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have a look at this https://www.investi.com.au/api/announcements/pdi/6ab1a169-9f1.pdf major discovery in the tenement next to HUM's Guinea target.
Also don’t forget they haven’t sold 50%. HUM have agreed an earn-in, whereby ARX can earn up to 49% of Dugbe from funding the various parts of the deal. So on day one, there is no dilution of HUM’s stake, only after they have spent time money, which I would assume will be capitalised into the project, will the HUM stake reduce. Any write off will therefore be minimal. This is a non-point FIFO
Unfortunately, there's only 365 days in the year....need a few more for some days off.
Cheers, Ash
Very clear to me Ash, maybe you should drink more often;-)
Actually, having checked the numbers, FIFO is right on the potential write down - the tangible asset value is $65m so if you deduct the royalty liability of $15m the net is $50m - $25m loss on transfer of assets to the JV. However, if the costs of exploration and the DFS c. $20m? are added back to intangible assets within the JV, the value of the asset to HUM are increased again by 51% - $10m. Then they will be depreciated, if Dugbe goes into production - end result is the asset value will be written down sooner or later. Question is, how much more cash could HUM shareholders receive as a result of the JV rather than admiring a balance sheet with an asset that's probably worth jacksh*t without further investment, and which allows the company to focus on potential assets such as Kouroussa?
Far too complicated at this time of night after a few beers! Hopefully, someone understands my drift....
Cheers, Ash
I agree with that, Ash: it has to be the net asset figure and the $15 million is a substantial reduction in any write off.
Furthermore, ARX are not only spending $10 million on exploration, but also picking up the tab for the DFS, likely to be a significant figure as yet not quantified (plus of course on going costs).
Finally, HUM has 51% ie, the controlling interest and it is difficult to say what premium that carries.
I have to say, I am not expecting an accounting write off on the grounds of the Dugbe deal.
The new project is far more suitable for HUM, better synergy in every way and I am with Tiger: really glad that Dan took the sensible course of action and left elephant hunting to the big boys and if they bag a whole elephant, with some ridiculous increase in oz.. and/or grade, we get half and would be in a position to fund or sell, as we chose, by then.
Hi Fifo!
I'm overjoyed that HUM are not spending any new money on Dugbe, which I regard as a money pit. (I'll be happy if ARX manage to make something out of the asset over time, but I certainly won't be buying any of their shares).
I couldn't care less about a non-cash charge to the company's book value relating to Dugbe.
IMO, HUM is all about the cash that Yanfolila is currently generating, and the hope that Kouroussa can continue and increase that cash generation in the future.
I think you'll find most shareholders here feel much the same.
If I was valuing HUM on a break-up basis, it would be of more concern. Also, worth thinking about the $15m future royalty liability - will this also be moved across to the JV - always look at the net asset position.
Ultimately, cash is king right now. Will the transaction affect HUM’s ability to generate cash? No. Will it potentially add further cash. Hopefully...
Cheers, Ash
Fifo,
Your comment assumes that there was value attributed to Dugbe previously, there clearly wasn’t.
With that in mind, 50% lost of nothing is nothing.
Now that there is actually some form of plan in place to move Dugbe forward it may begin to show some value to HUM. Therefore, 50% of something will be much more than 100% of nothing.
I know a watched kettle never boils
but can’t stop looking.
Maybe Q2 will make Hummingbird fly.
Or maybe before.