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always buy on good results in a bad market
GFM will eventually rocket
With the promise of future dividends mooted, as well as pretty stellar results, I think the market should view this as positive. Just the relative strength of the dollar impacting in the near term.
No early birds here then. Pretty astounding numbers. Will the market agree?
Thanks for the link UB, very useful.
With regards to ramp up to the higher target level of production, I always like to be pessimistic, in that it will take longer than expected to rise to that target (with great consolation that at the current level of production it's already a cash cow and plenty of wriggle room for any inflationary costs, energy, smelter ...)
Not specific to GFM, but I don't believe Board's really care about us Private Investors, albeit we are Shareholders; Boards say they communicate with and aim to build shareholder trust and value.
The extra bumper profit from zinc, for the period of end of Q1 2022 til date, for my own calcs, entirely covered Q1 2022 shutdown profit shortfall. So going forward we are starting to move ahead of this time last year comparison and that gap will only widen.
I have more research to do, but this does seem to be undervalued at this initial point and perhaps has just beaten down by overall global market sentiment and natural profit taking and de-risking that ensued. One to watch as the story unfolds.
I do my thinking on spreadsheets but a quick reference is the profitability set aside the historical price of zinc
https://www.lme.com/Metals/Non-ferrous/LME-Zinc#Price+graphs
And then consider the ramping up of production with the chairman's assertion that mining is essentially a fixed cost business.
If only the Board would communicate with us and yes, Roger's assertion that it was difficult to find shares to buy rings very hollow.
The extra profit from period zinc was over $4,000 would pay more than 1.5p per share in dividends. Option holders wouldn't get this though.
What I do like especially, is that they are profitable/cash cow at lower production and prices than those at present, giving great wriggle room for any downturn, furthermore no dilution/funding required.
Many thanks UB, great post!
Lots of positives highlighted and a cash cow indeed. However, I do agree that more can be done to create shareholder value namely, restart the share buybacks (watched an interview and was not convinced with the explanation of it being difficult to buy), in fact, even use this retrace in SP to buy. With the incoming additional bumper revenue this year, on the rise in Zinc price over last year, pay an annual dividend, an amount that they can sustain going forward. Both of which will support a higher SP valuation; benefit shareholders.
Let's think..... Is GFM a cash cow @ c. $3,500/ tonne?
Production increasing to 1,500,000 tonnes (upon final go ahead for new zones)
30+ years of mine life
No debt
Conservative FD keeps high cash balances
At current rates of zinc mined per tonne would give fully diluted eps in excess of 40c
Cash generation could easily top $80m in 2023
Market Cap £166m
Reasons for not being a cash cow
No dividends
Buy backs have stopped
Will PRC allow cash to be taken out of China?
So currently a mega cash cow for the company at zinc prices well below $3,600 but will that translate to a cash cow for us shareholders?
Even at current circa $3,500/tonne these are a cash cow, am i missing something, added to my watchlist for research over the weekend.
I wonder if we have tested for Germanium? Rockford just found it in their zinc/silver/lead deposit in Greece.
I am getting very tempted to increase holding, after saying I wouldn't and having sold half my holding previously, but I see upwards of 20% to 50% growth in the short to medium term. I am surprised not to see buy backs with cash flowing as it is?
Don't know is the short answer. From today's trades it looks like 1 or 2 sizeable sellers. Why have they sold? Could be:-
Seen a better opportunity;
spooked by the steep fall in zinc price;
worried about a slowdown in China;
worried about lockdown at the mine - Hebei province has imposed draconian lockdowns in cities;
despair at no trading update from the AGM;
something else.
Personally I'm very happy to stay in GFM and would buy more today if I didn't have a more than full investment here. I think low 90p's a fair price for GFM at c.$2,850 for zinc, c.$2,600 when production reaches 1,500,000 tonnes per annum.
I am wondering what I have missed??
Anyone?
