The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
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The gold price is now above a noteworthy $2,080, which should encourage further sector investment, thus benefiting CAPD.
Also, an interesting RNS from Intertek this morning. They've acquired Base Met Labs, a minerals testing business with a focus on gold, copper and other critical metals. No consideration was disclosed, and Base is relarively small with £7.8m turnover, but Intertek make positive noises about the sector as follows, which should reflect well on the prospects for MSALabs and Chrysos:
"André Lacroix, Chief Executive Officer of Intertek, said: "There is no doubt that, with a growing population and the rise in demand for raw materials, the requirement for leading ATIC solutions at every stage of the minerals and mining supply chain globally is increasing rapidly."
Good to see the share price inching up a little to the current 88p bid.
Nice coverage here about MSALabs helping define "the world’s largest rare earth metal deposit":
Https://www.mining.com/joint-venture/jv-article-msalabs-probes-global-expansion-after-swedish-mega-find/
Extracts:
"Now, MSALABS is turning to expansion in North America where it has a $145 million, five-year contract with the world’s largest gold producer, the Nevada Gold Complex run by Barrick Gold (TSX: ABX; NYSE: ABX) and Newmont (NYSE: NEM; TSX: NGT). The analysis company is promoting a centralized lab concept there for geologists to reduce turnaround time and save money. It will use three PhotonAssay units to serve the site’s 12 open-pit and 10 underground mines.
PhotonAssay
MSALABS, whose global customer roster also includes Teck Resources (TSX: TECK.A/TECK.B; NYSE: TECK), Hecla Mining (NYSE: HL) and Kinross Gold (TSX: K; NYSE: KGC), was the first to offer the patented PhotonAssay analysis in Africa and Canada. It is rapid and more precise than the traditional fire assay process where there’s risk of contamination and gold loss."
"MSALABS began using PhotonAssay at Barrick’s Bulyanhulu gold mine in Tanzania in 2021. It has installed nine units across operations in Canada and Africa and intends to deploy 21 units globally by next year, making it by far the largest provider of the technology. Barrick is replacing its fire assay setups globally with 11 PhotonAssay units under agreement with MSALABS."
"It has a global network of 27 laboratories in key mining regions including Canada, the United States, Latin America, Africa and Europe. Other clients include Canada’s largest gold producer, Agnico Eagle Mines (TSX: AEM; NYSE: AEM), Victoria Gold (TSXV: GCX), the Yukon’s only gold producer, and successful East Coast explorer New Found Gold (TSXV: NFG; NYSE-AM: NFGC).
Labs can also be found at Barrick’s Kibali gold mine in the Democratic Republic of Congo, Kinross’ Tasiast gold mine in Mauritania and Shanta Gold’s (LSE: SHG) Singida gold mine in Tanzania.
MSALABS has recently completed its newest laboratory in Marsa Alam, Egypt, supporting the renaissance of the Egyptian mining industry. The next facility will be just on the other side of the Arabian Nubian shield at the Jabal Sayid mine, a joint venture by Saudi state mining company Ma’aden and Barrick."
news of msalabs expansion to double their capacity:
https://www.linkedin.com/feed/update/urn:li:activity:7162655029965807616/
"msalabs
2d •
our val d’or laboratory has been undergoing a significant expansion and the new works are almost finished. this laboratory is twice the size of our existing facility and we’ve added space for a second photonassay™ unit, semi-automated sample preparation facilities and a substantial storage area.
✅ the new semi-automated sample preparation process will have capacity for processing more than 30,000 samples per month, and will further reduce turnaround time for results.
✅ we`ve added sample pulverizing capabilities to further improve tat and reduce costs for icp multi-element samples sent to our hub lab in langley (including lithium samples)
✅ we are further reducing waste with a new photonassay™ jar cleaning robot system which will enable reuse of sample jars.
✅ additional storage for pulp and co**** reject samples will allow for more efficient sample storage and retrieval
the new laboratory will be finished and ready to begin processing samples by the end of the week. if you would like to discuss our services, please contact val-d-or@msalabs.com"
Tamesis partners are cra'ap Rivaldo and dumbed down for people who only spend a brief time looking at company earnings, i'd take their spiel as a one sided coin. I can confidently say they have added no value to the share price!
Tamesis Partners retain their 160p target price, and conclude:
"Valuation
As Peter Stokes, CEO, comments: “The Group has delivered outstanding compound annual revenue growth of 33% since 2020 and we are confident of maintaining our growth momentum as we start 2024”. The breakthrough into North America is particularly noteworthy and more than offsets issues in West Africa to our mind.
