Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
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KnC
I think there will be a time for share buy backs, but I believe the anchois free production cashflow should be used to firstly reduce debt, which they will obliged to do, but then it should be used to drill out the anchois sattelite prospects, as it’s common in project finance to have what’s know as reserve based lending, so as the proven reserves increase , the loan repayments can be reduced thereby freeing up cashflow to bring more reserves into production and rapidly grow profits and hence market capitalisation.
An amazing opportunity.
Jimmy
On dilution. We could well see a share buyback policy enacted after the CAPEX debt is repaid. So sometime in 2026 I would estimate.
'The proximity of the Anchois Gas Development to the European gas markets cannot be overstated'
'Similarly, the Anchois-2 well result has de-risked numerous additional material exploration prospects on the Lixus licence that exhibit similar seismic attributes to the Anchois discovery. We model the c3Tcf of prospective resources on the Lixus licence using the pre-drill chance-of-success, noting that this is likely to be highly conservative vs an updated CPR.'
upwards
The interesting thing about the sub nappe, is that we know that the proven gas at anchois is thermogenic gas so it came from a deeper source. We just don’t know from where for sure, it could be the sub nappe, but we don’t know the reservoir conditions. It’s definitely worth a look in due course, possible as a well deviation from drilling anchois north.
We are expecting the new cpr to address the revisions to lixus area prospects and their chance of success.
Jimmy
We also don't know whether sub nappe prospects actually have any gas. Best stay focused on the above nappe targets that are already hugely derisked. Sub nappe can be tested by drilling deeper after the main targets have been tested, if Chariot so chooses.
Hi fernan,
Chariot have not published the resource estimates for sub nappe and for the rissana licence. All we know for certain is an additional 4.5 tcf potential at lixus and that the geology is expected to result in a 85% success rate.
The rest is upside, yet to be announced. Although the geology of the rissana area leads me to believe there is a very thick reservoir section north east of the lbs1 well which had gas shows. Obviously I don’t know if there is structure there but potentially another 2tcf, but it’s very early days and chariot did say they were looking for anchois look alike prospects in rissana licence.
Jimmy
Hi Jimmy.
I think we have more than 4.5 tcf of prospective resources, including the subnape and Rissana License.
Hence my target of discovering 4 tcf (gross).
Regards
Hi fernan
I agree the focus is getting to production cashflow asap. Then use that cashflow to drill out the 4.5 tcf of gas potential in lixus licence with an expected 85% chance of success, export surplus gas to Europe,
Happy days
Jimmy
Nice math Fernan. Personally I would be even more conservative with the costs and the dilution, but I would assume higher natgas prices. In the end it balances out very well for us regardless. As I've said before we could add 100% more shares as dilution and Chariot would still remain a multibagger. Of course, the less dilution the better for us shareholders. But I don't mind it if management believes they must dilute. Getting some quick cash can derisk and speed up development and since I've done the math I am comfortable with whatever AP & co think is best.
I want management to keep shareholders dilution to a minimum.
I want them to fully dedicate their efforts to develop Anchois.
After we get Anchois to the production stage, we can reinvest the resulting net free cash flow to explore the remaining gas prospects, both in Lixus and Rissana.
At gross production of 70 mmcfd and a selling price of US$ 9/mcf, we can have an operating cash flow (net to CHAR) of US$ 144 mm/year.
Gross operating cash flow: (70.000 mcfd/d X US$ 9/mcf X 0,965 (3,5% royalty) X 365)- OPEX US$ 25.000.000= US$ 197 mm/year
Operating cash flow (net to CHAR): (US$ 197 mm X 75% - G&A Expenses US$ 4 mm): US$ 144 mm/year
We already know that the cost of drilling a well in Anchois is around US$ 20 mm.
After allocating part of the net operating cash flow for the repayment of debt, we will still have a surplus to reinvest in drilling and exploration expenses in the Lixus and Rissana licenses.
Lets assume that, after drilling 3/4 wells per annum, we discover 4 tcf of gas (gross), with a net present value of US$ 3/mcf (last report from management indicated a NPV of US$ 2,5/mcf, but it should be higher in the future). Let´s also assume that, by the time we make those discoveries, we have 1.5 b shares outstanding.
Then, our "fundamental value" will be:
4 tcf X 75% X US$ 3/mcf / 1.5 b shares: US$ 6/share
This is the road that I would like management to follow. No new ventures, no new exciting projects, no distractions from the development and exploration of Anchois and the Lixus and Risanna licenses.
Regards