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I asked quite a few questions on the strategy. In principle it seems to be:
1) Announce RC decision to mine based on 500mt (ish) using a model with a copper price in the region of $8500. Total contained not specified but we can probably assume around 1.5mt. The intention seems to be to get the AA decision out of the way early. Colin expects copper price to reach 15,000, so (reading between the lines) it seems to me they want to announce this model while we are below 2mt and the copper price is low in order to get a 'no' from Anglo. I asked if getting Anglo out of the way could backfire as it removes the shield of that agreement and allows a lowball bid for the company. Colin stated that junior miners don't suffer hostile takeover attempts. The only example he could think of was SOLG and that was due to conflict within the company.
2) Phase 3 will follow the above (which is interesting as they assume there will be a phase 3) and will cover more definition on RC higher grade area to improve the IRR, further drilling at Ascot and NW of RC, which they now seem to think is actually open again. This will happen sequentially, not all at once.
3) Start talking to various majors who are more likely interested because they already have a presence in the area (Newcrest?). Again reading between the lines, it sounds like informal contacts may have already happened. Colin made it clear that when a deal happens, it can happen quickly.
Based on the above, the 2mt seems to be a moot point because it will become irrelevant once AA reject (or accept) the decision to mine trigger. This seems to be a coherent strategy with defined steps. It could be a relatively quick deal if Anglo trigger the buyback on the decision to mine, or maybe 6-12 months for a different buyer. Colin made it clear there would be no JV. Whether people will be happy with that strategy will depend on their time horizon and prior expectations, but given the current market cap I will probably add as funds become available.
Howezap, I think you've hit the nail on the head there. As I mentioned yesterday, Colin didn't seem to see deep drilling as a priority, even when I mentioned many are excited by the prospect of an IOCG. I doubt that's because he's not interested in it. It took over an hour to get onto Eureka after Manica and Bushranger chat and those are the company priorities. Also, others may correct me if I'm wrong but I believe he said we are a little "constrained" at Eureka. He also definitely said that defining an IOCG takes a lot of drilling and would take a long time. He was adamant there are IOCGs in Zambia but I don't get the impression it's a short term priority to find one at Eureka - the lack of update over the last 11 months seems to support this conclusion.
Was any clarity given on whether declaring a 2mt JORC would automatically trigger the buy-back offer or whether Xtract can effectively put it on hold until they have finished their exploration work and have their 'final' resource tally?
Thanks Andy
My theory on possibly why they might not want to undertake a drilling program at Eureka to test the deep sulphides in the short to mid term is maybe they don’t want to start with some exploratory holes without being able to commit to and back it up with the funding that it will take to enter into a more comprehensive exploration programme to prove it up if there is an IOCG deposit there. It makes sense in understanding from your note 10.
Drilling a deep deposit is a big commitment in time and man hours that would potentially swallow a lot of cash, as it’s not like drilling a larger porphyry deposit , there’s a lot more risk.
The eureka pit is still open ended to the north-west to extend and also at depth so there will be steady income eventually, which was the priority there.
I certainly wouldn’t rule out the deep drilling in the future from the evidence already returned from the mineralisation style and assays. So maybe if and when the company is in a more stable and healthy position…
Does sound positive overall and as I have suggested they are not likely to go into the full phase 3 drilling. Potentially just the shallow high grade at RC to improve the early high grade recovery. That’s good news.
Also once XTR announce 'decision to mine', AA have 30 days to make a decision on triggering the buyback.
Details of buy back
That was my only question and the answer appears to be 'the whole of EL5574'.
4. Details of buyback agreement eg whole of 5574 or RC only. If whole of licence then how will value be attributed to Ascot and Footrot.
Whole of EL5574.
In this case it should be only a matter of course to get the full 2 MT of contained copper out of RC and Ascot and at a far better grade than if the buy back was for Racecourse only.
Cheers
if there is a "Paul" in the group who sat in the front row and asked quite a lot of questions would you mind making yourself known ? I can also be contacted on twitter https://twitter.com/andmillsy if preferable
9. Need to improve comms and investor info eg Kalengwa still on website etc....
Agreed and will post recent pictures and videos from Manica. Colin gave a quick tour of the FB operation including gold pour to one or two of us after the meeting broke up from videos on his phone. Joel committed that once commercial production is reached this will be publicised to ensure greater awareness of what they have achieved in being a funded explorer.
10. Focus on what they already have and not go after new projects
This was definitely not a commitment they would make but they are aware of capacity within Xtract and they would appear to prefer a smaller production operation but no specifics were shared – watch this space.
5. If we declare 2MT then what happens ? Try and assess confidence about achieving 2MT and from just RC. What if we are at 1.9MT ? What are the steps and timelines to trigger decision to mine, how would funding issue be addressed?
Largely covered in (1). Decision to mine is alternative trigger and they are progressing this. Note decision to mine is a defined term in Australian mining. It means that there is an economic resource which could be mined doesn’t mean all funding etc. are in place. It is clear that to develop a mine of this scale would require a major.
6. XTR has several exploration options - what is priority ? Either Manica, Eureka, EL5574 or other Oz licences? How would income from Manica be allocated to exploration ?
7. Timescale and potential for revenue at Eureka ?
This was the least clear part of the meeting for me. As stated in the chairman stated the company is funded for next 12 months this was reinforced but it is reliant on income from Fairbride. It wasn’t at all clear though how funds will be allocated to the different targets. The Eureka discussion wasn’t clear and initially focussed on operations and not exploration but any plans for further drilling on the exploration side weren’t clearly explained. Anyone else at the meeting who can add to this.
