Member Info for adamsmithfreethi

From what I've been able to glean from the shock Broker target price of 80p published last week they are under no obligation to justify themselves other than some general observations. If this is not the case then apologies but I thought I would do my own back of a fag packet calculations to see what I came up with. Assumptions:
- price of gold to stay the same at it is over a 10 year period when expressed in GDP deflated $. I.e. it maintains its real value when measure against USD
- AISC is at 1400 $/oz and stays that way over the life of mine
- life of mine 10 years
- only published reserves of 5m exploited no further gold at Sakuri exploited
- no further exploration expenditure since resources not converted into reserves
- break up balance sheet value is $400m based on intangibles and plant having zero value at end of mine life
- the west african prospect is realistic based on high discount factors.

First we have break up value of $400m
Next we have 5m oz at AISC margin of 450/500. Given the 45/55 split let's allocated $200 oz of CEY. Multiply by 5m reserves gives you $1b
Add in the west African prospect which, depending on assumptions, is worth 300-500m - take the median - $400,
Thus 400m plus 1b plus 400m gives 1.8billion or ~ 150p per share. Not a million miles away from other broker estimates

So what assumptions did the rogue broker use? POG? - in which case all miners are impacted. AISC - the 1400 figure I use is pretty steep already. Do they have such a low opinion of the new management to deliver. Reserves ? What inside information to they know that nobody else does?
Perhaps I have missed something obvious.?
Suggestions on a postcard gratefully received ...

Centamin has a high cost base partly thanks to previous management incompetence and laziness. Mining the best bits and no doing the hard yards of stripping.
However, a silver lining is that if gold goes up as it is currently doing its prospects brighten accordingly. We just need to see evidence of a root and branch reform of this company so that it ends up half way decent in the performance leagues.
It looks like the new guy understands this - whether he can force lazy local managers no doubt appointed because of the strength of their pollical connections not their competence to be fired or change their ways is open to doubt.
Depending on how you read the reserves figures there is 10-20 years worth of production left in Egypt alone. They just have to eke out every efficiency and capture value added in every way possible either through say solar power (as they are doing) or improving processing efficiencies (think Tharissa)
This is a punt but by no means a stupid one!

These are probably the first time they've had to be shown in the accounts. Looking at the BS as at 31/12 it looks like these are excluded from declarations of net cash. No doubt the management will plead this is consistent with past practice when they we tucked away in a note but a finance lease is a loan by any other name and should be included in the net cash figure.
Time the management did this...

Up currently ~ 10%
Presumably news out tomorrow and us poor schmucks can catch up....

There's no point at this precise moment in time. However, as soon as the management deign to let a bit of sunlight onto the matter and, assuming it is non trivial, then I'll be out of blocks and I rather suspect I won't be the only one too.
What's the phrase for being kept in the dark whilst manure is being constantly dumped on one's head? Something to do with mushrooms I believe?

Thanks for the link. I must say the level of detail they go into is an embarrassment for comparative interviews with UK interlocuters. Haven't quite finished it but it's massively increased my understanding of the project - not least the promise of HEP in the medium term which at 4c per unit will be worth more HUMs entire capitalisation assuming the production profile sketched out by Stalker.
A couple of points that I need to consider are:
- at a project average grade of 1.8 g/t he is talking about AISC of 1000. How come HUM can only manage 1450 AISC for grades around 2 g/y. Can it all be down to geography.
- Stalker was talking about Capex for the 200/250 m oz/year facility at around $300m. Assuming half at 150m that is a hell of a lot to raise for a company currently valued at half that. Really the share price needs to rise of the guys that cash out are the ones buying in at the the share rise HUM will inevitably have to undertake to pay and continue to play. Never mind the need to scrape together enough to get Guinea off the ground.
There's a lot at stake with this mother ****er. Like one of Musk's rockets - it's taken off but will it land without BLOWING UP!

@Geezer & Taser - chaps/chapesses - take my advice and don't bother with BT. As you say he just avoids having any sensible debate and is impossible to nail down despite ridiculous & inaccurate outpourings. He clearly gets gratuitous satisfaction in winding people up and being unnecessarily rude to them.
He can stew in his own juices indefinitely as far as I'm concerned..
On a positive note I was impressed by the company executives performance in the Crux interview. We just need those accounts produced within deadline to disperse any lingering concerns about any more skeletons in the cupboard...

@finderskeepers I think you misunderstand me. Whilst I'm not fretting at this share I am vigilant. By all means automatically assume the management have clinched a great deal if you want to. I prefer to test that assumption a bit with other like minded interlocuters on this board. After all Cassidy are no fools.
There comes a point when assumed faith in the competence of management tips over to complacency. Not a good place to be.

Thanks for that Cheerful - I looked back to 2012 to see what the gold price was then in 2012. It was basically between 1600-1800 having made a long climb from under 800 in 2009. However, gold promptly declined to around 1200 in the years leading up to the pandemic. That presumably made the whole prospect uneconomic for Cassidy.
Perhaps they sold out in Nov last year thinking we can at least get some cash out of this and HUM take the risk that gold repeats it's trick of declining after an immediate financial crisis accompanied by Central Bank largesse.
Perhaps they have now miscalculated since central bank largesse continues and is now joined by fiscal generosity too.
Will they regret selling out or will HUM be the patsy - and by implication us too!