The shares are trading on 2024 PE and EV/EBITDA multiples of 6.8x and 2.6x respectively with a dividend yield of 3.4%. Not sure there are that many companies, certainly in the industry, generating 33% CAGR in revenue and paying a decent dividend.
Meanwhile the sector consolidates (it was a hard year generally for drlling contractors) thereby improving potential industry returns and the economic rent of those operating within it. After DDH1 was taken over by Perenti the no.1 drilling company in the sector, Boart Longyear, is to be taken private by a consortium of Private Equity investors. We retain our PT of 160p."
Capital has been awarded a letter of intent related to a five-year extension to its open-pit drilling services contract at Centamin’s Sukari gold mine in Egypt, with the contractor potentially extending its work there through to the end of 2029
https://im-mining.com/2024/01/19/capital-in-line-for-another-five-years-of-drilling-at-centamins-sukari/
Slightly disappointed with the results
capital, the business is going well
the relatively poor rating of the stock (ie undemanding p/e) is more of a broader small cap malaise with the market.
little volume in share trading as the majority of the register is made up of blue chip institutional investors, who are sitting there for a good yield, and an expectation of capital growth when the next big contract comes along.
“headwinds” are that the centamin/sukari mining contract finishes this year – and that has been in the market for the past 4+ years, so is expected anyway – but this is a natural conclusion, yet they are very involved in drilling (production mainly – grade control and blast hole) at sukari, and will continue to do that for years to come.
other ‘risks’ include their exposure to west africa, which seems to have coup every other month, but we all know mines are largely insulated from these events.
keep an eye on their expansion outside of africa – they are already in saudi, ****stan and ever increasingly in north america.
this won’t be enough as yet to de-risk african exposure, but may do in due course….we shall see, but this growth is mainly fuelled by one strategic client, which is barrick (and to a lesser degree newmont, the world’s largest gold miner – barrick is no2).
hope this helps!
I prefer (from this business) to use the cashflow statement to determine whether I want to stay invested or not;
TTM cashflow = £42M (price to cashflow = 4.23)
And also of note is what's done with the cash;
TTM investing activities = £44M
So, basically we have a company which could buy itself every 4.23 years, which has been generating a return on invested capital of 20- 25%.
A similar business, Nort American Construction, with similar growth metrics & double the debt/equity ratio trades on a PE of 12.5. That's 60% upside from 93p plus the reassurance that the business should keep growing given a healthy environment & there are liquid investments worth circa 40M$ which could be used to fuel further growth such as a 3rd mining contract which has been previously mentioned if you assume something is lined up already for the centamin equipment of course...
Don't quite understand why to use the ev/ebitda ratio though if i'm honest.
Pros and Cons of EV/EBITDA
Pros:
● EV/EBITDA is a widely used metric for evaluating a company's valuation and financial performance.
● It provides a comprehensive view of a company's overall value by taking into account its debt, equity, and operating earnings.
● It is useful for comparing companies within the same industry or sector, as it adjusts for differences in capital structure and accounting methods.
● It is a valuable tool for assessing potential investment opportunities and identifying undervalued or overvalued companies.
Cons:
● It does not take into account differences in a company's growth prospects, market conditions, or competitive landscape.
● It can be influenced by temporary or one-time factors, such as changes in accounting standards or fluctuations in interest rates.
● It may not be appropriate for companies with significant non-cash expenses or those with inconsistent earnings patterns.
Worth keeping an eye on CAPD's shares in WIA Gold - they've been rising nicely recently to A$0.5, and are now worth almost £5m.
Lesville, it's been known for a while that the CEY earth moving contract will end this year, but it's been more than adequately replaced by other contract wins already announced, as indicated in Tamesis' earnings forecasts which show CAPD on a P/E of just 5.8 and an EV/EBITDA of a ridiculous 2.3 for 2024.
Agree, seems to be some positive momentum albeit at very low volume which often tends to distort the price. However until we get back above a £1 I am still in deficit. Perhaps I should have added more when the price was in the seventies but the African criminality etc was a concern.
Didn’t know about the Centamin earth moving contract ending this year which will obviously reduce revenue and subsequent profit. Is there any possibility that this will be renewed?
Good to see the share price edging up slowly most days now.
Small Caps Live Weekly Summary on 29th December from Mark Simpson had this to say:
"Capital Limited (CAPD.L)
Could this be the year that we finally see the expected re-rating? For several years now this company has remained on a large discount to similar listed peers. The market has had several concerns. The first is the Africa-focus; the second is that they have been taking on debt to invest in growth; the third is that management had a tendency to sell on good news.
