transactions.

Capricorn’s Non-Executive Chairman, Mr Doug Jendry, said: “The board recognises the very strong feedback from shareholders in recent times that in the current gold price environment the best prospect for Capricorn to deliver maximum shareholder value is for the Company to develop the Karlawinda Gold Project itself. To this end we are very pleased to have attracted two highly credentialed mining executives in Messrs Clark and Okeby to join the board and drive the development of the project. The funding secured through the placement also further bolsters Capricorn’s cash position and will allow the company to expedite the work required to progress towards development.”

They went on to raise another $65 million in August 2019 via a share placement at 16 cents per share (also pre-1:5-share-consolidation, so equivalent to 80 cps now).  The issue price of 16.0 cps represented a discount of 15.8% to the last closing price of 19.0 cps on 9 August 2019 and an 11.9% discount to the 5-day VWAP of 18.2 cps. The placement was cornerstoned by two of Capricorn’s substantial shareholders at that time (Paradice Investment Management Pty Ltd and Hawke’s Point once again) and several Australian institutional investors who had been long term supporters of the (new) management team. Also, several of the founders of Equigold, three of whom have also previously been directors and shareholders of Regis Resources Ltd, subscribed for a total of $10 million.

That August 2019 equity raising enabled Capricorn to satisfy a key condition to enable finalisation of the previous (lapsed) offer of $107 million debt and gold hedging facility from Macquarie Bank Limited (MQG) for the development of Karlawinda.  

The following day (14-August-2019), CMM announced that they had secured 200,000 ounces of gold hedging with a 31 December 2019 maturity and a price of A$2,249 per ounce.  My understanding is that this hedging has been subsequently rolled into further hedging with a later maturity date.

On 16-Sep-2019, CMM announced another 4 Management and Board appointments that were all ex-Regis Resources people:

• Mr Kim Massey as the new Chief Executive Officer (CEO) of CMM
• Mr Paul Thomas to the Chief Operating Officer (COO) role
• Mr Stephen Evans as the General Manager of Operations; and
• Mr Myles Ertzen as a Non-Executive Director of the CMM Board.

At this point (September 2019), while Regis Resources had failed in their 2018 attempt to takeover Capricorn Metals (CMM), CMM was now completely loaded with Executives and Board Members who were all ex-Regis Resources (RRL).

In mid-October 2019 CMM announced that they were consolidating their shares on a 1:5 (one for five) basis, which became effective in November, effectively driving their share price up by a factor of 5 (from around 20c to 24cps to $1 to $1.20/share).  Obviously all shareholders at the time also had their holdings reduced by 80%, for example: If you held 100,000 CMM shares worth 20c each (worth $20,000) pre-consolidation, that became 20,000 shares worth $1 each (still $20,000) post-consolidation.

On 15-Nov-2019 they announced that Ms Tammie Dixon was their new Chief Financial Officer CFO) and Joint Company Secretary. She had held senior management roles with several ASX listed companies, including Regis Resources, Equigold and Hardman Resources.  They were REALLY getting the old team back together, eh!?!  The other company secretary later left the company (in late Feb 2020) leaving Ms Dixon as the sole Company Secretary and the CFO.  Tammie Dixon herself gave notice as CFO and Company Secretary of CMM in early March 2021, but she agreed to continue to assist the Company as required on a contract basis for 12 months. CMM's CEO Kim Massey will oversee the Company’s financial functions and perform the role of Company Secretary on an interim basis until a permanent replacement for Tammie is appointed.  Tammie is still listed on the CMM website as being their CFO and Company Secretary, but on the ASX and CommSec sites, Kim Massey is listed as being both the CMM CEO and their Company Secretary.  I assume Tammie is continuing to perform the role on a contract basis (from her home or other place of business) until at least March 2022 however Kim has assumed the official "Company Secretary" title and the responsibility that goes with it with regard to the ASX and ASIC.

On 17-Apr-2020 CMM announced:

• Karlawinda Gold Project (KGP) Ore Reserves had increased by 35% to 1,201,000 ounces (from 892,000 ounces); and
• KGP Mineral Resources had increased by 41% to 2,145,000 ounces (from 1,525,000 ounces).

