George Frangeskides, Chairman at ALBA, explains why the Pilbara Lithium option ‘was too good to miss’. Watch the video here.
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New to this share and that was a good set of results. Will be doing more DD, but is there a quick answer to, or cooment on, the investment potrfolio?
Not something I expected to find here.
"· The total value of investments (listed and unlisted) was US$38.7 million as of 31 December 2022, versus $47.3 million at 30 June 2022 and versus US$60.2 million at the end of 2021; The portfolio recorded investment losses (unrealised) of US$9.55 million in H2 2022;
· Capital was a net seller in 2022 and has invested a net total of $12.5 million in the investment strategy since forming the Investment Committee formally in January 2019;
· The portfolio remains concentrated around a few key holdings with our holding in Predictive Discovery accounting for ~50%;
· The Direct Investment portfolio will provide a mark to market contribution to results."
Continued:
"Conclusion: This is the third consecutive year of revenue growth for Capital which once again affirms the Company’s growth trajectory. Its three main business streams: drilling, mine services and laboratory testing offer stable and diverse revenues with, in our view, the most near-term growth to be seen with the MSALABS business and mining services. With the further roll out of Chrysos and continued drilling activity in Africa we expect this growth lasting well into 2024. The shares are trading on a 2023E and 2024E EV/EBITDA of 3.0x and 3.3x and P/E of 7.2x and 8.6x respectively – see Block Model.
We remain confident that the levelling out of growth we are currently forecasting for 2024, based on Sukari rolling off, is highly unlikely and that the company will transact further major contracts across all business units which will see revenue continue to expand into 2024 and beyond. Meanwhile we are forecasting a dividend yield of 2.8%. We retain our PT of 160p."
"Key Points:
• Full year revenue exceeds revised guidance
. The company achieved Q4 revenues of US$79.1 million which is 8% above the previous quarter ($73.1m). This drove FY22 revenue to $290.3m, 28% higher than FY21, which exceeded the upper boundary of the revised guidance of $280-290m. This is the third consecutive year of revenue growth with non-drilling revenue contribution edging up YoY (28% of total vs 22% in FY21) driven by mining services and the MSALABS business. The average ARPOR of $191,000 was up both YoY and QoQ which is a positive surprise to our modelling.
• Four contracts awarded in Q4. Capital continued to win new contracts and extend existing ones throughout Africa. During the quarter it announced three contract extensions and a new underground contract with Barrick at North Mara. There was a two-year extension at Barrick’s Bulyanhulu Mine, a three-year extension (with a further two years) at B2Gold’s Fekola Mine and an extension of the exploration contract with Tembo Mining. Note the quality of the customer base too. At the end of 2022 the fleet size had increased to 129 up from 127 in Q4.
• MSALABS continues growth trajectory. MSALABS now has four Chrysos PhotonAssay units commissioned with a further
three due to begin operations in Q1 2023. The Company notes that PhotonAssay continues to be in high demand with MSALABS set to capitalise on this given the expanded relationship with Chrysos Corporation to roll out 21 units by 2025. Given the performance to date and following the rollout of a further 15 units by 2025, along with the expansion of the existing geochemistry business, we remain positive on the ability of Capital’s labs segment reaching the 2025 revenue guidance in excess of US$80 million. Remember too this is effectively zero capital growth.
• Fleet utilisation comes off as portfolio repositioned. The fleet utilisation decreased QoQ to 73% from 77% as rig
movement increased. Capital have noted that it is pivoting away from short-term exploration contracts to focus on longer-term contracts at large scale mine sites and Tier-1 projects. We are not concerned with this quarter’s utilisation as we believe it will be transient as rigs are moved and then pick up slightly (we model an average of 76% going forward).
• Positive outlook gives group confidence to invest. Capital notes that it continues to see robust demand across all business units. The recent rebound in gold price is positive with much of the Company’s revenue generated from the sector. The MSALABS segment is experiencing very strong demand levels which the company is capitalising on with the roll out of at least three (we model seven) Chrysos units this year. The Sukari waste stripping contract continues to perform well and will be at steady state throughout 2023. This major contract continues to support non-drilling revenue growth as well as enhancing revenue diversification and we would imagine the company will be keen to extend and expand this
CAPD are the drilling contractors at Resolute Mining's Syama mine, where they've just announced "the updated Mineral Resource Estimate for Syama North increases 58% to three million ounces of gold" and:
"The infill drilling program at Syama over the second half of 2022 has exceeded our expectations and the drill rigs are still turning on this contiguous strike discovery of over 6km":
Https://www.investegate.co.uk/resolute-mining-ltd--rsg-/rns/over-three-m-ounce-mineral-resource-at-syama-north/202301190700022450N/
And CAPD are also drilling for WIA Dold at Bouafle, where they've announced "two new significant gold anomalies" and:
"We are confident in the scope for a significant gold discovery at the Bouaflé Project and have commenced an 8,500 metre auger drilling program to test the underlaying structures over these new anomalies":
Https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02621962-6A1132116?access_token=83ff96335c2d45a094df02a206a39ff4
Yea i can only think it's buy the rumor sell the news. But if you're taking a buffet view of buy the business the business looks good.