@swamp. I'm not going to defend the 150m to the death it's not the most important assumption since expenditure whether it turns out to be 100 or 150 needs to be covered. Having thought about it a bit more I think Dan and co have extra wiggle room if they want it without resource to dumb money raising either via placing or royalty sales.
It's a question of character once again. Will they creatively manage the situation and confound the likes of TBTT by taking the AAZ option or will they sell us out?

Thinking about the timing a bit more I think HUM has some wiggle room on two fronts. First finance and second operationally.
Take finance. I would expect a facility to be agreed in principle with Coris quite quickly and it should be fairly straightforward. Crucially all the cash required to be on the balance sheet won't need to be there up front. Only when disbursement begin.
Secondly operations. The RNS states "Mine construction to start within one year". What does that mean. I do not think it means "Mill construction". Thus is is quite possible and sensible for HUM to send in contractors to clear access to the site by next May. In terms of sequencing of events this must be one of the first things needing to be done. Building of accommodation can also be done. Possibly at this time an order for the mill can be put in with a down payment and not the full amount. All this type of work could easily be covered by the company without recourse to drawing down the loan. That could come much later when the preliminary work is completed and crucially gives more time to build up cash and/or explore alterative cash raising options if even by extending the period the company's resources prove insufficient.
This all requires balls - does Dan have them? Raising cash through a share placing at depressed prices or a royalty agreement suggested below would not be good for existing shareholders.
If any of you know about AAZ's history taking debt up to the max and beyond can pay off spectacularly if the underlying gold market is benign...

Swampmonster - thanks for your thoughts.
Cash in hand. Fair point at the end of Q1 they company was just shy of $5m net cash (including gold). Bung in another 4m (2m per extra month - apr/may and let's say real time the company has 9m net cash. Keep all the other assumptions the same and they just get over the finishing line. But it's tight!
As far as funding a new gold mine is concerned I'm no expert but from following other miners e.g. SRB you have to pay for the facility up front and with these sort of projects costs only go one way so from general experience I always assumed the worst...

Kamei - back in the days when HUM was a simple one mine operation having paid for the Mali license if would have gone to Coris Bank with a loan application. Coris would have looked at the balance sheet to see how much capital and yes crucially cash was there. Assuming after the initial share raises Dan hadn't spent all the cash on say Dugbe or the US silver mine there would have been some cash there. I don't have time to look back but there must have been some.
I'm willing to guess that there was probably enough to meet the 60:40 rule that TBTT is talking about. The lend a newbie miner with no experience or CV the whole amount is just not plausible as you are suggesting...

Agrogerson....

Apologies I meant 60/40 debt/cash Not equity
There is undoubtedly inflation in the industry maybe going up to $150m was a bit conservative but note I allowed for some deferred expenditure so they only had to hit a target of raising 100m within the year. I think that is reasonable and prudent as an assumption. Others might think otherwise...

Sorry I meant NO additional spend for Dugbe within the 12 month timeframe...

Ok enough of the mud slinging and mindless optimism and pessimism. I'm going to try and put some numbers and assumptions down - please shoot me down where you think I am wrong.
Key assumptions:
POG average for next year 1800
AISC - 1400 (probably conservative as many components back ended e.g. restoration/remediation)
Additional costs of drilling exploration amount to 100 per oz
Required capital costs of new facility $150m with $100m upfront to order buildings/material/labour
Loan/equity split 60/40 as per TBTT's point.
Average gold production per month 9000.
For additional spend for Dugbe within the 12 month timeframe
The balance sheet as of now roughly zero cash/zero debt

Given the above a monthly production of 9k gives a positive cash flow of 9k x 300 = 2.7m. Multiply this up by 12 gives $32.4m. Just over $7.6m short of target.
Alter any of the above assumptions and the dial moves enough to make the proposition look feasible or alternatively infeasible.
Ladies and gentlemen - you pays your money and you takes your choice....

Thanks Brucey - basically we have to pay x2 as much as for the Mali contract and then give them up to 35% of the company.
This is pretty steep in my opinion.

Does anyone know what the terms of the Mali license are - just for comparison purposes?

The terms of the deal look at bit steep 5% royalty and 1% (presumably on turnover) for the local development fund (let's hope it does what it says on the tin?). 15 years though it a reasonable period of time to exploit whatever is there.
Given HUM only has to start construction within one year, if both the gold price stays elevated and AISC does not spiral out of control I reckon we could finance through CORIS and cash flow.
There's gold, then there's a leveraged bet on gold through gold miners, for the brave there are junior gold miners and finally there's HUM. The ultimate *hit or bust investment!

I still think this has a lot of potential upside but early optimism about swift exploitation from resources in recovered territories has given way to a more realistic expectation. Still as you say a divi of 5% makes it all worthwhile!