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The figure I quoted was very much conservative, based on the fact that we only need to add a CIL rather than pay for an entire processing plant, as allowed for in the DFS.
Of course the '!' After the 13p SP was intended to be a note of caution, as getting that price is, in my opinion, unlikely.
However the 'paper' price I quoted is correct, based on a current POG of $1,580, and the generally held view that it will increase inthe short to medium term. Also there is much talk about the value of the USD increasing and that wouldn't do us any harm either.
On the whole, I would say that we are in a good position providing we have a dedicated full time captain at the helm - but I think that Captain Bob is the best person to make that call...
RE Discussion / opinion on future POG
Start from 12m 15 sec in.
Last 1 mins is very interesting
James, very much appreciate the effort taken in your posting of thoughts, pointers and corrections they all very welcome and taken onboard.
Also just noticed the bit in my first post today re CE neglecting exchange conv was wrong, must have miss typed something into the model at some point as my 1575 results dont match as stated earlier.
Will be updating/including for midyear cashflow from now on. Will also get to know xtr a bit better I think, lots to catch up on.
Some discussion re these cpi adjusted figs I referenced...
Not saying I buy all they say but definitely strongly expect the uptrend to continue over medium term - quite exciting really.
dought = doubt :)
It's difficult to see a realistic and logical reason why this won't multi -bag from these levels over the next 6 to 18 months. There can be debate on either a 4,6,8 or 10 bag (maybe more if you believe some calculations :)) but I think all or nearly all see a big upside from this level.
The risk and possible downside? I can only think that it takes a lot longer then anticipated to get HR up and running and we need another raise to cover G and A, so more dilution?? That is a worse case scenario (i think) and the, say, 10% or 20% dilution will be well covered by the rerate, later on. POG crashing is another but that seems highly unlikely.
As MMP will be taking the lions share of FB profits, I'm sure they wont walk away and are very keen to get the profits asap. I am sceptical about the 8 month construction lead times stated by CB as most mines take 18 months to build. I know some of the mine has already been built by Omnia, but 8 months does seem very optimistic lead times. Hence I think first pour Q1 2021. I suspect that's down to CB being CB again and looking at the best possible case - ie a stretch target and moreover aspiration rather than realistic time scales.
That said, we should get there in the end - no dought with a few more bumps in the road ahead. Hopefully not starting with Q4 alluvial results next week :)
Enjoyed reading your post, thanks.
For the NPV calculations, id always added back the estimated capex cost to the NPV 15 stated in the DFS. Generally when valuing something you ignore historic (sunk) investments and focus solely on the forward cashflows. However as the CIL capex etc hasnt been spent i think this is incorrect, and i should perhaps include 10-15 in my calcs.
In your discounting you are assuming that all cashflows occur at the end of the year e.g. For year two 19.8m/(1.15)^2 = 15m, i would make this 19.8/(1+.15)^1.5 which is mid year discounting and assume that cashflows will occur evenly throughout the year (on average in the middle of the year) It wont make a huge difference but will give a higher and more accurate valuation.
My understanding is that it was Ominia who spent 11m before they had a resource, im not sure about MMPs plants history? So i will continue to believe that they wont make the call to trigger the option until closer to the option expiry date.
Despite there being a range of uncertainty on valuation no one has come close to making the current share price seem reasonable and even the lowest is a multiple of around 4 solely on fairbride.
Other than MMP walking away i am struggling to see a downside here (other than the pain of waiting for things to finally happen of course)
I've set-up an excel spreadsheet which calculates profit against different POG, and as you say, a higher POG makes a substantial difference in the profit. Fixed and variable cost etc. I think we are in a Gold bull run and will see POG $2000 oz within 2 years.
I also wouldnt dismiss any other higher buy-out calculations but I havn't seen any other robust calcs (as detailed as yours) to support a higher buy-out price so until I do I'll stick with my maths and methodology to determine the buy-out price, which is not that far off yours.
A few points:
1. I was the person who stated FB is circa a quarter of known reserves. Obviously we can't just x FB profit by 4 but there should be a lot more available later on (whenever that is!).
2. CB is well known for his inaccurate forward guidance wrt timescales and figures, so don't expect HR in production this year, despite his timescales. First pour Q1 2021 (IMHO)
Thanks for your thoughts and workings.
