The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
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Martin, have you not read any of the recent RNS’s or watched the proactive videos?
From the September half year results;
“The Teichmann Group is a highly respected pan African civil engineering and mining group and we believe that their experience will be invaluable, not only in the development of Kareevlei, but in developing the business further once Kareevlei has proved its long-term viability.”
Is developing the business further with a respected pan African civil engineering company still ‘ complete guesswork’?
Mike even stated that the strategy was to consolidate Kareevlei over the next couple of quarters before announcing the next steps (this was back in July...).
I’d say you are looking for excuses to justify selling down your holding. IMO you’ll look back on this decision with as much regret as you did when buying 100k+ SXX shares at 20p and deciding to hold for the next 25 years.
I have no experience of either of those two I'm afraid.
I don't disagree that sentiment plays a role in share price direction, and is of some importance when trading shares short-ish term. But out-and-out guesswork about what a company might choose to do a few years from now is just that - guesswork.
Martin, Angus and UKOG operate on wishful thinking, not solid future potential. In reality, they can only guess at OIP and if it can be extracted. That’s why Angus have managed two dusters in a row, despite positive exploration reports. Markets always work on sentiment.
"Martin, many companies are valued on potential. Look at UKOG or Angus."
In my view, there's a difference between solid future potential (eg HUR) and vague concepts about how a company might or might not choose to evolve at some point. That's just wishful thinking.
Yes SuperRoty I agree.
Nice to see buys coming back. Market just testing how low it would go.
Martin, many companies are valued on potential. Look at UKOG or Angus. Years away from profitability, but priced on what they may do in the future. And unlike them, we are far closer to profitability, and an end to fundraising and dilution.
Ambition is always something that adds value.
They need to come clean with what is included in plc costs. Market doesn’t trust them by the look of it.
"A new mining operation, within the next three to five years seems a logical step."
Logical, sure. But you can't value a share on that yet, can you?
Plenty of sellers and profit takers by the look of it.
From one hand to another.
Martin, I understand your sentiments based purely on future profits, but personally, given the performance of the management over the last year, I no longer see BRD as a company that begins and ends with a single mining operation.
Whilst there has been no mention of it from the current BoD, I’d be extremely surprised if they didn’t have long term ambitions to expand. A lot has been learned, we now have, arguably, a really good team in place. A new mining operation, within the next three to five years seems a logical step.
Moving forward though, it's quite pleasing to see such great quality diamonds being mined at such early mining stages. As much as the projected cost per carat is an issue for me, with higher grades comes greater profit.
"Martin the long term better investments you mention below, would your preference be for SXX or ARB?"
I'm not going to deny being burned with SXX. It's one of those rare projects that I would dearly love to turn into a game changing business. I was in it very much for the long haul (25+ year timeframe), but there's clearly now a chance that existing investors might be wiped out if they can't deliver alternative finance. I'm a little bit over invested, but you take your risks, right?
ARB are only a small part of my portfolio, but I find them quite an exciting opportunity nonetheless. I previously had crypto exposure via XBT trackers, but ARB has taken over most of that now. I think a little bit of exposure to crypto is sensible and ARB are highly profitable as things stand.
I'm not pretending to be anything other than a private investor with an interest in managing some of my SIPP myself though, so what do I know :-)
"Martin, I really am baffled by your post! Can I ask why you bought BRD shares in the first place? As I can’t understand what has changed for the worse this year for you to decide to sell at a 20% loss when the company is about to turn profitable and is producing a record number of diamonds?"
I first bought into BRD around 18 months ago now and a lot has happened since. For a long while I was about 70% down, despite averaging down as the price fell. The dilution in November last year and again in May this year were pretty much terminal from a value perspective for me.
I can't remember what the lifetime of the mine is, but a total lifetime return of 7.3x current market cap (over what period?) doesn't feel like enough to me.
I'm retaining a small holding, but given the history, I'm pleased to get back to a position where I might just recover my initial investment.
Thought costs were projected at $300 per carat.
Todays valuation & summary view from SP Angel, 85% upside from current levels, ignoring any potential large diamond finds. Maybe that explains why there was a delayed buy for £20k just before close!
“Valuation: Simple modelling of the Bluerock numbers gives an approximate NPV@8% value of 243 pence per share. This assumes ongoing grades of 4.3cpht, diamond values of US$432/ct, throughput of 35,000t a month and costs of US$190/ct.
•We do not try to estimate the potential value of recovery of unusually valuable diamonds and we have not modelled any unit cost reduction in mining and processing as yet.
Conclusion: There is significant value to be recovered at BlueRock’s diamond mines in the Kimberley region of South Africa. We are hopeful that the operations are at long last starting to realise their economic potential and we expect to see the mine report some very interesting gem-quality stones over the next few years based on the recovery of ~100 >20ct stones so far this year.”
Martin, I really am baffled by your post! Can I ask why you bought BRD shares in the first place? As I can’t understand what has changed for the worse this year for you to decide to sell at a 20% loss when the company is about to turn profitable and is producing a record number of diamonds?
I was assuming that additional profits would be wiped out by unforeseen servicing costs and increased mining costs for the last 20% of value. Warrants might bring increased cash, but also increased dilution. I don't know that there's much of a dividend on the way here, and with a limited lifespan on the mine what will drive the share price up?
I'm not saying it's a bad company, just that growth/return potential seems limited to me.
Looking at the estimates on a conservative basis, but there could still be more down there than expected, we see a short term PT of £4.00 per share. Remember there is also a lot of cash to come in from the warrants that will be exercised here, bring in another circa £1.2m of cash, to the bottom line
Latest RNS confirms that the total lifetime revenue is 24x the current market cap. Profit margin of $130 per tonne (30%) suggests that total lifetime profit will be circa $37m max, which is 7.3x current market cap - a tiny bit higher than my 6.5 estimate.
I'm continuing to reduce my holding (still 20% below breakeven) on that basis. There are better long term investments elsewhere IMHO.