CNMC Seeks Concessions, Buffer Amidst Gold Surge

Date: May 13, 2016

Untitled Document

CNMC Goldmine Holdings

SGX Code 5TP
Mkt Cap S$M 122
% Price Change YTD 58.7
% Change – Div Adj. YTD 58.7
% Change – Div Adj.[1 year ] 17.0
% Change – Div Adj.[3 years ] -1.3
% Change – Div Adj.[5 years ] N/A
Price vs. 12M High% -6.6
Price vs. 12M Low% 79.6
% Div Yld 1.8
% ROE 36.4
PE 8.5
P/BV 2.7

Source: SGX Stockfacts ( 4 May 2016)

Operating excavators and bulldozers, drilling and blasting rocks – this is the stuff of every boy’s dreams.

For CNMC Goldmine Holdings Ltd Chief Executive Officer Chris Lim, the fascination with mining began early.

“I’ve always wanted to be involved in the mining business,” said Lim, 42.

“You get to blow rocks up, play with chemicals, and ride in helicopters to transport the gold – it’s a boy thing! Is there any other job that is cooler? I don’t think so,” he added with a laugh.

In the initial years, the family business revolved around the mining of dimension stones, including granite and marble. But this segment was plagued by stiff competition and pricing pressure.

In 2004, the opportunity to mine gold surfaced with the Sokor project, located in the state of Kelantan, Malaysia. It started out as a government-to-government venture between the Kelantan state government and a Chinese state-owned enterprise (SOE), a relationship that was facilitated by Lim’s father and CNMC Chairman, Professor Lin Xiang Xiong.

When this arrangement fell through, Lin, who is the chief advisor on Kelantan-China International Trade for the Malaysian state government, took Sokor private and CNMC began operations in 2006.

“The Kelantan Chief Minister had enough faith and trust to give us the Sokor project, so no matter what, we had to do it well, so as not to disappoint him and others who believed in us,” Lim recalled.

It was a gruelling journey. Father and son faced a barrage of criticism from sceptics.

“Malaysia was not known for its gold mining industry then. The burning question on everyone’s lips was: Could we deliver? But we took all the criticism in our stride and turned it into a source of encouragement.”

A Rough Ride

Certainly, there was no shortage of hiccups and hurdles.

“We experienced a myriad of ups and downs – more than downs than ups. Things we did not think would go wrong went wrong, and things we initially thought weren’t so bad became worse. But we pressed on.”

Life was tough and funds were scarce. “We had to do everything ourselves,” he said.

In the early days, Lim stayed in a rented hostel more than two hours drive from the mine, together with the geologists. They drove to the site every morning at the crack of dawn in a rickety, old vehicle, using logging tracks to navigate through the jungle.

“There was nothing but trees and rocks all around us, and I remember seeing tiger paw prints along the way,” he said.

CNMC has come a long way since.

Today, the Sokor Gold Field is the Group’s flagship project, covering an area of 10 square kilometres with four identified gold deposits – Manson’s Lode, New Discovery, Sungei Ketubong and Rixen. The Group achieved its first gold pour on 21 July, 2010, and its output has been rising steadily, exceeding one metric tonne of bullion as of July 2014.

There are now staff hostels, a canteen, and even Internet access.

“And that’s the miracle of mining – creating something out of nothing, in the middle of nowhere,” Lim said.

The Sokor project is an open-pit, heap leach mining operation. A combination of haul trucks and excavators are used, and in the leaching circuit, gold is extracted from a cyanide solution, before being deposited onto activated carbon, from which the metal is then chemically stripped. The gold is melted into dore bars – which contain between 85% to 92% pure gold – before being shipped to a refinery where they are further processed.

As of 31 December 2015, the project had JORC-compliant gold resources (including ore reserves) of 13.81 million tonnes at a grade of 1.39g/t in the Measured, Indicated and Inferred categories for a total of 618,000 oz of gold.

The Australasian Joint Ore Reserves Committee (JORC) standard is an international public reporting code that classifies mineral deposits based on their geologic certainty, extractive feasibility and economic value.

One Team, One Family

“The success of Sokor today is the success of the group as a whole – everyone in CNMC has put in effort over the years as a team, and as a family,” Lim said.

The Group has been able to build a strong production team because of its people-centred focus.

“We take care of our staff, and in turn, our staff takes care of us,” Lim said.

“We are one big family, regardless whether you are an excavator operator, a mechanic, a security guard or an accounts executive. On site, the staff all eat together – there is no such thing as an executive dining area.”

In October 2011, CNMC was the first gold producer to list on Catalist. Wilton Resources Corp followed suit in December 2013, while Anchor Resources Ltd made its debut in March this year. Of the 18 mining plays listed on SGX, these three are focused on gold production within the ASEAN region.

Across the Asia-Pacific region, there are about 110 listed gold miners, with the majority in Australia, followed by China.

Between 2011 and 2015, CNMC revenues grew from US$5.1 million to US$36.5 million. The company reported a net loss of US$5.1 million in 2011, and has now generated US$13.4 million (S$18.2 million) in profits after tax, according to annual reports.

CNMC has a current market capitalisation of S$124 million. Its shares hit an intraday 12-month high of 32 Singapore cents on 4 May. In the year thus far, the stock has generated a total return of 61.4%, compared with a decline of about 3.0% for the benchmark Straits Times Index.

Gold jumped to a 15-month high last week, crossing the US$1,300/oz mark briefly on 2 May. The metal has rebounded more than 20% from its December 2015 low of US$1,051.10/oz.