Have not read the BB much at all probably flick thru a couple of posts a quarter until I bought more the other day, read the posts since my post and had a bit of a flick around, so have not seen more than CE’s 13p. Mainly post things to record my reasonings behind the trades that I do, (when trying to explain things in written form sometime errors surface).
Questions were asked of how the NPV changes with POG, I think my posts show (if correct) that the recent change is marked and hugely beneficial to xtr share value, of late the sp however has reduced and the mcap valuation has been running counter to the actually demonstrable value.
The POG has now surpassed the point at which MMP could have bought out xtr at discount to concurrent POG future earnings, now the decisions rest (among other considerations) on an entities speculation of the POG into the future.
None of my figures included todays gold price 1583.89 (from goldprice.org), those numbers are below.
Buy out price 42.48m usd / 32.71m gbp (roughly 7-8x todays mcap)
Buy out price per share gbp 7.158p (based on 457m issue)
Future cashflow - project 156.65m usd
Cashflow attributable to xtr 36.03m usd
Cashflow attributable to xtr per year 5.15m usd
Cashflow attributable to xtr per year per share gbp 0.867p (very close to current sp btw, imo ridiculous)
Im not really well research specifically on xtr at the mo, but my understanding is that all the above relates to fairbride only, and flicking back a bit today I think I read someones post that FB represents a quarter (just from memory) of the manica concession which totals around 1.4m oz
The last date ard rock production should commence according to CA is this October, if so this company seems likely either to be generating yearly profits from one of its projects pretty much equal to its current mcap from a date less than 9 months away or be bought out at multiples. Meanwhile possibly generating cashflow from sale of gravity recovery amenable ounces and very likely tail end of alluvial recoveries. Its quite a big if but still.
Not to mention manica exploration upside, pog upside, or +++Zambia Cu - CB’s specialty.
So yes, agree, your figures and mine are not too far off (both multiples to todays valuation). Im not dismissing anyones valuations as they may, and probably do, know more than me and Ive not seen their assumptions, reasoning or calculations (or even possibly their actual valuation in the first place).
All im saying really is that the POG massively affects the XTR attributable value whatever the scenario that pans out, be it up or down, disposal or production. CB knows it, MMP know it. Theres been a bit of quiet lately and the POG is in a seemingly strong uptrend.). On the face of the very limited looking into it Ive done, the sp looks very attractive to go long xtr.
Got to make the T now so no more time Im afraid.
Good weekend to u & all.
Thanks for all your work doing the calcs.
If I've understood you correctly you seem to be coming to the conclusion that $33.8M would be the buy-out figure. Obviously, at todays date and against certain assumptions.
If so, that's in the same area I calculated yesterday as I said circa $30M to $35M . If I understand you correctly, then you appear to agree, roughly, with my figures.
However, IF the buy-out price is circa $34M then that's circa £26M which is circa 5.7p a share. Again not a million miles form my 5 to 5.5p SP but if that's correct, are you dismissing the other buy-out valuations that were much higher?
I want the higher valuations to be realistic but can't see it, and it appears your calcs support my view. Correct??
0.77usd to 1.0gbp should read 0.77gbp to 1.0usd
Comparing the buyout prices vs production earnings figures side by side makes the momentum in the POG very significant in the commercial decision MMP will likely be pondering. Following is POG followed by future earnings to xtr followed by cost to buy future earnings at 15% discount.
1262 20.0m 9.2m
1290 21.4m 12.3m
1500 31.9m 33.8m
1600 36.8m 44.1m
1800 46.8m 64.8m
2000 56.8m 85.4m
2600 86.7m 147.3m
Say at 1500 they decide to buy out at 33.8m and the price goes to 1600 (by the time the plant is running) they made a profitable decision then (a year into production or so) the price moves to and stabilises between 1800 and 2000, they are laughing.
The money is not the only element that comes into the commercial decision obviously to own it outright is a big deal.
'cant see why they would rush into giving away 20-30m usd Before they know fairbride is what it says on the tin'
Definitely see where you coming from but according to CB they ploughed 11m into the front end of the plant before they even had a resource so not sure they are as cautious as you seen to assume. Only basing that on CB ‘off the cuff’ comment tho.
Maybe we will find out soon.
Corrections very welcome, like I said definitely no expert just having a go, might buy some more next week if stays sub 1p, will try and have to have a look at the FS at some point too.