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Hi Tiger and Prof, sorry not to be able to talk about Cey on that board as it seems to have been hijacked again, hopefully temporarily, by conspiracy theorists who see some plot to bring down the Cey price as though it needs that, whenever I report on management and figures one 007 stirs it, similar to what drove me and Tibbs off before. Sadly the falls one predicts on bad news happen but one is as much the cause as the reporter is of a political change. Thanks both who know me for your support. Luckily Hoc board discusses problems openly, sadly of falling gold price and falling output. My view of the two shares is changing; IF gold price holds and IF Cey can bumble along with a bit above 415k Oz at around $1240 aisc less 52.5% profit share that is still just under £100k profit which gives a PE of 14 around current prices. Remember its share price has almost halved from the Aug peak when expected profit was £230k, so getting close to fair value unless more bad news. But at least they have a lot of gold, 8m Oz measured, 2m indicated,.5m inferred in Sukari, so enough for 25 years at current extraction rate, depending whether worth it. Hoc should do similar Oz this year and have no profit share thought tax, so a lower PE, but can’t bumble along at 415k Oz unless it finds some more. They have half Centamin’s proven reserves at 4.5m Oz, though they have far more indicated, at around 8m and another 4m inferred, though seem to make it v hard to get at in accounts as all min silver equivalent, as probably look bigger. The big fly in both is £100k plus capex and how much is included in aisc, for sustaining, and how much is not included as for growth projects, which could wipe out profit, anyone any idea? Ps my figures are approx and could be quite wrong of course with my maths. But for both now it is the gold price.......
This sums up why I think discretion is the better part of courage right now:
www.project-syndicate.org/commentary/us-disputed-election-scenarios-for-markets-by-nouriel-roubini-2020-10
Hi Prof!
Thinking things over, I am as worried as you are that there may be a resource restatement at Sukhari on December 2nd.
I begin to wonder if Kees Dekker wasn't right all along, and if the old management didn't systematically "high grade" the mine in pursuit of their own personal objectives, and that now the chickens have come home to roost.
I'm mostly in cash at the moment, and I intend to stay that way for at least a week or two. But HOY or CEY? For now, (safety first), the answer must be HOC. If Biden wins the US election (and the Dems take the Senate as well) I'd also expect some silver upside from the Green New Deal (all those solar panels will require silver).
Sotolo,
Many thanks. Have taken a few more off the table over at CEY although not put it back on the table here yet.
Messy day in the markets and think we could see quite some more which may well, in the short term, hurt gold and silver which will in turn hurt miners.
Given all the shortcomings of previous management over at CEY I do have a worry that it could extend to drill results being less positive than previously trumped and that being highlighted on 02 Dec. Do you see that as a possibility?
Best wishes,
Prof
Sorry Prof, my post had its last last para cut yesterday as too long, saying that gold shares tends to be a leading indicator of the gold price and their falls suggest that gold will break down, once it leaves the comforts of the 1900’s, so maybe best to hang on before buying more, tho of course couldn’t say that on the Centamin board. All best
Sotolo,
Have now read you response. Thank you very much that is incredibly helpful and one I will reread a few times before coming to a decision as to whether to invest in HOCs. I might sell a few more CEY and move that across to HOCS to at least diversify the company, if not the gold risk. I do have a niggling worry with CEY that, given the previous regime seems to have completely oversold just about everything, they have oversold the exploration results and 02 Dec will also expose that. Against that I can't help but wonder whether the new CEO is doing that 'new CEO' thing and kitchen sinking it.
BTW what about HOCS and dividend? Do you think it will increase now debt is pretty much paid off?
Finally, and reference where you started your post, I do feel for you getting the 'decamping' abuse on top of your own financial loss. As is so often the case, you were proved right, albeit I know you would have preferred to be proved wrong as you would have been better off. Like you I struggle to see why people have such a problem with opinions different to their own, surely having our sometimes overconfident views tested is to be welcome in investing.
Best wishes,
Prof
Hi Sotolo,
Thanks for the response. Have just seen it and not read it yet but I was worrying about you, as I was about Tibbs, given neither of you have posted much since the bad news at CEY. Hope all is OK and you have managed to find a way through with the house.
Will now, with much anticipation, read you response.
Best wishes,
Prof
Sorry not to reply quicker to your post on the Cey board but I was a bit put off; it is bad enough losing money & worrying, without being accused by conspiracy theorists who decry different views suggesting interference, and they will take any steps necessary. It has driven dear Mr Tibbles off before. A bit pointless if you can only post that shares and profits will rise, especially when management say production and profit will be down
This board is much quieter, partly because there are fewer Hoc shares traded, as the family own more than half; it is more volatile, also because the market treats it as a silver miner while it is now over half gold.
Hoc have two problems which lowered their share price: First Hoc’s secular short mine lives, with another lower production forecast before Covid:
In 2019 Hoc beat forecast and mined 477k gold equivalent oz at an aisc below expectation of $965, for a profit of $450k less Tax and Capex. Cey in 2019 was almost identical 480k oz at $943. And while Cey has 52.5% profit share and royalty Hoc has high Capex to find new metal.
By early 2020, before Covid, Hoc predicted a production drop to 432k oz, so higher aisc of 1015-1035 (and Capex 115-130m) so around 20% profit hit. While Cey predicted higher ounces. So the two share prices diverged with Cey rising above Hoc.
As 2020 turned out both were unexpectedly hit, one by Covid shutdowns the other by the mine wall. Hoc’s Covid mine shutdowns are known and temporary, so I think the recent share price hit has been overdone, unlike Cey’s lost production that could last longer.
So to 2021. With PM’s at this price if Hoc production recovers, to the reduced figure they originally predicted for 2020, they make a bit under $400m less tax and capex. While Cey with 415k at a massive $1200-1275aisc make $120k after profit share and royalty. All these figures are on the back of my fag packet so may be wrong but I think Hoc should make more than Cey everything else being equal next year while being valued less
However I haven’t added the Argentine and Peru political risk which I think outweigh the Centamin court case.
So in conclusion Hoc deserved to suffer badly from its 10% lower production pre-Covid, Cey deserved to suffer more for its over 20% loss in production and hugely higher aisc. So which is better poised to make it up, Cey because they will sort it out but could be years, or Hoc dependent on their exploration results? Now Hoc is over 100p higher it may be about right, but depends very much if any good exploration news on the upside, and no political problems for the mines on the downside.. I would like nothing better than for both shares to soar.
On another note there will be more miners to choose from; (Silver) Wheaton which is royalty based, floats in London, I think tomorrow, also Kinross etc. However gold shares tend to lead the metal and they are not looking rosy just now & who knows what the US election will do to gold whoever
Morning Sotolo,
I am starting to take a look at HOC where I know you and a number of the others on this board are also invested.
I was interested to see that forecast for this year was 422k gold equivalent oz after producing 477k in 2019. I appreciate that in light of COVID and the resulting production halts earlier in the year the forecast is now 280-290 which was reconfirmed last week in Q3 prod results. I also note that HOC is approx 20% less market than CEY at current share prices.
Looking only at the next year, it seems CEY and HOC could be producing broadly similar gold/ gold equivalent oz. Have HOC given any insight as to what they expect to produce? HOC have traditionally paid a very low dividend which I get while they have been paying down debt. Given their debt is almost repaid is there any indication whether profit will now go to dividend or exploration/ CAPEX? Finally what do you make of the medium to longer term prospect of the two companies?
Would appreciate you informed thoughts. (Have posted on both boards as relevant to both companies and not sure where you look more).
Thanks,
Prof