Hi robertalexander - given the run up in the share price prior to the update, it's most likely short-term traders exiting with a small profit. I can never see the point of taking the risk myself! Unless I suppose it's to supplement an existng core position.
Tamesis Partners have retained their 160p price target for the moment, presumably until further review when the prelims are out.
They note CAPD are on a 2023 P/E of only 7.2 and an EV/EBITDA of just 3. Which is just ridiculously good value imho.
Do you think the market didn't like the results or is it just general malaise in the wider market [IE FTSE down/US down etc]?
I agree. Good results. Revenue marginally ahead of expectations is a positive surprise. Nothing on margins though so we don't get a handle on profit or EPS until March. Which is of course fair enough.
I would have liked to see some more detail on MSALABS. Hopefully they will break down revenue by the three pillars in the final results.
JL
PS thanks for all the mine updates Rivaldo. Much appreciated and please do keep them coming.
Tamesis retain their 160p price target for the moment, presumably until further review when the prelims are out.
They note CAPD are on a 2023 P/E of only 7.2 and an EV/EBITDA of just 3.
Excellent - revenues are slightly ahead of even the very top of guidance.
The $290.3m is also way ahead of Tamesis' forecast of $283.8m. And Q4 revenues of $79.1m revenues bode very well going forward.
Both drilling and non-drillng look in great shape. Non-drilling is increasing fast and is now 28% of total revenues, with Chrysos' prospects looking explosive.
The investment portfolio took a hit as already known - but is worth $38.7m against a cost of $12.5m in 2019 - still a terrific return (and presumably after some profits have already been taken since CAPD were a net seller in 2022).
With "multiple long-term contracts" renewed and won in the year, and Sukari performing very well, CAPD's revenues are not only increasing but also secure going forward and less and less influenced by cyclicality in exploration drilling.
CAPD look in great shape imho.
Good or not? Seem mixed to me... But what do I know?
CAPD are the drilling contractors at Odienne for Awale Resources (where they own 8.3m shares), who last night announced a positive drilling update, with continued drilling to come:
Https://money.tmx.com/en/quote/ARIC/news/4877780437185854/Update_on_OdiennxE9_JV_initial_drilling
"Company CEO Glen Parsons commented today:
"Awalé and the Newmont JV team are excited to have the first seven scout holes drilled into the Sceptre East Anomaly which forms part of the larger >20km 2 highly anomalous gold and copper Sceptre mineralized system. Initial observations from the drilling at Sceptre East show that we have intercepted an alteration and mineralized system with extensive chalcopyrite and molybdenite mineralization, and which remains open in all directions. These initial holes at Sceptre East have only tested a fraction of the broader 5km long Sceptre Cu-Au in soil anomaly. We eagerly await results for what has the potential to be a large new discovery in Côte d'Ivoire, following which the company anticipates recommencing drilling as soon as possible in this 1 st quarter of 2023.
Furthermore, the two holes drilled at Charger have both intercepted wide zones of mineralization behind a surface gossan in a new artisanal zone. This drilling has also opened the potential scale of mineralization at Charger.
We look forward to receiving all pending results and the continued drilling at these targets, as well as the new Lando and BBM targets to the north."
