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Page 21. Possibility of a sustainable dividend. Looking excellent. Should be much higher.
If wishful thinking worked, theses shares should be in the 69p target area!
I tried to access the note yesterday evening without success. They were appointed a joint broker about seven months ago; it has taken them long enough!!
Mon, 1st February 2016 - 14:30 Numis today initiates coverage of Sierra Rutile Ltd (LON:SRX) with a buy investment rating and price target of 35p.
A point that might support Gibraltar's first alternative is that both Gemcom and Norcast in which Pala took stakes and then invested their expertise, were taken private by Pala reaching agreement with other shareholders and then relisted via an IPO. Whichever route Pala take they need the co-operation of the three remaining iis as to a take out price price. Between them they hold a lot of shares.
Dara - all they have to do is let the other II know that they are on a share buy back plan to increase the SP (surely they wouldn't sell to upset the strategy) it's easier to justify a selling price nearer to £1 when the SP is creeping up through a planned buy back
Guys Pala are VC/Hedge Fund style investors who specialise in buying poor performing assets in the mining sector and turning them around and selling for a profit. Like all such investors and I deal with similar operators on a regular basis their investment window is around 36 months. Pala in my view will have one of two strategies i)An all share bid having a price agreed with the II's before they go public. In effect they take the Company private and possibly re-list at a later date on the main market. ii) And more likely in my view a packaged trade sale to realise value. I have said this many time Pala are not about doing nothing their investment window has probably already extended beyond what they prefer and my view is they will be looking how to exit sooner rather than later profitably. All of this I have said before but Pala's cost price average must be between 16-20p I expect they will want to exit at anything North of 80p and I would have thought a range of 80p-£1.20 leaves plenty on the table for the buyer. I really don't think rutile prices will drive strategy this is a long term asset for the right buyer. I guess time will tell but I think Pala will be keen as will the II's to cash in for a decent profit and move on.
ricky - your theory in my view does not take into account the three institutional holders. If you look at the Pala website and look at the section in which they advance their past success you will see that they invest in a company, turn around the company and then sell their investment. SRL is a different company compared to that in which Pala invested in 2011. What we do know is that without Gangama SRL was at record production in Q4 2015. Gangama come on stream in Q2 2016. SRL have al ready contracted to sell 80% of targetted production. That prompts two questions. First does that 80% of production include projected Gangama production in Qs 3 and 4 and second at what price has the 80% been contracted for. Gibraltar is no probably right in that Pala will look to sell. A question which needs an answer which only time will tell to give us will Rutile sales prices increase this year. I also do not think that the company will have plenty of surplus cash if the board's intention is to pay down the cost of building the Gangama plant. At least unlike so many other miners both large and small, SRL does not have a great deal of debt. Further the directors have not gorged themselves and management with cheap options. We will have to be patient.
There are currently about 50 million shares in free float (and probably a lot less when you consider Gib and many others won't sell until the price is substantially higher) so if the company wants a much higher SP why don't they use a chunk of their forthcoming cash flow to buy them up - at the current SP it would only take £8m to buy the lot!!
In the small-cap mining arena, Sierra Leone industrial minerals miner Sierra Rutile hardened 1.88p to 17.5p after it announced record rutile production in the fourth quarter. The company added that 80 per cent of maximum targeted sales volumes had already been contracted for 2016
A short but good snippet in Saturday's market report in the Daily Mail.
Would expect some interest on the back of the rns.