In all three, we have had good news recently. With large contracts in North America due to start, this is now becoming a more balanced portfolio. Their Centamin earth-moving contract is due to end in the middle of 2024, and the sale of the equipment could mean that they start to reduce debt (although at these levels, a buyback probably makes more sense.) With the current gold price strength, the current cycle seems far from over, so they have been proven right in pursuing growth over the last few years, but only long-term contracts with Tier 1 producers. Finally, management buys have outweighed sales recently. Could this be the year they are given credit for all the work going on behind the scenes and their record of good capital allocation?"
Epiroc has partnered up with mining services company Capital Limited to field test the SmartROC D65 BE, a battery-electric surface drill rig for the mining and construction industry.
The battery-electric version of the SmartROC D65 surface drill rig will be tested at Capital Limited’s Sukari operation, in Egypt (owned by Centamin) during 2024. This mine already has a broad fleet of Epiroc drill rigs, according to the OEM, with Capital carrying out an earthmoving contract involving load, haul and associated drilling services.
Hakan Aytekin, Vice President, Epiroc Surface division, said: “This field test is an important step in our drive towards emission-free surface drill rigs. Capital Limited is always pushing the boundaries with new technologies, and that makes them an ideal partner for this field test.”
https://im-mining.com/2024/01/05/epiroc-partners-with-capital-on-smartroc-d65-battery-electric-drill-trial-at-sukari/
UK mining sector has been handicapped throughout much of 2023 and despite every positive update the interest here has been lacking. Are we finally seeing a revival off the back of a weaker dollar outlook?
At the last quarterly update CAPD reiterated revenue guidance for 2023 of $320 - $340 million (MCap: $220m) and further “positive momentum into Q4” as Ivindo and Reko Diq ramp up. Capital’s portfolio of investments are increasing at a rate almost on par with MSALABS and yet there is very little buzz here.
With gold now up to $2,075 the environment for CAPD's clientele couldn't be much better.
Hopefully 2024 is the year when the market re-rates CAPD on the basis of its excellent prospects and track record, cheap fundamentals, the value of its $50m investment portfolio and in particular the increasing diversity and reduced risk of its geographies and the fast growth now being realised in its MSALabs/Chrysos division.
Good news overnight from CAPD's investee company Awale Resources.
CAPD are also the drilling contractor at Awale's Odienne project, and after recent investment from the behemoth Newmont Mining, Awale have announced a new drilling campaign at Odienne which is now a JV with Newmont:
Https://money.tmx.com/quote/ARIC/news/5597112793973133/Awale_Commences_New_Diamond_Drill_Program_at_the_OdiennxE9_CopperGold_Project_Secures_Additional_JV_Funding_with_Newmont
CAPD are the drilling contractor at HUM's Yanfolila mine, and per HUM's new update things are going well, with additional drilling expected:
Https://www.londonstockexchange.com/news-article/HUM/operational-and-exploration-update/16261484
"Yanfolila Gold Mine, Mali
· 78,220 ounces of gold ("oz") were produced at Yanfolila to 30 November 2023 at an average AISC of c.US$1,340 per oz and the Company is on target to meet FY-2023 production guidance of 80,000 - 90,000 oz and AISC under US$1,500 per oz.
· Key areas of focus remain the development of the Komana East Underground ("KEUG") operation and the continuation of mining performance across the mine."
"We plan to continue delivering targeted, cost effective drilling campaigns at known and future deposits with existing positive exploration results targeted at Yanfolila, and increasingly at Kouroussa. As we look forward, our team has developed detailed exploration plans which we will look to increasingly execute and remain confident of maintaining and extending Yanfolila's LOM and in particular extending Kouroussa's LOM to reach our target of a +1 million ounce Reserve base at that asset."
Tamesis have maintained their 160p target price and their forward forecasts.
They have CAPD on a P/E of only 5.8 and an EV/EBITDA of 2.3 for next year, with a 3.9% dividend yield.
In summary:
"Overall, this announcement de-risks Capital’s guided revenues for MSALABS to FY2025. It also cements their presence in the low risk region of North America. Both these factors should ultimately lead to a re-rating of the shares. So far though the shares are down 19% YTD, and trading on a PE multiple 5.8x and EV/EBITDA of 2.3x for FY2024, with a dividend yield of 3.9%. We continue to believe our target price of 160pps is justified".