Good news from Leo Lithium's Goulamina lithium project - including a couple of mentions for CAPD as the driller (and CAPD hold around £3m of shares in Leo Lithium):
Https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02621619-6A1131946?access_token=83ff96335c2d45a094df02a206a39ff4
"GOULAMINA MINERAL RESOURCE INCREASED BY 33.8 Mt TO 142.3 MT
• Total Goulamina Resource increased by 31% to 142.3 Mt @ 1.38% Li2O
• Danaya Domain Resource, which is located within the broader Goulamina Project,
increased by 33.8 Mt to 56.1 Mt @ 1.24% Li2O, a 152% jump
• The result confirms the prevalence of a high-grade resource at Danaya and supports possible extension of the current 23-year Goulamina Project mine life
• Revised Danaya resource model reveals new drilling targets and further exploration potential
• Drilling at Northeast Domain is continuing, with further Mineral Resource updates
targeted for H1 2023"
"Outlook
Drilling activity at the Northeast Domain is ongoing with one RC rig and one diamond rig. It is anticipated to restate the Goulamina resource in H1, 2023. The Danaya MRE has also highlighted opportunities to further extend the Danaya Mineral Resource with additional resource drilling"
"RC drilling was completed by AMCO Drilling SARL (AMCO), and Capital Drilling (MALI) SARL (Capital), using nominally 5.5-inch diameter equipment, with a face sampling downhole hammer. Core drilling equipment at Danaya was supplied and operated by AMCO and Capital. Drillhole diameter ranges from PQ size within highly weathered and oxidized zone and standard HQ size diameter within fresh rock. Diamond holes were drilled from surface or as diamond tails on RC holes. Core was orientated down hole so that structural measurements could be taken. Diamond
Core drilled by Capital drilling in the 2022 campaign was not assayed in time to be included in the Danaya MRE, although the geological and structural information was used to define the pegmatite solids."
Me too first buy today, looks like ridiculous value and very safe investment at these levels.
I've joined the party today. Looks a promising company.
Update is scheduled to land around then
GLA
I note a post elsewhere from AIMProspector referenced as a "World Exclusive"!
"Capital will announce a Q4 trading update on Thursday, 19th January"
New all-time highs at these levels.....(and cheers shareminator!):
Http://uk.advfn.com/cmn/chrt/chrt_wrap.php?epic=LSE%3ACAPD&name=&type=1&size=2&period=13&date1_day=27&date1_month=10&date1_year=2000&date2_day=13&date2_month=01&date2_year=2023&ind_type1=0&ind_type2=0&ind_type3=0
Thank you for sharing all the recent developments here Rivaldo. It’s very much appreciated!
Looking strong here, and a number of news items:
- gold still rising and now at $1,883, and could continue to do so with expectations that the US Federal Reserve will slow its interest rate rises
- news overnight that Marvel Gold's Yanfolila mine- where CAPD are the contractor - has produced encouraging results:
Https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02620432-6A1131488?access_token=83ff96335c2d45a094df02a206a39ff4
- interesting article in the FT today noting that Saudi Arabia are launching a mining fund of up to $15 billion in an effort to reduce their oil dependency, which would do very nicely for the sector as a whole!
Https://www.ft.com/content/46bf21a4-e626-4581-ad85-8b74bbd82e4e
"Saudi Arabia has launched a mining fund that plans to invest up to $15bn of capital in overseas assets according to people familiar with the details, as the country works to reduce its dependence on fossil fuels.
The venture, 51 per cent owned by Saudi state-owned miner Ma’aden, with the remainder owned by the country’s Public Investment Fund, will take non-operating minority stakes in mining projects internationally, the two companies said on Wednesday."
"Given the scale of projects in commodity markets, the fund is prepared to deploy more than $15bn of capital for investments over the coming years as suitable opportunities emerge, the people added. PIF declined to comment beyond the statement."
Good news overnight from Golden Rim at Kada in Guinea, where CAPD are the exploration drilling contractor, with much more drilling to come:
Https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02619397-3A610683?access_token=83ff96335c2d45a094df02a206a39ff4
"Golden Rim’s Chief Executive Officer, Tim Strong, said:
“We are delighted at the speed with which the drilling has commenced and the progress of our exploration program at our flagship Kada project in Guinea. RC drilling has averaged more than 1,000 metres per week at Massan. The RC rig has moved to the Bereko prospect, 9km north of the current Mineral Resource, allowing us to commence a trenching campaign at Massan to further improve geological confidence within the Mineral Resource area.
“A diamond drilling rig is scheduled to commence soon and is expected to provide us with vital structural information about the controls on mineralisation across both the Massan and Bereko prospects.
“We are expecting our first assay results towards the end of January, and the two drill rigs and trenching will provide us with a steady stream of new results over the coming months."
Part two:
"since 2019, a rich source of new contracts has come from the company’s own portfolio investments. By taking equity stakes in miners, primarily at the exploration and development stage, Capital has gained a strong idea of its pipeline and the likely timing of tendering activity, which the company says is always carried out at arm’s length.
The return on this investment strategy has been excellent. Since Capital began taking stakes in 2018, annual recurring revenues from portfolio firms has jumped from zero to $48mn (£40mn), while the value of its listed and unlisted portfolio
has swelled to $47.3mn, from a cumulative cash outlay of $11.5mn. ...
Second, the group recently appointed resources and logistics veteran Peter Stokes as chief executive. He is based out of Perth, which will not only puts the company close to the capital spending decisions of important prospective future clients, but frees up co-founder and executive chairman Jamie Boyton to look for more contract opportunities around the world.
