Charles Jillings, CEO of Utilico, energized by strong economic momentum across Latin America. Watch the video here.
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News just out this afternoon - Allied Gold has approved development and fast-tracking of production at the Diba project, where CAPD are the drilling contractor, with production in H1'24:
Https://www.juniorminingnetwork.com/junior-miner-news/press-releases/2828-tsx-venture/ele/148213-elemental-altus-notes-development-approval-of-diba-project-by-allied-gold.html
"Frederick Bell, CEO of Elemental Altus, commented: "We welcome Allied Gold's announcement that our recently sold Diba project, which is contiguous with their flagship 10 million ounce Sadiola mine, is being fast-tracked in to production in H1 2024. The combination of royalty revenue and milestone payments from Diba will contribute meaningfully to our revenue growth, with over 6,000 GEOs and up to $6 million in cash payments over 2024 and 2025. There remains a material resource across the project and significant exploration upside...."
More "excellent" drilling results from PDI's Bankan project (where CAPD are the contractor) sent PDI's shares up 6% overnight.
I calculate this holding alone is now worth almost £24m:
Https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02710418-6A1167721?access_token=83ff96335c2d45a094df02a206a39ff4
Surely CAPD should issue an RNS re the Allied Gold IPO, if only to clarify how much their holding is now worth (or whether they sold any on IPO). We know that the AAUC m/cap is now C$1.32 billion, but don't know CAPD's value within that.
The Allied Gold IPO will open in Canada this afternoon, under the symbol AAUC.
As a reminder, CAPD own a large stake in the formerly privately owned Allied Gold Corp. This is thought to be around 2% of Allied, and has been valued at $7.7m at 31/12/22 (see p.101 of the Annual Report). It's thought that on IPO this stake could be worth $17m-$20m or so for CAPD, on top of the considerable investment value of the rest of CAPD's investment portfolio - giving a likely total portfolio valuation of some $45m-$50m:
Https://finance.yahoo.com/news/orion-mine-finance-announces-receipt-123000171.html
CAPD took part in Wia Gold's recent A$11m fundraising at A$0.032 (a 20% discount ot the share price at the time), summarised here:
Https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02689236-6A1159402?access_token=83ff96335c2d45a094df02a206a39ff4
Per their disclosure CAPD now own 19.9% of Wia, or 183,216,279 shares - these are now worth around £3.4m at the current A$0.037 price, so CAPD have made a decent profit already on their purchase of around 123m shares:
Https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02701796-6A1164548?access_token=83ff96335c2d45a094df02a206a39ff4
The presentation this morning was very informative and positive. The company is resisting the pressure to start share buybacks to bolster the pitifully low share price. I see this as positive, in that the company has far more productive ways of deploying capital. The development of MSALABS in North America is encouraging too, as it will help rid the company of the "Africa only" label, with all the unjustified risk premium that seems to attract.
A good production update from Resolute Mining, where CAPD are drilling contractors at Syama, resulting in the RSG share price moving up yesterday.
Syama's production is being expanded to over 250,000 oz per annum, so this will be a substantial operation:
Https://www.londonstockexchange.com/news-article/RSG/summary-of-half-year-results/16093182
Interesting little company called Tribal Tech is doing an IPO this month. Automated drilling & sampling rigs. No threat at the moment, but one to keep an eye on
Per dangersimpson2's post elsewhere, It seems that CAPD have increased their stake in PDI, presumably in the 15c placing in May. The latest PDI presentation has them at 9.8%. CAPD's investment portfolio is likely now worth over $50m, even before any uplift from the Allied Gold IPO:
Https://announcements.asx.com.au/asxpdf/20230807/pdf/05sdfkhdx4jnlv.pdf
More info from ds2:
"At A20c this means the CAPD stake is worth around $26m. Given their willingness to put fresh cash into an already large position, they likely see Bankan as a new Tier 1 mine that is pretty certain to be developed, and has a high chance of delivering long-term production drilling contracts on top of the existing exploration drilling and capital gains from their equity position.
Overall, the total equity portfolio is likely to be above $50m again, prior to any uplift if/when Allied IPOs. So this is starting to be a material part of the capital structure again. Although one that never gets fully priced by the market due to its illiquidity/volatility."
