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Shares mag Be brave and invest in Sierra Rutile (SRX:AIM) in the hope that rutile price weakness is past its worst and that the company’s financial position is about to experience significant improvement. Stockbroker Numis reckons the miner’s share price will more than double as expansion plans are executed over the coming year. That should result in higher production levels and lower costs from the Sierra Leone-based natural resources group.
thats the short term future, with gangama and all other parts running we should be able to go to 250kt per annum :-) imo
Many thanks for that link. I had forgotten about Master Investor on Seeking Alpha. He raises an interesting point in that mined but not sold rutile. He also echos Gibraltar's point that SRX is for the future. The outstanding issue is what will Pala engineer if anything and is there any weight in the Sisay comment on proactive that the company intends to move to the full market. If it does the free shares must amount to 25% and thus there would imo have to be an issue. And if so at what price and how will they get it to that price?
Yes Gibraltar but I cannot see Pala achieving the kind of prices that you were advocating in 2015 on that prognosis. However it seems to me that there is a compelling argument to say that with Pala's input and decent management, a third party will see that with costs even lower with Gangama coming on stream and with a cyclical rise in rutile sale prices not so far in the distance and profits to follow, this would be a good time to make an offer for the company. Whether such an offer will be in the bands bandied about by you in 2015 may not be easy to predict or achieve. I would not be surprised to see an offer coming at two times Pala's investment which I put at between 15 and 18 pence thus 30 to 36 pence with a premium on top of that say an offer of 45 pence per share.
Corbs, little to say on the results. I think the subtle point which hasn't been raised is from a trading perspective without directly stating the same, another year of mediocrity can be expected. 90% of production sold for the coming year one can only assume at currents prices ( as otherwise Sissay would be saying different) hence one can virtually predict the P & L 12 months hence. Whilst I sound like a broken record Pala must be looking for an exit at profit they are turnaround specialists with an optimum 3 year window. I keep hearing folk getting excited about future dividends this is a long way off looking at the current situation. Its tread water time until prices harden but even this may have little or no impact on SRX with pre-sales until 2017 and beyond.
http://tinyurl.com/jjqzvxc John Sisay, chief executive of Sierra Rutile Ltd (LON:SRX) says the company had a “fantastic year” against the backdrop of slumping commodity prices and the Ebola crisis in Africa. He adds that while some companies were downsizing, Sierra “chose the brave step to expand in our Gangama project”, all while cutting cash costs. Looking ahead, Sierra said first quarter rutile production is expected to be about 26,000 tonnes, down by a third on the previous quarter but up 11% year-on-year, and confirmed it is trading in line with expectations.
I was a little disappointed with the results - there was approx $4.5m of one off (I hope). provisions and an increased royalty payment of $4m which accounts for the loss. (Cash generation was decent though) The outlook still looks good with higher production and lower costs and potentially higher selling prices.
The loss of $9.4million is equivalent in simple terms to $75 per tonne which can be made up either by costs savings or an increase in sale price using the mined product as the yardstick. The $75/t is part eradicated in 2016 by the estimated cost price per tonne reducing to £590/t or a saving of $24/t compared to 2015. If the cost went as low as $540/t as a possibility advances by the CEO the resulting difference would be $1 (one)/t The other way to look at with a sales price of $775/t an increase of $75/t would do the trick. In other words the company should go into profit this year. Finally regarding the $44million cost of Gangama $24million was paid in 2015 (see under projects). As I said earlier Numis have lifted their target. The shares have to be a buy imo.
Numis have upped their target from 35 pence per share to 40 pence per share.