With their vast experience in new gold mine and gold processing plant construction and optimisation, it appears that Capricorn's Board and Management are pretty much building Karlawinda themselves, hence why GR Engineering (GNG, who did the original PFS and DFS for the KGP for the previous management at CMM) were dropped when all of the ex-RRL guys took over at CMM.  They don't believe they need to pay another company to manage the process when they can do it themselves.

Further Reading:

27-July-2020: Project Update and Upscale of Process Plant Throughput

29-July-2020: $32.3m Capital Raising

27-Aug-2020: MACA Ltd Selected as Preferred Mining Contractor   [MACA (ASX:MLD) do all of the open pit (OP) gold mining for Regis Resources]

13-Oct-2020: Diggers and Dealers Presentation

20-Oct-2020: Karlawinda development progressing on time & budget

18-Nov-2020: Further significant milestones on Karlawinda development

[On 18-Nov-2020 Mark Clark (CMM's Executive Chairman) bought another $73K worth of CMM shares on-market at between $1.66 and $1.67/share.]

20-Nov-2020: 2020 AGM Presentation

20-Jan-2021: Strategic Investment in DiscovEx Resources Ltd

01-Apr-2021: Quarterly Activities Report

Home | Capricorn Metals (capmetals.com.au)

Analyst Coverage | Capricorn Metals (capmetals.com.au)

KGP (Karlawinda Gold Project) Overview Video

Karlawinda remains on track for first gold pour in the current (June 2021) quarter.

I am not currently holding CMM shares, but I'm thinking about it.  I consider this a risky point in their history, with possible cost blowouts and possible commissioning issues, however if the ex-Regis guys now running Capricorn are as good as their reputations and track records suggest they are, then they might sail through this quarter smoothly and get a positive rerating by the market when they announce they are now producing gold at Karlawinda at the plant's nameplate capacity.  They are not there yet however, and a lot can go wrong, so for now I'm just on the sidelines watching closely.

They certainly have the potential to become a strong up-and-coming gold producer, with excellent near-mine exploration potential.  And they will be first cab off the rank in terms of first gold pour - before Calidus Resources (CAI) with Warrawoona - their first gold pour is expected during H1 of CY 2022, and Bellevue Gold (BGL) who are targeting first gold production towards the end of 2022.  Capricorn (CMM) is therefore the potential big 2021 gold story, if everything goes to plan.

Disclosure: Of the companies I have mentioned in this straw, I currently (as at 05-Apr-2021) hold shares in RRL, GNG and BGL.  CAI and CMM are both on my watchlist.

20-Nov-2020:  2020 AGM Presentation   or using the secure ASX website:  2020 AGM Presentation with the ASX's "ERSONAL USE ONLY" watermark up the left hand edge of every page

Recently:  18-Nov-2020:  Further significant milestones on Karlawinda development   or   ASX Version

I do NOT hold CMM although I have traded them previously.  They are developing the Karlawinda Gold Project located in the Pilbara region of Western Australia, 70km by road south-east of the town of Newman.

They originally came onto my radar due to (1) Capricorn buying the Karlawinda GP (gold project) off IGO (Independence Group, ASX:IGO, whose shares I hold and have followed for many years); and (2) their (CMM's) previous management's intention to get GR Engineering Services (ASX:GNG, a company I also hold shares in) to engineer, procure and construct the Karlawinda processing plant (the EPC contract).  However, much has occurred since then.  New management.  New plans.  Different plant design.  Different EPC contractors.  If the gold price was still making all time highs, I think Capricorn (CMM) would be also, as they're in one of the sweet spots at the moment of powering ahead with the build, and not having anything go wrong - yet.  The risks associated with financing and approvals are all behind them, and the risks associated with final cost blowouts and commissioning issues are all in front of them.  Once the commissioning begins, that's when I often sell out of such stocks, if I'm holding them, then wait for the plant to hit its nameplate capacity in terms of production with no significant issues, and then look to possibly re-enter, as they would be substantially derisked at that point. 

