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https://oilprice.com/Energy/Energy-General/The-Commodities-To-Benefit-From-Chinas-Stimulus-Plan.html
Like you, I am keeping an eye on events in China. Will be interesting to see if they increase the rhetoric at the China National Congress over Taiwan. But that could be a positive for gold in 2023 and help us, assuming we are at full production in Moz. Still don't understand why our gold assets in Moz aren't promoted to the market more. A regular flow of RNS's would help awareness if not the immediate shareprice.
Id like to see a pic on the website with Colin holding a dory bar....... might be enough gold produced to do this already
Colin, it cant be too much hotter in Mozambique than the UK at the moment. great opportunity to arrive already acclimatized.
Something I’ve not seen discussed, though I may have missed it......since the first conceptual model in July 2021 the Australian dollar has weakened by about 8% vs the US dollar. That means more A$ for each lb of copper sold. So revenue goes up but costs, which are all in A$ for BR, remain constant. Thanks to that operational leverage, the NPV in A$ goes up significantly. At the same time the break-even point drops - no longer US$5 per lb, say, but maybe $4 (say). No doubt there will be arguments made about long term vs short term FX rates, and of course AUD vs GBP, but it’s a point worth noting.
Howezap, it would also be good to understand what there hasn’t been a notice of AGM date published yet.
So we ‘may’ or may not have a podcast this week after a comment posted on telegram from Kev Hornsby about catching up with Colin.
What could we expect if so?
Decent update on Fairbride for starters, and from the other producing mines would be well received.
Comment on last year report and financial position.
Projects in the pipeline maybe.
There will not be much he would be willing to divulge that we don’t already know from Oz. Maybe confirm end of drilling, and go over again what they need to do next.
Reiterate target. (Bites lip)
Not expecting any prior RNS, then to be backed up with interview. Not expecting an interview tbh but a general update would be welcome to steady some nerves if there is.
But certainly news on initial start up progress from Fairbride.
Received its first income from Tahuehueto today. Tahuehueto went into pre production a month before manica. Obviously they are different projects with different methods, but it's probably not unreasonable that they will get manica income in 4 weeks time. That will be roughly 2 months from pre start. Hopefully xtr will start to get income from next month.
Cheers Flipper, I’ve never really thought about it like that. No idea when it’ll pick up, that’s the joy of investing. Few key aspects that I’m looking out for:
Chinas National Congress and potential exit from zero covid.
NATO countries working out that it might be a good idea to invest in alternative / green ways of getting energy and moving away from oil / gas dependency as quickly as possible.
Suspect it’ll be towards end of 2022 for these.
https://oilprice.com/Energy/Energy-General/Technology-vs-Scarcity-The-Worrying-Reality-Of-Exponential-Growth.html
This also shows the scale of the problem. But when will metals/copper recover ?. At the moment, looking across mining shares, the markets isn't interested. Plenty of otherwise sound exploration companies will struggle if they need to raise cash at the moment.
Great report to get your heads around the scale of what’s coming down the track
https://www.mckinsey.com/industries/oil-and-gas/our-insights/global-energy-perspective-2022
Copper price has dropped off for the past 30 years during recessions and people will trade off this basis. But given the huge investment in electricity that’s coming, it won’t last and will have to start tracking up.
Now off to get my shopping before the tarmac melts....
"Do you honestly think Kjeld and team will get out of bed for £1.8m which is 1% of 180m????"
Hi Bauhouse,
Thanks for asking for my thoughts. Unfortunately my thoughts are irrelevant. It's the numbers that matter. I laid out a very simple equation and you just have to plug your own numbers in. When I did so I made it clear that I was being very conservative (and incidentally only considering RC ) but I invite you to do the same. Get back to us with your thoughts, numbers and expected sp and we can see what you think Kjeld will get out of bed for.
Regards.