There was no beating about the bush when Investec came to write up Sierra Rutile’s (LON:SRX) latest set of results in its morning commentary. “Good set of results,” headlined the broker. “Sierra Rutile reported record fourth quarter production (up 25% year-on-year) and taking full year production up 10% year on year to 126,000 tonnes of rutile.” That’s no mean achievement in a market that’s lately been very unforgiving to mining companies, and the result was duly recognised in some serious buying activity which took the share price up 12% to 17.5p by lunchtime. Investec wasn’t alone in dishing out the plaudits. Numis called the results “positive”, RBC maintained its “outperform” stance on the company’s shares, and SP Angel talked optimistically of a “good performance” historically and the potential positive impact of the move to dry mining at Gangama. The move to dry mining remains on budget, with US$21mln currently spent, and on schedule for commissioning in the second quarter of this year. That’s all to the good and should help costs continue on the downward trajectory that was initiated during 2015. However, much depends on the commodity pricing environment, and here Sierra Rutile’s position is interesting. Investec highlights that during 2015, realised prices for Sierra Rutile’s product dropped by only 2% and notes additionally that around 80% of projected 2016 output is already contracted to buyers. So, although punters may be fretting that the overall market for mineral sands looks bleak, it’s clear that that outlook very much depends on which mineral sand you’re producing. Sierra Rutile’s rutile has buyers in place and pricing resilience, although as RBC concedes at the end of its analysis, until there is a recovery in the wider mineral sands space investor sentiment is likely to remain subdued. For SP Angel though, the glass is half full rather than half empty. “Should the pricing environment improve, Sierra Rutile should be well positioned to benefit from this,” the broker said. SP Angel also highlights what’s perhaps even more crucial for investors in a skittish market such as this - that relative to peers Sierra Rutile looks comparatively unencumbered by debt. Debt has been the big bugbear of mining companies large and small over the past few months, but with Sierra Rutile’s strong cashflow profile combining with falling costs and lower debt, there certainly is a case to be made for the company relative to peers. We’ll know more when the full financial results are released in March and guidance for the full year is given. But for now it’s nice to know that one or two companies out there are still meeting expectations. http://www.proactiveinvestors.co.uk/companies/news/121405/sierra-rutile-impresses-brokers-with-record-production-12140
Sierra Rutile (SRX LN) 16.8 pence, Mkt Cap £87.5m – Good Q4 Operational Update  The company produced the highest rutile production to date with 38,787t of rutile up 14% on the previous quarter.  This was also up 25% on the same time last year.  This will put production for the full year at the upper end of guidance at 126,021 tonnes of rutile (guidance 120,000 to 130,000) tonnes.  Ilmenite production was 10,484 tonnes up 3% with zircon down 5% at 229 tonnes.  The company could have produced more rutile but is now managing production to match sales volume to limit working capital usage.  Direct operating costs were US$537/t down 1% from last year and all in operating costs were US$666/t down 2%.  Despite lower fuel prices and weaker currencies, the company did not make as much headway on costs as a result of poorer recoveries from tailings in the first half.  As the Gangama Dry mining comes on stream, costs should come down with tailings becoming a smaller proportion of volume.  The Gangama Dry mine is on budget and scheduled for commissioning in Q2 2016 as planned.  Realised prices for FY 2015 are 3% below average realised prices in FY 2014.  Pigment demand which was weak in 2015 is expected to make a recovery during 2016.  The company will continue to manage production to match sales demand. Conclusion: This looks like good performance from Sierra Rutile. Sucessful commissioning of Gangama will bring on higher volumes at lower cost. The company are also trying to align production to sales demand to better manage working capital and improve profitability. The market for 2016 is expected to be better but will still depend on overall economic growth. Prices remain opaque but should the pricing environment improve, Sierra Rutile should be well positioned to benefit from this. With the other junior mineral sands companies encumbered by debt, Sierra Rutile offers the best quality exposure to the sector. see link hTTp://www.*************.com/views/17991/sp-angel-morning-mining-note-atalaya-billiton-highland-gold-sierra-rutile
Costs have further reduced. Sales have increased by volume. The key for me, leaving aside Gangama which corbine correctly identifies as being on time and within budget, lay under the headings within the RNS "Sales and Marketing" and separately "2016 Guidance". There appears to have been a dip in sales prices achieved in H2 making an average of minus 3% for the year. However there is an expected shortage in feedstock availability "over the next few years" and "customers continue to exhibit strong interest in SRL's high-quality product and agreements to purchase volumes from the Gangama Dry mine are ALREADY CONTRACTED" and in the next paragraph "pigment demand is anticipated to make a modest recovery during 2016" Under 2016 Guidance it is stated that 80% of the maximum volume of sales targeted for 2016 are already contracted and with the change to a policy of a sales led production plan for 2016 there will be a focus on profitability over volume - very much up my street. We will get what I believe will be a more transparent production sales and cost guidance with the 2015 financial results in March. I may be sticking my neck out but here I agree with ricky who recently considered that SRL is now being prepared fi=or the sale that Gibraltar has been discussing. Just my thoughts.