Lately however, I have been avoiding the entire construction phase, including the commissioning that comes at the end.

Even after all of that is done and dusted, stuff can still come out of left field, like tailings dam wall leaks/collapses (RED 5's Siana mine in the Philippines), severe weather destroying part of your plant (MML's Co-O mine in the Philippines), sovereign risk (KCN's Chatree mine in Thailand being shut down, OGC's Didipio mine in the Philippines being shut down) or hitting difficult ore to process or having lower gold grades than expected (DCN's Mount Morgans, GCY's Dalgaranga, Wiluna Mining's Matilda project when they were still called Blackham Resources, it's a long list...)...  However MOST of the obvious and likely risks are probably behind the company at that point.  That said, if they are operating in the Philippines, Thailand or Indonesia, I'm just not interested.

I keep having the odd look at CMM mostly because (a) they are now stacked with ex-Regis (RRL) people - on the board - including Mark Clark who used to be the MD of RRL (up until Feb, 2014) and Mark Okeby - and their entire senior management team are all ex-RRL, and (b) because Regis (RRL) tried to takeover CMM a few years back, and would have succeeded (the then board of CMM unanimously supported the takeover) except for CMM's largest shareholder at that time - Hawke's Point Holdings - blocking the move.  Hawke's Point later launched a takeover offer of their own, at an even lower price, and that also failed.  Hawke's Point have subsequently sold down their position after the CMM share price increased a LOT, however they (Hawke's Point) are STILL RRL's largest shareholder, with a current position of 9.99%, which is a bee's whisker off being a blocking stake (i.e. 10%).  They could simply buy a few more shares on-market at any time to get back to 10% or above and block any other future takeover attempt, if they wanted to.  If CMM was to be taken over now however, it would be at a much higher price, comensurate with their current trading range plus a suitable takeover/control premium.  

CMM's Karlawinda GP is around 550km away (NNW) from Regis' Duketon operations, so if Regis was to have another crack at CMM, they would be looking at Karlawinda as a prospective additional and separate standalone gold project, which is how it is being built of course.  They were never planning to truck the ore to Duketon.  I still think Regis MIGHT be interested, but probably less so now than they were then.  Karlawinda would have looked to them as being a good project to develop back then, and now that it is over half built, and has become a lot more expensive, the opportunity is not the same any more I guess.

Here are CMM's current largest shareholders:

1. Eley Griffiths Group Pty Ltd, As of 01-May-2020 held 5.23% of CMM, as of 05-Aug-2020 held 6.45%;
2. Paradice Investment Management Pty Ltd, went from 8.93% to 9.94% on 04-Aug-2020, then sold down to 8.92% on 13-Nov-2020; and
3. Hawke's Point Holdings I Limited, sold down on 04-Aug-20 from 16.80% to 9.99% (34,340,852 CMM shares).

I consider Paradice and Eley Griffiths to be "smart money".  Hawke's Point have also proved to be fairly astute to date I have to say.

After peaking at $2.26/share mid-September (and hitting an intra-day all-time high of $2.37), they have fallen back to close at $1.665 yesterday.  This is in line with all of Australia's major gold producers and project developers - they've all come off over the past little while.  To give just one example, RRL's SP has reduced from $5.55/share to $3.85/share over the same period (-30%).  CMM are off about -26% from their mid-September high.  So they look cheaper now.  However, that's all relative.  CMM looked expensive to me before.  They now look like they're a bit closer to fair value for a gold project developer at the stage they are at.  Proven producers like Regis (RRL) who have multiple mines, are profitable, and pay dividends, are a much safer option.  I own RRL shares and I was buying more of them during the past week.  I have NOT been buying CMM shares yet however.  They remain on my watchlist.  If you flick through their AGM Presso (the first link at the top of this straw) you may understand why I keep them on my watchlist.  They could get exciting.  

