Finding gold is just the beginning of the mining story. It takes more than that to establish credibility. Next comes making the money. That’s especially important in these days of rampaging costs.
So the reason explorer Cluff Gold’s share price is not too far down from its high is that founder Algy Cluff has done it all before.
This bloke’s a proper character!
Algy Cluff is a great character. Now in his 60s, he is definitely a legend in his own lifetime. After serving in the Grenadier Guards, he embarked on a career in resources spanning more than 40 years.
He has run four different natural resources companies, all bearing his name. As well as being a serial entrepreneur, he is probably the most famous Africa-hand still working.
"I've been involved in Africa in one way or another since 1960 when I was in the Army," he says.. "That mysterious and romantic place got under my skin."
He still visits every other month on behalf of Cluff Gold, where he is (unfashionably) both chairman and chief executive.
Algy Cluff made his first fortunes in North Sea oil. He started with Cluff Oil in the 1970s, then moved on in the early 1980s to mining in Africa with Cluff Resources.
Much to his annoyance, this was taken over by Ashanti, the Ghanaian gold group, in 1995. He then launched Cluff Mining, specialising in platinum projects in South Africa. He left in 2004; that company is now known as Ridge Mining.
In between, in the 1980s, he owned The Spectator for four years. He obviously liked life at the right-wing political and literary magazine, because he remained as chairman for 20 years.
After leaving Cluff Mining, Algy Cluff launched Cluff Gold. This was, he said at the time, to be "my last throw of the dice".
However, there have since been on-and-off rumours that he wouldn’t mind another. A diamond company, for example.
When it came to setting up Cluff Gold, Algy Cluff did something VERY sensible. He made a bee line for North American investors. North Americans are much more into gold mining than European punters.
That means they are prepared to pay more and stay in the game longer. And with such a lot of mining going on in their own territory, North American investors are much more understanding of the problems miners face.
The North Americans all want a bit of Cluff
Around 60 per cent of Cluff Gold is owned by North American investors. And they certainly aren’t complaining at the company’s rate of progress.
After only four years, production has already begun. The first gold was poured in March!
Cluff owns two junior open-pit mines, both with a five year life. It owns 90% of Angovia in Cote d’Ivoire and 78% of Kalaska in Burkino Faso.
The company said it expects its Angovia Gold Mine — where the first gold production was sourced — to produce 40,000 ounces of gold per year.
Its Kalaska Gold Project is due to start production early in the second half of 2008, at an annualised rate of 60,000 ounces of gold initially.
Of the 100,000 ounces of gold expected to be produced in 2009, 82,800 ounces will be attributable to Cluff Gold. Costs are modest - $38 m so far. Production costs are around $380 an ounce — so the margin looks excellent.
Forecasts for Cluff Gold’s pre-tax profits this year are £6.99m, giving earnings per share of 7p. For 2009 they’re expected to be £17.15m. Last year, before production came on stream, pre-tax losses were £4.78m, a loss per share of 7.5p. There is asset backing of around 76p a share.
So the share price has come up to trade around 94p, against a low of 64p and a high of 110p. That puts the market cap on the AIM quoted company at around £80m.
These profits will fund development at a third mine. This is the Baomahun open pit and underground mines in Sierra Leone.
Not surprisingly, North America’s Cluff followers are along for the ride — it has a 10 year life and could produce as much as 230,000 ounces a year. Work is currently at the pre-feasibility study stage.
To speed things up, Cluff raised money in March. A placing of 14.57m shares pulled in $25m, at 88p a share. The placement was reported to have been well supported by investors in both North America and Europe.
That’s because he’s a real straight shooter!
Algy Cluff’s experience shows in his care not to over-egg the company’s prospects.
"It would be disingenuous of me not to refer to the cost inflation that the mining industry is currently experiencing, with the price of cement, shipping, oil and steel in particular at all time highs, the year ahead will certainly present some challenges," he told shareholders.
Nor is he a forecaster! Enough for him that "current turmoil in the world financial markets, whilst unwelcome, will, together with the depreciation of the US dollar, continue to provide fundamental support to the gold price which for the first time in March of this year rose above $1,000 an ounce."
So, all looks well in Clough’s world!
Keep mining!
Erin and Isabel
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