A4444... Totally agree. The BoDs cannot demand when a market is buyers or seller favoured. They can however choose to wait for more favourable conditions or decide what was unacceptable a few months ago is now negotiable. The majors will know that the lowly copper price would no doubt have brought previous economic resources into bargain basket aisles and they would be looking for forced sell scenarios first. Either we price accordingly or take or resource off the market. The majors have the financial clout to pay the lowest they can.
At current SP, I suspect most xtract shareholders would get out of bed ......and then run a marathon if that is what it took to get an 18p offer now :) I suspect 90% would accept that offer if it were made today against current sp
Unfortunately the sale price will be against what someone is prepared to pay, and not what the BOD want for BR or what they think the valuation should be.
Is it the bottom for copper?
5% up today is my bet.
Thanks for sharing that, on Xtract, sounds like kev Hornsby is in agreement with non diversification of your portfolio. Maybe he read our previous discussion Andrew on the subject, he mentioned in last 12 months.
for a bit. 34min 15 seconds in
https://audioboom.com/posts/8122264-the-sunday-roast-featuring-adam-wilson-ceo-of-bens-creek-aim-ben
It's quite heavy, but this is a very recent nature article about the formation of PCDs (porphyry copper deposits).
https://www.nature.com/articles/s43247-022-00440-7
It's not overly relevant to our area of the fold - although it does include subduction magna creators.
In general it's talking about the use of monte carlo simulations to determine ideal creation scenarios for PCDs. That the way the chambers and intrusions are developed then go on to impact the cooling and hence the mineral make up of the intrusions and alterations. Essentially slow formations with lots of magma, beat hands down, faster more violent eruptions. (I would classify ourselves as a slower formation as we were pushed up ahead of a slowly advancing sub duction zone.)
What's more important imo, is that the science and our understanding of PCDs is still advancing massively year on year, certainly from when Anglo were exploring BR 7-8 years ago. I think I posted last year about a phd vacancy at reading uni, concerning understanding how alteration actually occurred particularly the zone size.
Our understanding of geology is really quite shocking whether it's micro, such as understanding the moveability of oil in a column or chemical changes due to acidic alteration of leached intrusions, through to macro plate changes and timings such as the lachlan fold formation.
Maybe a takeaway from this is to beware of AIM\ASX\TSX exploration companies who don't have access to geologists that are up with modern theories. Some companies get lucky, some really do have very good geologists on tap. Also to be weary of IP and geo interpretation work unless you know who has done it!
Anglo are not short of cash
They have been buying back shares from Goldman Sachs for the last year and still have sizeable war chests to spend.
Hi jezoo your comment
>>> AA could buy this almost as a tax limitation purchase based on their profits last year, sit on it until they need it or the price of copper goes up. <<<
The last point you make, although for me , more through reasons from their own internal politics, has been a concern of mine for a while, but from a different perspective. AA, if for whatever reason they think at this point in time it is not for them but want to keep that option open in the future, they would not necessarily need to buy it to sit on it would they? With the legally binding agreement still in place it’s not going anywhere! If, xtract leave any kind of wiggle room in the legitimacy of their supporting evidence that AA could dispute that the criteria has not been met that forces them to exercise their option when Xtract are ready for them to do so.
I’m no expert but I say what I see, I think it is essential the company need to get this right first time. Hopefully with 2mt and the decision to mine options to eliminate that possibility.
It is then easier to understand why, they have needed to complete the extra work, and is taking time to put a solid package together hence the comment regarding the quality of the data pack they are putting together that would satisfy any major!
What I mean is, it’s a fine line between pitting quality against quantity in building an asset. If Xtract have got that balance between quality, always quality first! and quantity, then we will be rewarded.
All great comments, thanks Bizzy a sensible reply that I know supports Andrews reasoning he has previously given.
And this from Bizzy >>> Of course this doesn’t mean they won’t use the current situation to bid a cheeky low ball price.