Pay particular attention to their chart on page 19 which shows where Karlawinda sits relative to other current producers in terms of AISC Margin (Profit Margin) vs Indicative Reserves Life (Mine Life).  Karlawinda has a 12 year mine life, with a AISC (All-In Sustaining Cost) of ~A$1,200/oz, and should produce 105-120koz p.a. of gold.  That means they compare very favorably with most other Australian listed gold producers.  However, remember, they are NOT gold producers - yet.  They will be soon, but there is some water to flow under that bridge yet - before the plant is finished, commissioned, and running at nameplate capacity within its projected cost range.  Things can go wrong, and they often do.  Capricorn have some very experienced and well-credentialled board members and senior executives (with the majority of them being ex-Regis Resources), so it would be entirely reasonable to have more confidence in them to get this thing built and running smoothly as a result of that, however I would personally still prefer to wait.  I may dip my toe in (they are on my Strawman.com scorecard after all), however it will likely only be a small position until they become proven producers.

Further Reading:  https://thewest.com.au/business/public-companies/former-regis-md-mark-clark-to-head-up-capricorn-c-197003 (from July 2019)

and: http://capmetals.com.au/   and   http://capmetals.com.au/projects/karlawinda-gold/

27-Oct-2020:  Quarterly Activities and Cashflow Report

20-Oct-2020:  Karlawinda development progressing on time & budget

The first link (the Quarterly Report) contains some good pictures of Karlawinda and the progress they are making there.  Check out the size of the Ball Mill head and pinion (bottom of p.3).  That's a decent piece of kit!

20-Oct-2020:  Karlawinda development progressing on time & budget

DEVELOPMENT PROGRESSING ON TIME & BUDGET

PROJECT LOAN CONDITIONS PRECEDENT SATISFIED

HIGHLIGHTS

• All conditions precedent now satisfied to commence draw down on $80 million debt facility.
• Development of the Karlawinda Project progressing in line with schedule for first gold production in June 2021 quarter.
• Forecast development cost continues to be in line with guidance of $165 – 170 million.
• Development cost of $62.4 million spent to 30 September 2020, leaving a balance of forecast spend to complete of $102.6 - $107.6.
• Cash position on 30 September 2020 was $49.3 million, which combined with the $80 million debt facility gives a total available funding of $129.3 million. This represents a 23% contingency allowance on the midpoint of forecast cost to complete.

--- click on link above for the full announcement ---

[I do not hold CMM, but they're on my Strawman.com scorecard.]

27-7-2020:  Three announcements from CMM - concerning Karlawinda - this morning:

1. Project Update and Upscale of Process Plant Throughput
2. Quarterly Activities and Cashflow Report
3. Trading Halt (Capital Raising announcement pending)

I'm not a CMM shareholder, although I have been in the past.  I lost a fair bit of interest in the project after the board and management were all replaced and they dumped GR Engineering (GNG) as the EPC contractor to build Karlawinda, then changed the plant design.  They're now changing it again.  This is a risky time to be a shareholder of a gold project developer - during the build phase.  Common occurences can include unexpected capital raisings, construction delays and cost blowouts, then commissioning issues and plant modifications required.  Then underperformance if the plant doesn't perform as expected.  We saw all of that with Heron (HRR), a zinc producer, who went with Sedgman (part of CIMIC Group - ASX:CIM) to build their Woodlawn plant for them, and that did not work out well at all.  While HRR is a fairly extreme example of where things can go wrong, and how it can negatively affect shareholders, there are dozens of others; sometimes the issues don't emerge until after the plant has been fully commissioned and handed over and then the ore type changes or the grades don't live up to expectations resulting in big cost increases.  GCY (Gascoyne Resources) and Dacian Gold (DCN) are two examples of that in the gold space.  Wiluna Mining (WMX, formerly Blackham Resources) is another.

I have found that, generally speaking, the best times to hold explorers and developers is when they are still exploring and hitting those high grades of gold, then to take profits (sell out) during the build phase, stay out during the commissioning phase, and have a look at getting back in once they've been in production for a couple of years and all of the bugs have been sorted out, and they've fine-tuned their grade control and ore processing / gold recoveries.  And that means that CMM are an "avoid" for me at this point.