Good drilling news overnight from CAPD investee company Awale's Odienne project, where CAPD are the drilling contractor:
Https://money.tmx.com/quote/ARIC/news/7422487696303553/AwalxE9_Reports_High_Grade_Gold_at_Charger_Target_OdiennxE9_Project
"Awalé Reports High Grade Gold at Charger Target, Odienné Project
PR NewswireAug 21, 2023 8:30 AM EDT"
"Drilling results from Charger and Sceptre East continue to deliver great results. We are happy to see another 100 gram-meter interval within 65m downhole width of mineralization at Charger, which included 12m at 4.9 g/t Au. We await results from a further 6 holes at Charger and see it as a significant high-grade target that can advance toward resource development drilling in the coming year. Additionally we eagerly await results over the ensuing months for the new Lando, Sceptre Main and BBM targets.
At Scepter East, its sheer scale and potential is coming to light. Turning the rig 90 degrees and drilling West to East in the final hole for the program returned a high chalcopyrite/molybdenite vein density, with the hole ending in mineralization at 365m . These early holes provide a better understanding of the system's controls on copper and gold mineralization. We are still learning about the geometry of Sceptre East but these first holes are the critical steps in developing our model, said Andrew Chubb , Awalé Resources CEO."
Berenberg have a 171p valuation and a Buy - they remain very positive:
"Shares in mining services provider Capital Ltd have room to double in price, after an in-line set of interim results, Berenberg said.
The investment bank has a 'buy' rating on Capital shares and a price target of 171 pence per share. Capital was down 2.8% at 83.00p on Wednesday afternoon in London. The stock is down 13% over the past 12 months.
London-based Capital on Wednesday reported pretax profit of USD23.4 million for the six months that ended June 30, up 55% from USD15.1 million a year before, on revenue of USD154.3 million, up 12% from USD138.1 million.
Earnings before interest, tax, depreciation and amortisation, adjusted for the accounting treatment of leases, rose 10% to USD43.9 million, from USD39.9 million a year before, though the Ebitda margin narrowed marginally to 28.5% from 28.9%.
The results were in line with guidance that Capital had given last month, with the revenue figure having been already provided by the company. Berenberg said Ebitda of USD43.9 million was in line with its own estimate of USD43 million.
Capital held its interim dividend at 1.3 US cents, which also was as Berenberg had expected.
Looking ahead, Capital guided for full-year revenue of USD320 million to USD340 million. This would be up from USD290.3 million in 2022. Both Capital Drilling and Capital Mining expect to see revenue growth in the second half of the year, it said, due to the start or ramp-up of existing contracts. These include the potential restart of disrupted operations at the Meyas gold project in Sudan.
"Capital has delivered a solid H1, underpinned by continued strong performance on the Sukari waste mining contract, and in spite of the shutdown of operations at Meyas Sand following the escalation of conflict in Sudan," commented Berenberg analyst Richard Hatch.
Capital has mining services contracts with London-listed Centamin PLC for the Sukari gold mine in Egypt. These were expanded at the end of 202.
"We continue to be encouraged by Capital's consistent addition of both drilling and mining contracts on high-quality assets," Hatch said."
Anyone join the call this morning? I wasn't available but hope it will be available publicly in the next day or two. More good progress this half, although looking unlikely they will get back into Sudan in the near future - it looks awful over there. A tragedy unfolding. Other than that, still looking very cheap indeed.
ON Tamesis point about 2.4 times 2020 revenue, but what about profit or free cash flow. They have certainly not kept pace with that rise. Hopefully, they will follow in time, otherwise there is something odd going on - too much depreciation?
JL
Tamesis have retained their 160p target price and note the current year P/E of 5.6.
They state that H1 results were "bang in line" at EBIT level and above, with EBITDA margins and net profit slightly down due to "the high growth in the MSALABS business where costs are front end loaded" and "as the business incurred a higher non-cash finance charge from its leasing arrangements".
Here's the strong outlook and a couple of interesting extracts:
"We retain our target price noting further ongoing consolidation in the sector with the Perenti offer for DDH1 in Australia. As in the mining industry, consolidation clearly bodes well for the services business. We also believe that the increase in size and diversification of Capital’s business begets growth in a virtuous cycle that is hard to break (assuming quality is delivered). It basically allows Capital
to leverage a greater offering of products into a larger clients base both by size and geography. This thematic has much further to run."