8. Quarterly gold reports not fit for purpose and don't reconcile for last 2 years to annual reports. Need segregation of different hard rock agreements, closing gold stock and transparency on how operating costs at Fairbride are determined and reported.
Joel appeared receptive to segmentation of results to give better visibility of alluvials v hard rock v Fairbride. James and I offered to provide investor input to the proforma report. We won’t get closing stock oz as it is deemed a control risk to publish that data.
Fairbride is progressing well and income should be received in Nov / Dec with commercial production. Gold pouring needs further focus. Equipment is working well. Life is 3 years based on oxides but transition zone and sulphides, with enhancement to plant, can prolong this. There are many yet to be explored deposits and Colin mentioned specifically more potential at Dots Luck.
Likely net operating cash flow c$1000 / oz.
I was reassured by the controls they have in place to ensure the right outcome for Xtract e.g. physical presence in the gold room, appearing on top of definition of operating costs.
Andy, your notes will be appreciated. We respect your need for a lie-in!
1. Bushranger what is timescale for RC model and Ascot if separate timeline. What happened to last timetable!
Bushranger was discussed at length for maybe an hour of the 1h45 q&a.
Colin admitted previous timescale not hit but stated they will have only missed it by a couple of months as aim to have an updated model for RC in the next couple of months and this is both the resource model and financial model to support any decision to mine. He appears to want to limit any immediate further drilling to the objective of proving up what they already have at Racecourse and focus on early high grade for mining and helping the financial case. This would be the priority, in my understanding, ahead of Ascot and drilling in new areas defined by the geophysics for example NW of Ascot was an area of interest.
A mine at RC will be in the order of 25 years at 20mt subject to above financial modelling with a likely cut off at 0.15, there is 2mt (on the entire licence)”
2. Does he still stand by comments that "it's not a 10p porphyry" eg £100million. How would he compare it to other recent sales eg Josemaria $485m
Not explicitly asked but from the discussion referenced above he definitely stands by that and he specifically mentioned sale of Kiwara at US$260m agreed when copper price was c$5500/tonne. Josemaria mentioned so I suspect he was reading the bulletin board.
3. What are next steps and timeline for Ascot - is comparison with Cadia potential valid e.g statements made on 39 assays on 27 May "similar characteristics to the discovery of the deeper, gold-rich Ridgeway deposit, which is a part of the Cadia-Ridgeway group of porphyry deposit"
Immediate priority for any further drilling is on Racecourse again Colin talks about the nature of the gold found on drilling and belief this is above the main porphyry. The geophysicists would appear to want to do more here right now but main focus is to complete RC model.
4. Details of buyback agreement eg whole of 5574 or RC only. If whole of licence then how will value be attributed to Ascot and Footrot.
Whole of EL5574. Clear that having a wider audience of potential buyers for BR will yield a better outcome than just a single buyer. Unclear if BR will be in target jurisdiction for AA but world is changing geopolitically and that may change perception. 80% sale and 20% retention is a useful bargaining tool if AA were the ultimate buyer but clear a global audience would give a better outcome.
5. If we declare 2MT then what happens ? Try and assess confidence about achieving 2MT and from just RC. What if we are at 1.9MT ? What are the steps and timelines to trigger decision to mine, how would funding issue be addressed?
Largely covered in (1). Decision to mine is alternative trigger and they are progressing this . Note decision to mine is a defined term in Australian mining. It means that there is an economic resource which could be mined doesn’t mean all funding place. Clear major needed to devel
I went out with a few friends after the meeting last night and so only just getting to sharing the update now. Was there anything new and earth shattering - "no". Have I bought or sold any share today - "no". But it was good to go and the sentiment from the board including Kjeld was very assured and positive and I do feel they have a strategy they are following around BR but we aren't privvy to the whole strategy. Hopefully my notes, being posted shortly, will give a bit of insight but it really isn't anything which isn't already in the public domain.
I dreamt he told the meeting
"look guys... I know what I said about kalingwa.... and eureka..... and yea ok what I said about bushranger too... but this next opportunity really is too good to pass up... once in a lifetime"
Assuming some people attended the AGM, what was the general feeling after Colin had his say, are we anywhere near something positive? Thanks in advance
Silence is golden...I hope!
CB made them an offer they couldn't refuse and anyone who said 'no' woke up with their dog's head in bed with them. Typical AIM.
I have visions of CB pulling out a revolver at the AGM. Placing it on the table and saying:
"there are two rules about Xtract. One we dont talk about Xtract. Two. We DONT talk about xtract."
Everyone nods and walks out of the room in silence.
Could be Steve, an offer in the offing ?
We can dream.................
Or were they all drunk on champagne? Lol
Did everyone attending the AGM have to sign a NDA? Very quiet.
No I wasn't there, just my take on the lack of bullish posts from people who were.
I sincerely hope I'm wrong
In view of the silence, perhaps Millsy and James are at number 2 with Birdy (AKA All down the pub celebrating)... :-D
Best,
Mr T
Well keeping quite has its advantages if your selling.
I think not continuing at eureka is big news, Colin was saying we might have a massive iocg there!!!
Now it's not worth a few deep holes to fi d out?
"Well if the AGM was that good then someone would be saying it"
You could say the same if if it was not good?
My experience of AGMs is that they are largely an administrative process, and tend not to be used to make ground-breaking announcements as to the future, or whatever, of the company. As someone pointed out yesterday, any 'interesting' stuff would need to be announced to the market either in advance, concurrently with the AGM, or afterwards via RNS.
You can't announce market sensitive information exclusively to a tiny subset of shareholders who were fortunate enough to be able attend a physical meeting in person.