31st December 2022 update23 Jan 2023 19:52
Well, the fruits of patience are coming rapidly to ripeness.
1/ Bilboes - sold to Caledonia - 1% NSR, Listed Caledonia Holding (10-25% TP upside Liberum/WH Ireland), 3.2% Div.
2/ Futura - 26% stake in 2 Metalurgical Mines now permitted, Wilton and Fairhill, moving to FID $25m, also 1.5% NSR
3/ Tungsten West - bombed out in 2022 but 25% IRR and Tungsten in demand following Ukraine conflict.
4/ Kanga - highly attractive economics fertiliser - IPO in 2023 or 2024
5/ Nussir - Copper DFS done - FID next step or IPO in 2023 or 2024
6/ Cemos - 2nd production line completed late 2022.
7/ Prognoz - tied to POLY - opens 2023 and NSR worth $1.5m a year. Possible issues extricating the money until war ends. (But POLY is going great guns as a business, and its share price has doubled in the past few months following growing optimism.
8/ First Tin - listed and bombed out in 2022; now recovering; tin is back to $30k; DFS being worked on.
There's so much good news filtering through and the discount has narrowed from 45% to 36% but the long term discount to NAV is on average 20% and each commodity area (gold, tin, fertiliser, coal, silver) are either at elevated levels or are heading higher. There's lots to like and compared to other royalty plays this one is inordinately cheap! Its market cap is £55m and holds assets worth (today) £88m.... but "worth £88m" is based on a locked-in value which unlocks this year or on a purchase price and not a fair value. So if we took this to be conservatively 25% then this is actually still on a 50% discount to NAV. Reversion to 20% suggests a 60% upside from here. (to about £0.85/share). If it reverts to par (as it did in June 2021 during a period of excitement around commmodities) then a target price of £1.10 is realistic.
It's difficult to see any downside here at its current 52p. Even if we do see severe recession later in 2023 (we aren't even close to that as I write) the breadth of geographies and commodities insulates the buyer.
Certainly, credit to its management who are rather (too) quietly plugging away on the deal flow and shepherding this array of commodity plays. This one dropped in 2022 along with its holdings and the uncertainty of finding a hobbit-sized home for Bilboes, and the news of stranded Russian assets, uncertainty of coal investment in Australia all seemed risky. But in 2023 much of that uncertainty is now looking much more positive and a path ahead to prosperity now is clearer.
GLA