"MSALABS relationship with Chrysos continues to deliver. MSALABS now has the largest international network of the highly successful and popular Chrysos PhotonAssay technology which continues to grow. The company is guiding to 21
PhotonAssay units by 2025 vs six by YE 2022. Each Chrysos unit is expected to generate annual revenues of US$3-5 million so we are looking at c$80m+ of revenue from MSALABS vs just $3m in 2019. This revenue growth has come at minimal capital
outlay. As such we would argue this side of the business has similar characteristics to a typical tech company which implies double digit EBITDA multiples."
"Positive outlook. We have gone through the drivers of growth into H2 2023 and beyond and the company’s revenue guidance of $320-$340m reflects this positive outlook. Management also notes “tendering activity remains robust across the Group with a number of opportunities progressing”
Investment Case
As has been the case for nearly every announcement in the last three years these results are strong and point to further strength and growth. The company will have increased revenue by 2.4x from 2020 this year yet the share price is 13% higher than it was in Augst 2020. With activity in the mining sector still strong and long-term contracts locked in, we see safety in the medium term revenues and margins. Meanwhile the shares are trading on PE and EV/EBITDA multiples of 5.6x and 2.6x and a dividend yield of 3.6%. This implies next to no growth in the business yet all three components continue to deliver."
"On a comparative basis – see Fig 3 below – the company trades at a discount to its peer group albeit we would note the whole sector has derated. We would also point out that the table understandably suggests a bigger and more diversified business carries a higher multiple. We expect this will evolve with the Capital share price and/or we may see further consolidation."
The H1 headline figures make good reading, with EPS up almost 100% to 8.9c (from 4.7c)!
The EPS adjusted for investment gains is 8.8c, and the outlook confirms the revenue guidance, so given 7p EPS in H1 CAPD look on course to meet or beat Tamesis's forecast of around 14.8p EPS this year, or a P/E of just 5.8.
Net debt is up as guided due to the Ivindo contract win and consequent equipment purchasing, and the investment portfolio is now worth $42m against the £162m m/cap, and excludes any gains from the likely Allied Gold IPO.
Whatever the figures, the outlook and the general sense of the interims is full of confidence for both the drilling and services divisions.
And MSA Labs/Chrysos looks transformational and simply unrecognised by the market.
PDI's shares - where CAPD own around £15m of shares - are up 4.4% overnight on the news of "outstanding" drilling results from Bankan, which increased the size of the gold resource by 29% and where CAPD are the drilling contractor.
Lots more continuing and additional/new target drilling to come too:
Https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02694637-6A1162143?access_token=83ff96335c2d45a094df02a206a39ff4
Welll, someone's dumped hard today to cause a drop on no news.
i do hope this doesn't presage a bad news RNS tomorrow....there's certainly no reason to expect one, but you never know. In the absence of such i guess sp will slowly claw back in time.
Yet it keeps on dropping.
This article suggests a pre-money valuation for Allied Gold of $1.2 billion:
Https://www.newsfilecorp.com/release/163921/Africas-Fastest-Growing-Gold-Miner-Attracts-Highly-Experienced-Former-Yamana-Principals-to-Drive-Public-Listing-and-Continue-to-Build-the-Next-Generation-Senior-Gold-Producer
CAPD's investment was valued at $7.7m at the last year end and is 1.55% of Allied. With a $1.2 billion pre-money valuation that would imply a value of $18.6m.
Of course we'll know for sure whether this IPO valuation has been maintained in the next couple of weeks.
Good news - looks like the Allied Gold IPO is going ahead on or around August 17th.
CAPD are thought to own around 2% of Allied, and this stake was valued at $7.7m at 31/12/22 (see p.101 of the Annual Report). The stake could be worth up to another $20m or so for CAPD on Allied's IPO, on top of the very considerable $30m or so value of the rest of CAPD's investment portfolio - giving a total portfolio valuation of some $50m against the total m/cap of £167m:
Https://finance.yahoo.com/news/allied-gold-corp-limited-allied-204500881.html
Allied have raised the minimum $250m, and are looking for more to take them nearer the $300m originally mooted.
Difficult to tell what CAPD's upside is without knowing exactly how many Allied shares they own, unless this paragraph helps someone to work it out:
"In connection with the Going Public Event, the Common Shares will be consolidated on a 1:2.2585 basis prior to the issuance of the Resulting Issuer Shares, which are expected to trade in Canadian Dollars reflecting an effective price of approximately C$5.92 per Resulting Issuer Share."
