Then and now charts. The wave 4 prediction that it would not be a simple triangle but an a-triangle b- c pattern proved to be correct. We are now also approaching the target established more than a year ago. We would not buy it there. From $2.60 to 16 cents is very impressive. Listening to Ned Goodman the other day at the Prospectors etc (PDAC) show downtown, he reminded that in his opinion about 1/2 of these companies (there are 700 plus) will cease to exist soon. He is a geologist and very well respected on Bay street.

CUA could be in a 4th wave, following the a – triangle b – c pattern. A thrust up to 48 cents should then occur in the next week or so. Thereafter below 23 cents and above 0.

Counting waves is an art, if you are at a complete loss just count the total and if it does not add up to 5 + X x 4 it is probable not complete. We are at 8, not 9 so there may be another low to come. We shall see.

Just read an analyst opinion that basically argued that since the stock is trading below the cash on hand per share this is a no-brainer, a buy of course as 28cents is below 30 cents (10 mln. cash, 30 mln shares, roughly). Let’s look at the accounting;

This is the balance sheet as per Aug. 31 of this year. Notice that cash on hand dropped from 18 mln. to 10 mln., a drop of $8,347,972. But this is an exploration company and under GAAP or IFRS rules they are allowed to “capitalize” just about all expenses un till such time that the investment proves to be impaired. This is explained in the notes;

The Company is a junior mineral exploration company currently engaged in the acquisition and exploration of precious metals on mineral properties located in Colombia. On the basis of information to date, the Company has not yet determined whether these properties contain economically recoverable ore reserves.  The underlying value of the mineral resource interests is entirely dependent on the existence of economically recoverable reserves, the ability of the Company to obtain the  necessary financing to  complete  development  and  upon future profitable production.  Mineral resource interests represent costs incurred to date, less amounts amortized and/or written off, and do not necessarily represent present or future values.

Essentially you can keep digging un till the funds run out without seriously affecting the shareholder’s equity. The funds are simple moved from cash to “exploration and evaluation” assets, which are valued as follows;

Exploration and Evaluation Assets

The Company follows the practice of capitalizing all costs relating to the acquisition of, exploration for and development of mineral properties and crediting all proceeds received against the cost of the related properties.  Such costs include, but are not  exclusive to, geological, geophysical studies, exploratory drilling  and sampling. At such time as commercial production commences, these costs will be charged to operations on a unit-of-production method based on proven and probable reserves. The aggregate costs related to abandoned mineral properties are charged to operations at the time of any abandonment, or when it has been determined that there is evidence of a permanent impairment.  An impairment charge relating to a mineral property is subsequently reversed when new exploration results or actual or potential proceeds on sale or farmout of the property result in a revised estimate of the recoverable amount, but only to the extent that this does not exceed the original carrying value of the property that would have resulted if no impairment had been recognized.

This balance sheet was as of Aug. 31. Nearly three months have passed. Given a burn rate of about one million a month cash should now be at about 7 mln. or 23 cents a share. Using fully diluted 42 million shares that would work out to 17 cents a share. But even then these numbers do not mean a thing if the company cannot complete the project or it is found to be unprofitable for future production. We will know soon when the next financials come out and certainly in 7 months when all cash is gone.

Then there is that often overlooked category of events after the fact;

12. Events after the Reporting Period

(a) On September 19, 2012 the Company amended the exercise price of 36,000 share options from $1.50 per share to $0.52 per share.
(b) In October 2012 the Company, having failed to reach an agreement with the underlying owner of the Barranco Project, to amend the option terms, determined to terminate the Barranco Option.

Sometimes it pays to dig into the details but few people actually do. It can be so tedious and also there are still armies of analysts and brokers that are amazed everyday that somehow the assets always equal the liabilities. By the way, there is nothing wrong with these accounting methods. Boeing, for one, uses essentially the same method for accounting for it’s aircraft. Nevertheless it pays to understand what is going on.

Then (April 2011) and now, as usual;

The president of this company resigned three days ago. In our first blog we mentioned that the company was entering the “dig or die” phase simple because all the options held by management started to drop below the water line. In Germany, where this stock also trades, some websites are expressing alarm and disgust ;

CuOro Res — Minen-Rakete? Oder was ist da los?

Which freely translated would say, Mine rocket? Or what the h…. is going on. Interestingly the company’s own website has all the news up to date and offers this in English and German. Unfortunately the translator has been on vacation since June. Apparently, when it comes to investing, some are more equal than others.

At 35 cents this may well be a buy, C=A as a vector and the RSI and MACD are respectively at an extreme or not confirming.  But then there is this phrase that says that fish rot from the head down. We will pass.