Good to hear from you. How do you think that they are going to release value?
re increase in rutile production with gangama and bolt ons coming on stream . imo
robust. expansion on time on budget. new boss likes it. 50th anniversary coming soon, another 60 years of mining worlds largest natural rutile asset, next year will see production ramp up further heading towards the 250kt per annum mark. "Sierra Rutile is not reliant on a recovery in commodity prices to aid its success and in this regard is firmly in control of its own destiny." Unlike its peers in our sector :""A strong focus on cost control meant that production cash costs were lowered further during the year to $614/t" ""As of today, demand for high-grade natural rutile from our existing customer base continues to remain firm with over 90% of targeted sales volumes already contracted for 2016. Sierra Rutile's guidance for 2016 reiterates our commitment to high quality, low-cost production. We expect to produce between 120,000 and 135,000 tonnes of rutile at a production cash cost of between $540/t and $590/t." :-)
For the second half of 2015 72,000 tons of Rutile at $130 Margin plus some Zircon sales less $6million in overhead gives a pre finance cost profit of about $3.5m. Cash flow of a further $10m For 2016 I expect 140,000 tons (improved margin due to Gagama) of $150 giving a pre interest profit of $10m and approx $25m cash flow from operations 2017 could be very good (if Rutile prices gain just a little)
Gibraltar - you have for over a year stated that in your view a take out of Pala's position is round the corner. So far nothing has happened which leads me to assume that either no third party is currently interested or the other iis cannot agree with Pala what they would accept to sell their stock. If that is the position then the only route for investors to see any value is for the company to urgently work to increase profits and declare a dividend thus giving an income return which in turn would support an increase in the share price. It is pretty obvious to me and I suspect others that the company with Pala's assistance has done wonders to turn the company around. A look at presentations shows tremendous equipment, a well run company and we all know that the prime asset of the amount of high quality rutile would in normal circumstances justify a higher share price if there were more free shares on the market. Numis appear to have had zero effect to justify their appointment. Something has to happen.
this is the first time that I have seen SRX give notice of when they intend to publish their results but that could be down to a change in chairmanship. I have been investing for many years and several of the companies in which i have invested during hat time have given such a notice. At least the board did not this year dish out cheap options for themselves.
I don't think there is a proper market for SRX shares (around 95% of share are in the hands of II's or PI's who are holding long term) - so the current price is not a realistic representation. I do think the Q4 results will be decent (slight worry that the results will be bad and they are throwing out positive news about expansion projects to counteract) My view is that the opportunity for profitable expansion will be realised in the share price at some point followed by a potential business sale.
It is very unusual to issue an RNS (announcement) that you are going to make an announcement at a later date. The other RNS was kind of issued as a smoke screen.
but they always release their annual results towards the end of March and it is only the 23rd today. I think (although in fairness you accept it) you are wide of the mark. The fact is that for one reason or another the shareholders are not seeing any delivery of value.
From my experience strange going's on today. Deflect from the long expected accounts with expansion news. I have a funny feeling an announcement may come with the accounts which they didn't want timed with the Easter break? Maybe putting two & two together but Financial PR is something I deal a lot with in my business and I wouldn't bet against the numbers and a bid on the table same day! I could of course be hopelessly wide of the mark. But if it was a simple issue the figures it would have worked this week.
I do not know if peeps have missed this morning's announcement but Michael Barton has left Pala plus stood down as chairman of SRL. The new non-exec chairman is not a Pala man. Does this mean that SRL will develop form hereon in under its own steam so to speak and will Pala still be looking for an exit (although we know that that is their normal modus operandi)?
Good to hear from you. I hope your health is bearing up. Patience pro tem. Full year results towards the end of March and an update on Gangama and whether on track to be commissioned in Q2. Perhaps we will see the beginning of Gibraltar's drive by Pala for a sale. The market has been awful. There are plenty of doom mongers out there but life and trade goes on and SRL has a high quality large rutile deposit.
hi-thanks for your post on other stock. i still hold on all positions for what its worth. corbs
Whilst there is nothing really new in today's presentation a friend of mine bumped into a director of Pala at Indaba and told him that Pala regard SRL as a fine company. He put the sp down to the cr*p market. As far as the presentation is concerned Gangama seems to be still on course,