V Good RNS - Q4 production represents an annual run rate of 150,000 tonnes - before they add in Gangama!! I'm surprised they can't give 2016 guidance when 80% is pre sold This will generate a lot of cash over the next few years Dressed for sale
not forgetting legacy selling to the likes of dupont and others that want the best quality there is-which of course is from the srx deposits. id like to know more re this rns re legacy selling for next periods, as srx have mentioned a while ago, some of the product was legacy sold ahead of the years production figures. gangama is good news, on target and on budget. :-)
they been brining costs down year on year-when gangama comes on stream costs will drop further-imo welcome aboard, u invested here? (how long) these are good figures imo, all things considered, note they were dealing with major supply issues (see previous rns feed) during the ebola situation, with country in various lockdowns for nigh on a year? pala and mnsr sisay are very mindful of brining costs down further. do u have suggestions where they can look? re brining costs down further. id be interested to hear them? thanks corbs :-)
Little bit concern with rising of costs. Don t know how market is going to react as indeed we are in a depressed market. All-in Operating Cash Cost3,4 of US$666/t for 2015; - Adjusting for Rutile In-process, Direct Operating Cash Costs were US$530/t and All-in Operating Cash Costs were US$658/t, in-line with cost guidance.
Thank you both for your comments. I agree with you corbs that there is top possibility. Gibraltar I looked at the 2014 accounts and the inventory year end (stocks of ilmenite zircon and rutile) stood at just under 50K tonnes down by 11K on the year before. Do remember that the sales prices in the year 2014 were depressed; we need to watch for the prices achieved in 2015. It is one thing keeping costs down which in itself is laudable but one must achieve good turnover. Corbs I do like your idea about storing unsold product for "better times"; that might be effective once Gangama comes on stream. We know however that sales prices have been coming down but there is talk (Gibraltar's recent FT article as evidence) that good quality rutile will sell at a higher price during 2016. What we do have is now great infrastructure and one hell of a deposit. Corbs I asked about the proposed power project. The chairman told me that the proposed partner could not raise the finance - therefore I would not rely on that as driver. SRL is undervalued. The shares are suffering with the downturn. I have ruled out any deliberate desire for Pala to get the remaining stock for a song and thus take advantage of the depressed resource prices which would hurt us because surely the remaining three iis should give us some protection and further Pala have a reputation to preserve. Finally the Chiese seem to be buying up this that and the other and could revisit SRL for a purchase..
well, its possibly down to chinas wheels falling off their a380? supply/demand globally. would like mnsr sisay to clarify next rns on fiscals the legacy selling situation as well as projects on going, and we heard nothing more re the power project? remind me please guys when this was first touted by srx? and timeline re that? i see this as chance to top up personally. note srx are still driving costs per tonne down each year. im wondering re diesel costs if they can get better prices considering global glut and maybe have larger storage capacity to take advantage of prices? same goes for the rutile and the domes for storage? keep storing the excess for the time rutile prices move north? corbs:-)
All, we are back at the pre SRX price on this stock now, lower than the Ebola lowest price. Limited trades however the price makes no sense and i say time and again that Pala will move when they choose to either exit or take the Co private. The underlying strengths of the Company remain and assuming the year end numbers show all stock sold then the stock is probably really worth in the region of 50-60p which is were it should be on trading alone. A takeover price has to be be beyond this level. Nothing has changed in my opinion, I guess I am quiet as little to add from my historic posts, its just a waiting game.
is quiet in the current circumstances. It would be good to hear from him with his views given that he is possibly the largest private investor in the company. Whilst we have to accept that the sector is bombed out but SRL is a company with a good management, a highly developed mining site and customers for its high grade rutile.
Sierra Rutile with a Market Cap of £80m is expecting to throw off between £20m and £50m a year in cash !!!!!!!
That was a presentation of last April but be that as it may you are possibly right. Gibraltar has consistently reminded this thread that Pala invest in a company, inject their expertise and then sell their interest at a profit. As we know there was a third party interested in the company in the autumn of 2013 but terms could not be agreed. At that time the share price was much higher. Whilst resource prices have fallen since then nothing stays down forever and as far as SRL is concerned the deposits are large with a very long lifespan and the quality of the rutile is high. The questions that need answers are whether Pala will seek to agree an acceptable price with the three remaining institutional holders and then take one of two courses a) seek a buyer of the company at that price or b) acquire the outstanding stock they do not own at that price, take the company private and then later arrange an IPO to refloat the company. In the meantime we may well see the release of the 2015 final quarter's figures this coming Monday. One way or the other they will want a return on their investment both of $ and expertise.