Looking ahead, CNMC aims to continue boosting its gold output and resources. Exploration continues apace at Sokor to extend the life of the mine and identify fresh targets for production. In addition to gold, it aims to develop silver, lead and zinc resources that have already been discovered in the Project.

The Sokor Project’s gold resources rose to 618,000 oz at the end of 2015, from 506,000 oz at the end of 2014, despite extracting more than 31,000 oz last year.

Building a Buffer

Nonetheless, resource depletion is one spectre that looms large. “There will come a time when the resource will be drawn down, so that’s why we need to go out and actively look for new concessions around the region,” Lim noted.

CNMC will focus on mining assets located in Malaysia and other parts of Asia.

“That’s because our crew is in Malaysia, we’re familiar with the country’s regulations, and can kick-start a new project fairly quickly when the time comes,” he added.

It’s unrealistic for CNMC to venture beyond the Australasian region because of size. And while other mining projects in Malaysia may offer good potential, the Group continues to be cautious and selective.

“We do not want to take on anything that we have no confidence of turning into a producing asset,” he said. Meanwhile, CNMC is exploring the feasibility of diversifying its earnings, building a second revenue stream as a buffer.

One non-mining but related business that could potentially be a good fit is plantations.

“Plantations require big plots of land, which we already have, and the equipment used in plantations is similar to what is on site – tractors, bulldozers and excavators,” Lim said. “But nothing is on the table at this point in time.”

What is certain, however, is the unpredictability of commodity prices, he noted.

“We were inspired by the collapse of oil prices 18 months ago to look for a safety net. That really underscored the fact that commodity prices are beyond anyone’s control,” he said.

“We are already one of the lowest cost gold producers in the world. But what happens in an unlikely situation where gold prices fall below US$500 an ounce? We don’t want to be in the same position as the oil & gas companies.”

An Indomitable Spirit

CNMC’s all-in cost for FY2015 – which includes the cost of mining operations, the capital spending required for exploration and production, and other costs not directly related to operations – stood at US$608/oz.

This is lower than many producers in Australia, US and Africa, and gives the Group an all-in margin – defined as the all-in cost of output versus the realised selling price – of 48%. This provides a significant cushion against any decline in gold prices.

“Our costs are relatively low because Sokor is an open-pit mine – the mineralisation starts near the surface, and the ore is very leachable,” he added.

“The deeper you go, or the more complicated the geochemistry of the rock, the higher the costs of extraction.”

Given the volatile outlook for commodities, Lim has taken to watching gold prices like a hawk.

“I’m always checking the gold price through an app on my phone – it’s the first thing I do when I wake up, and the last thing I look at before I go to bed.”

Needless to say, the Business Administration graduate from Australia’s Deakin University is no stranger to challenges.

“One thing I learnt from Chairman – my dad – is that never-say-die attitude. If you want something, you need to pursue it relentlessly, regardless of how many times you fail,” he said.

And in business dealings, always maintain your integrity. “That’s the legacy my dad created, and that’s what I want to pass on to my kids as well,” said Lim, who has a one-year old son.

Lim still maintains a strong bond with his father, 71, a Chinese ink-and-brush artist of international repute.

“My dad also taught me to expect problems in life – not every day will be a fair weather day,” he added.

“The key is learning to solve the problems, anticipating them before they arise, preventing them from developing further, and managing them well when they do crop up.”

Financial results

Year ended 31 December (US$ ‘000) 2015 2014 2013 2012
Revenue 36,471 33,213 16,626 16,761
Profit before tax 14,438 14,831 5,172 1,460
Net profit/loss 13,429 15,320 3,434 1,011

Source: Company data

Quarter ended 31 December (US$ ‘000) 4Q 2015 4Q 2014 % Change
Revenue 9,299 9,787 -5.0
Profit before tax 4,739 4,418 7.3
Net profit 4,084 4,044 1.0

Source: Company data

Find out more about the risks & opportunities in gold exploration and mining by watching these web clips here


  • Expanding Gold Production – The Group is able to process approximately one million

    tonnes of ores per annum currently. It intends to increase its leaching capacity and
    enhance its gold
    recovery process with increased output.

  • Cost Optimisation Programs – The Group is always streamlining production processes
    reduce raw material wastage, so as to cut costs and enhance profitability. It is also

    leveraging economies of scale from increased production capacity to lower material
    costs from
    key suppliers.

  • Accelerate Exploration Activities – To boost gold resources and reserves, as well as

    increase silver, lead and zinc resources and reserves, in the Sokor Gold Project.

  • Portfolio Expansion Programs – To explore opportunities in the acquisition and
    development of
    other mining projects in Malaysia, as well as highly prospective exploration
    and mining projects
    in SE Asia and Australasia.

CNMC Goldmine Holdings Ltd

CNMC is the first Catalist-listed gold producer on SGX. The Company started trading on Catalist board on 28 October, 2011. Together with its subsidiaries, CNMC is principally engaged in the business of exploration, mining of gold and the processing of mined ore into gold dores. The Company is currently focused on the development of its flagship project – the Sokor Gold Field Project, located in the State of Kelantan, Malaysia.

For the year ended 31 December 2015 financial results, click here.

The company website is:

For web clips on gold exploration and mining, click here.


First published on 6 May 2016 on

Text: Jennifer LH Tan

Photo: Company file

kopi-C is a regular column on SGX’s My Gateway website that features C-level executives of leading companies listed on the Singapore Exchange. These interviews are profiles of senior management aimed at helping investors better understand the individuals who run these corporations.

For previous editions of kopi-C: the Company brew, please click here.