That’s a really good point, as with the terms in the agreement, that would see a third party evaluation lay down a marker, (if internal estimates differ too much) to help negotiations to reach an agreed asset value. It certainly helps prevent that scenario that would see xtract bullied so to speak, to accept a low ball offer from a business point of view once that major shows them the colour of their money.
It’s that binding agreement once again, that is restrictive. But, has given the company not only the protection against all the other big fish while building the resource, as I’m sure this would have been sold by now without it in place, but some protection from our buy back partners that have first refusal that will ‘hopefully’ assure a fair value is reached.
Bushranger is a quality asset, now how about that quantity?
"They will want to asses a potential acquisition using a copper/gold price set they truly believe in for the lifetime of the mine. If they simply use current depressed prices they risk losing out on highly profitable investments, and lose out to their competitors. If they believe in a future copper price that will be sustainably higher than historic prices due to electrification etc, they will use that price set in their valuation. "
I'm no expert, but that has been my view. I think it passes the common sense and more realistic approach that the major's analysts / financiers would use. Esp as the mine will be in production in the years 2030 to 2060 not anytime soon.
If the POC was say $13K now but everyone thought POC would be sub $8K in the next 10 years and falling, would they really use current $13K as the base price in any buy valuation?
I very much doubt it , not if they wanted to keep their job :)
"Buy land,they aren't making it anymore" Mark Twain:
They also aren't making Porphyry's anymore either.
AA could buy this almost as a tax limitation purchase based on their profits last year, sit on it until they need it or the price of copper goes up. There is always a bigger fish and what we see as a priority is their option financially.
It isn't nearly such a big deal to them as it is to us.
Some comments on AAs valuation approach and cash availability. I worked in a major oil company for 20 years the last 10 in M&A. I don’t have any significant knowledge of copper/gold but they have many similarities from a valuation perspective. I am sure will have a set of macro economic assumptions, updated qtrly (GDP forecasts by country/region, interest rates, inflation rates, exchange rates, etc) and a price set for copper, gold etc. During my time in oil, the spot price ranged from $20/barrel to over $120. The price sets we used for investment/divestment evaluation never moved lower than $40 or higher than $60. The odd flashy project manager tried to put in a high case at $80 just to try to titillate the executives but those numbers were never shown in a formal proposal.
For internal valuation purposes I am confident AA will have a similar approach. They will want to asses a potential acquisition using a copper/gold price set they truly believe in for the lifetime of the mine. If they simply use current depressed prices they risk losing out on highly profitable investments, and lose out to their competitors. If they believe in a future copper price that will be sustainably higher than historic prices due to electrification etc, they will use that price set in their valuation. Of course they will look at low and high cases and perform lots of sensitivity analysis on various key valuation drivers (e.g. the different production and start up capital costs). Of course this doesn’t mean they won’t use the current situation to bid a cheeky low ball price. Who wouldn’t? But CB should know the game and his trump card should be the potential competition for the BR asset for other suitors. At the end of the day the likely competition for BR is what will set the price.
Regarding cash availability, I expect the AA Treasurer will have a key sign off for any project over, say $50m. They will have a capital budget for the next few years (which MAY have been revised downwards due to current environment), as they will always be looking to feed their project pipeline. The finance/treasury teams will be very interested in the cash flow profile, especially in the early years given likely lower cash inflows in the near term due to current low commodity prices. If BR really has a significant open pit element then that would likely be a massive tick for the AA Treasurer as lower capex outflows initially and quicker cash inflows. Overall, I don’t see current market sentiment being the big issue. It’s much more about the size of Racecourse, nature of Ascot, etc)
The economic and geopolitical situation is changing so quickly that making forecasts is becoming impossible. Who will care about COP26 and all its idealism when they haven't got electricity to turn the lights on or simply can't afford to. Electric cars anyone ?. But if AA do an all share offer, then whereas the cash sum equivalent maybe far less than many of us on here would want, a deal could still be possible. Both AA and XTR shares have dropped by fairly similar amounts over the last 6 months/1 year.