Currently, the clear majority of mine-site sales are made in Africa, where Capital is the largest independent mining services company and focuses largely on tier-one assets managed by premier mining groups including AngloGold Ashanti (US:AU)Ashanti (US:AU), Centamin (CEY) and Barrick (US:GOLD).
Although there is competition in many of the countries where the group operates, international miners’ preference is to partner with established names with a good track record of safety and local workers. On both these fronts, Capital is a sector leader. The group is also bullish on the outlook for mining capital expenditure, citing the historic depletion of reserves across various metals and massive
forecast demand for materials that will be critical to the global energy transition.
Recent contract awards – and rising utilisation rates for Capital’s growing fleet of drilling rigs – suggest this demand is already on the up. Arguably, the customer base is more concentrated than is ideal, with around half of all revenues coming from the Centamin-operated Sukari mine and another unnamed project. However, these revenues are split across six on-site contracts, so are not as risky as they appear.
More broadly, by selling ancillary services to a hot sector – and having built up a good track record and scale since it began trading in 2005 – Capital Limited is a stock in the best tradition of ‘picks and shovels’ investment plays.
Even without growing organic sales from its dominant drilling business, its canny push into laboratory services looks like a strong driver of growth and is expected to generate more than $80mn in annual revenue by 2025, up from $30mn this year and just $3mn in 2019.
The volatility of the mining cycle means investors should be careful not to forecast too far ahead. But the strength of Capital’s near-term outlook could hardly be more detached from its market valuation."
Here's the full tip - part one:
Https://www.investorschronicle.co.uk/ideas/2023/01/05/capital-limited-in-name-only/
"INVESTMENT IDEAS
Capital Limited in name only
The drilling services company is under the radar, growing well and inexplicably cheap
January 5, 2023
Name aside, it’s not hard to guess why investors might look past Capital Limited (CAPD). As an on-site services provider largely catering to Africa’s gold producers, the FTSE Small Cap index member appears to be in a cyclical sector in a high-risk geography. Its assets are rust-prone heavy drilling rigs, rather than
precious metals. And while its clients seek treasure and exposure to limitless spot markets, Capital hunts for modest margins on multi-year drilling or earth-moving contracts.
But there’s a lot more to the business than first appearances – a point you might think investors had grasped, more than a decade on from the company’s London initial public offering and seven years into a 330 per cent share price rally.
Indeed, by any measure, Capital has talked and walked like a well-managed growth company for some time, and little suggests that its trajectory is about to stop.
How then, does one account for the cheapness of its shares? Despite a lack of debt, they trade in line with book value. And despite rising sales and an expanding operating margin, they trade at less than six times forward earnings, a 40 per cent discount to peers and the stock’s own five-year average of nine. Capital’s price-to-earnings growth (PEG) ratio of less than one also suggests the past year’s share price appreciation has been overly cautious. Not that long-term investors will
have minded; had they reinvested their steadily growing dividends back into the stock, annual returns would have averaged 25 per cent since late 2017.
The answer, we would venture, is that the market has mispriced Capital’s risk premium. Let’s start with the basic mechanics of the business. Capital provides a wide range of services across the mining cycle, from the exploration phase to a mine’s development and eventual production stages. These include the leasing of equipment, geological sampling, fleet management, and drilling and earth-moving
work. Since 2019, it has offered on-site laboratory services, which allow its clients to outsource geochemical analysis and assay work to an independent, licensed contractor.
These services are provided through contracts comprising a mix of management, volume-based and per-sample fees, and are typically signed for between two and five years. But Capital’s close working relationships with its mining customers mean the group always has a clear idea of long-term spending plans, and repeat awards are
common. Contracts also contain provisions that help to shield Capital from the effects of cost inflation."
Https://twitter.com/otemple79/status/1611070639367921664
"#CAPD nice to have some decent coverage in the IC tomorrow, highlighting how chronically undervalued it is ??????
"investorschronicle.co.uk
Capital Limited in name only
The drilling services company is under the radar, growing well and inexplicably cheap
6:42 PM · Jan 5, 2023"
i.i.i have set up a momentum screen for small cap shares where:
The 50-day moving average price has risen above the 200-day moving average price
Price strength has been positive against the market over one year, three months and one month
Positive forecast earnings-per-share growth in the year ahead
CAPD are one of the top 10 shares highlighted in yesterday's article, with a P/E of 5.3:
Https://www.ii.co.uk/analysis-commentary/10-small-cap-shares-lead-recovery-2023-ii526472