01-Jun-2020:  Capricorn released this Corporate/Investor  Presentation back on May 12, but I missed it.  It presents a good overview of the company.  I don't hold shares in them currently, but they're on my Strawman.com scorecard.  They are a gold project developer, so no income yet, and still very speculative.

17-Apr-2020:  Karlawinda Gold Reserves Increase 35% to 1.2 Million Ounces

Market Like!  Caution:  Not a producer yet.  They are building their gold processing plant now, while still obviously finding more gold.

08-Apr-2020:  Quarterly Activities and Cashflow Report

Capricorn (CMM) are making good progress with the Karlawinda Gold Project (KGP) in WA and say that COVID-19 has so far not significantly impacted construction and development activities at Karlawinda.  They're fully funded through to gold production there.  Still speculative at this stage however.

31-March-2020:  CCZ Equities Research:  Capricorn Metals Ltd (CMM):  Funded, first gold from Karlawinda due in 1Q 2021 

CCZ’s call on CMM is “Hold” (upgraded from “Sell”), with a 95 cps PT (up from 90 cps).

CMM have to be regarded as speculative because they’re building a gold processing plant and won’t have any regular income until that plant has been completed and commissioned.  It won’t be substantially de-risked (in my view) until it’s running at or above nameplate capacity, particularly because the CMM board and management have all changed, and so has the EPC contractor (who is building the plant) and so has the plant design (from the original design by GR Engineering – GNG).  GNG don’t have any involvement in Karlawinda now – since the Capricorn (CMM) board got rolled and the previous management all quit, and the new team decided to go in a different direction, so while I do hope that Karlawinda will be successful, there are also a few seeds of doubt there (or reasons to be cautious).

Recent reports and presentations from Capricorn Metals (CMM):

31-Jan-2020:  Quarterly Activities and Cashflow Report for the December 2019 Qtr

18-Dec-2019:  Debt Financing Completed & Project Update

20-Nov-2019:  Share Consolidation Update

20-Nov-2019:  AGM Presentation

Disclosure:  As discussed in my valuation update, I don't hold CMM shares, and I had previously considered my exposure to CMM's Karlawinda gold project would come via my holdings in GR Engineering Services (GRES, ASX:GNG), but it seems that CMM's new board and management are happy to build Karlawinda without GNG now.  Karlawinda looks to have favourable economics and they're in the right place (Australia) at the right time (record A$ gold prices), but much can go wrong during this development/construction phase, and can also go wrong during the commissioning and ramp-up phases next year.  We don't need to look far to see where things have gone badly wrong - Gascoyne Resources' (GCY's) Dalgaranga gold project, Heron's (HRR's) Woodlawn zinc project, there are plenty more examples of where there are either serious cost blowouts and/or construction delays and/or actual production doesn't achieve anything near what had been projected (in terms of grades and recoveries) due to a variety of factors.  Dacian Gold (DCN) also recently had what many would have considered a near-death experience (again caused by lower grades and recoveries than they had expected resulting in much higher costs than they had anticipated), but DCN look to be pulling through that phase on the back of further high-to-reasonable-grade gold discoveries within a reasonable distance of their existing plant.  It can be a roller-coaster ride, and should be considered very high risk until these developers actually do become producers with track records of consistently profitable production, which obviously takes years.  There's money to be made if you jump on the good ones early, but there's also plenty of money to be lost if you don't pick the eventual winners.  Much like horse racing. 

My plan now is to stick with the proven producers (like NST, EVN, SAR, SBM) for the most part, and to only gamble on junior developers with money I can afford to lose.  Consequently, I'm not currently "invested" in any junior precious metals or base metals explorers or developers, preferring to stick with the proven producers.

September 2018:  CMM (Capricorn Metals) have released a presentation that they have prepared on their Karlawinda Gold Project for the 2018 Precious Metals Summit, held this month in Beaver Creek, Colorado, USA.   It is titled, "A compelling opportunity in the Australian gold sector", see here.