Tamesis retain their 160p price target, and note that the current share price is "a good buying opportunity".
In summary:
"On Track to Meet Full Year Guidance
This morning Capital Ltd released its Q2 2023 trading update for the quarter and six months ending 30 June. Overall the results (comprising operational data and revenue) is in line with our estimates and leaves the company on track to meet its guidance of $320-340m revenue; which will be the 4th yr in a row it has set a record. YoY growth in revenue, ARPOR and average fleet size was 12%, 9% and 11% respectively.
The results also show the diversification in this growth – non-drilling revenue is now 36%. This comes from the company’s MSALABS business that now employs 10 Chrysos PhotonAssay™ across Africa & Canada growing to 21 by FY25. The third leg is the
company’s mining services business where the company recently won a very competitive tender for Fortescue’s Ivindo iron ore project in Gabon.
The company continues to deliver diversified revenue growth both technically and geographically thereby reducing cashflow at risk and ultimately its cost of capital. We maintain our PT of 160p."
The Q2/H1 update is out and shows CAPD trading nicely in line with expectations, and therefore on a P/E of just 6.0.
Notably, non-drilling revenue is now 36% of total revenues. MSALabs and Chrysos continue to thrive, with Chrysos revenues expected to reach over $80m in a couple of years.
One or two hiccups in terms of Sudan drilling, which is expected to resume soon anyway, and resulting lower fleet utilisation, but with such a spread of rigs including some riskier geographies that's more than reflected in the rating.
With more and more long-term drilling and mining services now secured, on top of the expanding Labs business, CAPD are still in extremely good shape imo.
Interesting development. Didn't see that coming, I thought they already had quite a lot on their plate with their three pillars, is this effectively adding a fourth? I can see a certain logic in it. CAPD can add renewable power to their offering when bidding for mining services contracts. But renewable energy is very capital (with a small c) intensive. Who will pay for the installation? Presumably the mine owner, but would they really want that as part of a mining contract? Why would they not be using a dedicating energy expert for that part of the mine?
Hopefully it is not much of a distraction for management in the short term. They have plenty to get on with. Share price under pressure too. :( Never nice to see director sales at that scale, so that was likely to create a softer market. Especially with rising interest rates causing havoc with large capital projects.
JL
Posted by CAPD on Tuesday:
Https://twitter.com/_capitallimited/status/1678610437309599744?s=46&t=ICJFcVcXKMwMj3KTqBQyIw
"Capital Limited
@_CapitalLimited
We are very pleased to announce the formation of Mine Power Solutions (MPS), a joint venture between Enerwhere, a leading provider of hybrid and renewable power solutions, and Capital Limited. MPS will provide holistic renewable hybrid power solutions to the mining and exploration sectors in Africa and the Middle East, delivering clients environmental and financial benefits. The JV is the first of its kind for both companies and combines Enerwhere’s expertise in hybrid and renewable power, and Capital’s established African and Middle Eastern presence and extensive experience in the mining and exploration sectors.
Pictured are Jeff Court, Capital Chief Executive Officer – Mining and Daniel Zywietz, Enerwhere Founder and Chairman following signing of the JV. Contact enquiry@minepower.solutions for more information on how we can assist your project with a renewable power solution."
Yes, very positive update. The only thing missing was any numbers. I wish CAPD would be more forthcoming on revenue and margins at MSAlabs as it is hard to value. Given the growth rate you would think that spinning off MSA into a separate business would be value accretive as surely that would rate much higher than the rest of the business. My other slight doubt is about capacity - after these initial 21 are rolled out, how many more can the market absorb before starting to reach saturation? It feels like they now cover the main mining areas with the exception of South America, could that be next?
JL
Today's very positive update on Chrysos and MSA Labs confirms that the Chrysos rollout is on track and going rather well, with expanding global coverage.
And CAPD have raised their stake in MSA Labs to over 81% in a fundraising to enable further growth:
Https://www.londonstockexchange.com/news-article/CAPD/msalabs-trading-update/16031103
Great to see CEO buying a maiden stake here and particularly the CFO spending almost £50k on CAPD shares.
Golden Rim's shares were up 13% overnight to 9 month highs on "encouraging" drilling results at Kada, where CAPD are the drilling contractor (and also own around £1.5m of shares):
Https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02683401-3A621191?access_token=83ff96335c2d45a094df02a206a39ff4