I am tempted to buy more,but don't tell the wife!
Anyone know when we shoukd expect drill results on zone 2 and 3?
Hoping this gets the party started pre next quarterly production figures
More good news from China. President Xi promising massive infrastructure spend to boost China's economy. Should underpin or boost the demand and price of zinc.
Patience. Market Cap is £204m with 20.2m options to be exercised at 30p and 40p. My guess is that each WEEK revenue is c. $4.3m, after tax profit of c. $1.12m (£863k) and free cash generation of over £1m (depreciation higher than CAPEX).
Don't think this will be fully reflected in the SP until this cash generation is being returned to shareholders, POZ remains above $3,200 (quite a gap ATM) and the risk from PRC is perceived to be less.
what the hell is keeping the sp so low?
With the upcoming AGM and 2021 results announcement I thought I'd look at the last few reports (my first purchase was on 3rd October 2008).
From the Chairman's 2020 results statement:-
As the Company has grown and generated cash, inevitably various opinions have been voiced in relation to the share price, share buybacks, dividends and even the realisation of the value of the Company. It is enough to say that your board continues to evaluate all these options on an ongoing and meticulous basis and remains committed to ensuring that the views of all the shareholders are considered and, where possible, acted upon, a course of action that Solomon himself, with all his wisdom, would find difficult.
With the past behind us, I look forward to the next year of this incredible journey;
From my guess as to where we might be:-
H1 2021 revenue of $54m will be beaten in H1 2022 if the zinc price stays above $3,800. This is based on the exceptional amount of gold recovered in Q1 and the note of zinc sales to date giving me encouragement that not mining has been spent exploring the most beneficial areas to mine;
H1 PAT of $13-$16m. This guess depends on c. 320,000 tonnes being mined in Q2 and the COS returning to historical cost/tonne mined + 12% inflation and admin costs being minimal during Q1;
PAT of $52 - $63m if an annual run rate of 1.375m tonnes pa is mined in H2 and current prices are maintained. I know this is below the minimum target of 1.500m tonnes but the new licence is yet to be operational;
A full year at 1.5m tonnes at current commodity prices would give a minimum PAT of $82m, fully diluted eps of 43c;
with c.174m shares in issue a dividend of 1p per share would only cost $2.3m;
I could go on but I thought GFM to be a fantastic investment (whilst noting the perennial threat from PRC) with zinc at $2,900 so looking forward to brilliant statements over the next three weeks. As the Chairman has often stated that mining is a fixed cost business the price of zinc substantially above $4,000 x more than 1,000 tonnes a week being sold my guesses above could turn out to be substantially exceeded.
Yes it looks good but it seems very difficult to get past this point on the share price, but I am hopeful.
I've been estimating revenue for Q2 in my head this weekend. Following this RNS I've completely underestimated. 4,000 tonnes of zinc sold already on Q2. 1,474 ounces of gold produced in Q1. Amazing.
Agree, very encouraging figures. Hoperfully the forward looking statement on the 5th May at the AGM will give us a better view of what's not only ahead but also of whe higher prices oalready drawn.
Given the stoppage, they are not bad, at least it is all systems go. They don’t give much away, I would have thought they could have mentioned record zinc prices as a positive! It should be a belter for the next 9 months, just have to be patient.
Hi sage.
Good to see you on here. Oh the good old iii days hey.
I wouldn't be surprised to see an offer in the next year or two either. It'll be disappointing if that offer is not at least £3 given the faith shown over 16 years (10 years for me)
Hi, I have been in GFM for 16 years and used to post on iii until it was closed. I have read a number of your posts regarding future cash flow and agree that GFM is a debt free cash cow. Following the license, increased production and commodity prices north of where they were in 2018 results next year should be stellar. It follows that the sp should be north of previous highs. The bigger question though is whether Roger and co will sell or pay dividends. The age of the bod (especially Roger) could be very important in the coming months. Time will tell.