Also:
"• MSALABS guidance looking well on track:
Capital guided revenues to grow to an excess of $80m by FY2025 (FY2021 revenues $15m). We estimate ~$15m of $80m revenues to contribute from the addition of the laboratory component today, and essentially de-risks the guided revenues to FY2025. We believe the company is being typically conservative in their guidance, and we maintain our revenue estimates for FY2024 and FY2025 of $69m and $90m.
• Strong Platform for growth in the US:
Capital has been targeting the region this year. Three major contracts have been announced with NGM, namely: 1. Drilling contract, 2. Chrysos units via the partnership with Barrick and 3. Laboratories addition today. The combined contract revenues will add ~$65m in revenues by 2025, and they have all been added in the last 3 months. They have also appointed a new executive, Aaron Austin, who will act as the CEOAmericas and oversee the rollout of these operations and their expansion in the region."
I can feel the board's excitement from the RNS. MSALABS CEO is "thrilled" to announce this.
This isn't a small contract, dipping their toes into the USA, this is a big deal. The biggest deal in their history.
This is also a showcase of their state of the art hybrid facilities. Others will be looking on with interest.
Tamesis Partners said in their last update note that there was "scope for an increase" in their forecasts for Chrysos units.
The point about today's news is that it crystalises to the market in a clear narrative $140m of revenues over the next 5 years, rather than simply being a "forecast" - these huge additional revenues are now a reality.
And of course the establishment of such a large stream of revenues is America gives CAPD a credibility bost since revenues there are so much more secure and less open to fluctuation due to political or other risk than operations in Africa. It therefore opens the door to a higher rating from Mr Market.
Along with the minor matter of the securing of $140m of future revenues.....
After a quick scim, isn't this announcement already in the broker estimates out to 2025, along with the other 10 assay units yet to be officially contracted?
Selling services to newmont would be new, no talk of that though. Also, having a significant beachhead in a lower margin market compared to Africa is hardly an excitement. Except for chryasos units ofcourse........
Wow - as described in the RNS today, a "major" contract win for MSALabs, securing $140m of revenues over 5 years, and extending to $30m per annum as it matures:
Https://uk.advfn.com/stock-market/london/capital-CAPD/share-news/Capital-Limited-Nevada-Gold-Mines-NGM-Contract-Award/92865807
This is a "Significant beachhead" for CAPD into the American market, sitting alongside the additional $35m drilling contract also recently won with Nevada Gold.
And also:
"These three new PhotonAssay units mark the start of a broader partnership agreement with Barrick Gold, with trials underway for a possible ten further PhotonAssay units by the end of 2025 across multiple of Barrick's other operations."
CAPD is just ridiculously undervalued as they keep delivering the goods. Let's see a serious re-rating from here Mr Market....
O.K but let's remember most our revenue (as with $mdi) comes from gold services, and gold is correlated with dollar index and interest rates, which everybody thinks (including the fed) will drop in 2024.
Anyway, as a protest to the seller, which since end Oct, who has basically kept us pinned at 77p, I have bids at 77p. If they wan't to sell, they will lower the bid so as a word of advice, bid under ask as you don't know how long they will take to clear and if enough volume sits under current price they will likely take it.
Encouraging sector commentary from Major Drilling (thx to kaizenkid)....
Https://www.miningstockeducation.com/2023/12/major-drilling-achieves-highest-revenue-in-more-than-ten-years-strong-cash-generation-drives-share-repurchases/
"Looking at calendar 2024, customer demand is expected to remain strong as the growing supply shortfall in most mineral commodities should continue to drive demand for our services for several years. The growing global demand for electrification will only increase the need for metals like copper, nickel and lithium. The enormous volume of copper, battery metals and likely uranium required will further increase pressure on the existing supply-demand dynamics.
We expect all of this to drive substantial additional investment in copper and other base metal exploration projects as we help our customers discover the metals that will allow the world to accelerate its efforts towards decarbonization, as well with gold prices recently reaching record highs, this could have a positive impact on funding for junior mining companies. In the short term, it's important to note that we are now in our third quarter, traditionally the weakest quarter of our fiscal year as mining and exploration companies pause their drilling programs often for extended periods over the holiday season"
Also, MSA Labs' new facility has just opened in Egypt, where:
"Canadian exploration company Lotus Gold Corporation, who will be one of the new laboratory’s first clients.....will utilise our services as they advance exploration on a number of interests in Egypt"
Https://www.linkedin.com/company/msalabs/posts/?feedView=all