Member Info for adamsmithfreethi

Also forgot to mention that a look at the B/s for end June 20 shows net assets of $400m and breakup value of $900-1000. How low can it go?

Appreciate the fag packet and figures thereon. I also did a calculation on Friday based on the assumption that the entire 90k of deposits were lost and then came up with a hit to profitability of around $70m using what I considered to be conservative assumptions. Based on this in a rational world the hit should have been around 3-5%. However, the world is not rational.
The only question is should the likes of you and I sign in to the loony bin (with apologies to all our woke brethren) or should it be those bailing out?

Fair point. It's clearly hard to know what the AISC will be for the duration of time this deposit was due to the mined, I think they say Q4 and all of 2021.
I tried to approach it from the other standpoint by looking at the profit foregone and not the higher AISC that will be incurred in the coming quarters. By assuming a lower AISC of 600 for the higher grade deposits and the company foregoing the large margin on this (albeit with the govt sharing the hit) this was attempting to tackle the problem from the other direction.
I think....

Hmm - I have an old (small holding) of CEY at 35p which had ballooned very nicely. My first reaction was a figurative shake of the head and put it down to the spotty performance of the management.
Nevertheless I thought of doing a quick calculation which is as follows:
Let's assume the management's estimate of the gold in the sector is correct and is lost. I.e. it will never be recovered.
Let's next assume the AISC of this "high grade" gold is much lower than the quoted AISC of around 900. Let's reduce it to say 600. I think this is doubly conservative since not mining the sector will mean no remediation costs (which I assume to the captured) in the AISC.
Looking at the production sharing agreement which is swinging from 60:40 to 50:50, already the Egyptian govt are taking the lions share of the net profit (it's hard to go further as I don't have access to the allowable costs CEY can deduct from revenue) but let's assume the Egyptian govt share 50% in the hit.
The hit to CEY is thus as follows 90K times 1900 (current gold price) minus 600 divided by 2.
Drum roll... which equals just under USD60m.
And yet the value has dropped by GBP 400m. What am I missing?
Anyway for the record I've bought at 1.621 - so feel free to shoot me down.

Sage advice from a number of posts following yours.
I rather suspect you got a bad case of confirmation bias. Ask yourself this question. Would have been so impressed with the tool if it had told you HUM was a dog and, consequently, don't touch it with a bargepole?
There really are no shortcuts. Only scammers, thieves and so called experts willing to make you believe that!

As always loading up on debt is a double edged sword. AAZ is a prime example of this. Originally I bought in at 15p but became spooked at their vast debt relative to their value. I sold out at 7p and I think it went down below to below 5p at one point. It consequently had a market market of less than £5m supporting debt in excess of £40m. And at the time I thought investing was pointless because the company was really working for the banks.
Those that bought in at 4-5p had much stronger constitutions than me! However, I was lucky enough to spot a quarterly RNS reporting a positive cash flow of, I think, around $2m. I bought in a continued to do so up to 35p and obviously haven't regretted it. However, even at the point of positive cash flow it was still high risk. The CEO had the lend the company money out of his own pocket so keen was he not to dilute his holding.
Clearly AAZ are at one end of the spectrum whilst others seemingly willing to issue shares will nilly e.g. another holding I had - AMER an oil explorer. Now that was a lousy experience and I'd go for the riskier but infinitely more remunerative AAZ.
It'll be interesting to see where in the spectrum HUM position themselves. My preference is for more debt if then can secure low interest rates and good terms. After all the sun is shining for would be borrowers.
As for dividends I'm not bothered but I can see the physiological effect it has on investor sentiment. After all as Mr Fundsmith is never tired of pointing out , not paying dividends is a great way of compounding returns. Dividends just give you optionality in putting your money elsewhere without suffering often painful Bid/Offer spreads

Thanks Tiger I'll do that...

Yes thank's again OL, Pope No 2 et al. I think you all put your point very well balancing detail with appropriate caveats. I can't really add anything much else at this stage except for a couple of general and non connected points.
1) the FT money section has again for the 2nd time in maybe 3 months recommended HUM as a buy. As a longtime reader I can't recall any stock being recommended twice in such as short time never mind an AIM one. However, I expect this to make zero difference to the price because...
2) What counts in today's investing world is momentum. Whilst virtually all AIM gold miners are throwing off cash, at least at the pre-tax level, and whilst their share prices have in the main all risen, I don't see significant momentum behind them yet. By contrast I can only gasp at the Tesla and even Apple share price. Both have had a share split and theory says - so what? Practise says quite a lot actually. At the time of typing stock prices are up by around 10% and 4% respectively. Tesla is on its way to becoming a half trillion company that generates virtually no cash and certainly wouldn't do so without the government subsidy and some "nifty" accounting. I know all the data based arguments for current value but really just like Mr Creosote this baby is going to explode. In the aftermath I'm hoping the market will start to appraise the value of cash flow as much as currently does data flow.
3) And finally thanks for steer on PGMs - one area for diversification. I've long thought Pt being geologically rarer than gold could enable it to rival AU as a store of value. However, it lacks AU or AG's historical pedigree. Who says history doesn't count...
GLA!

I'd like to add my thanks too Otho. I'd loaded up even more than I had on the coup news and was looking to sell when the price reached 40pish but you've made me pause on that.
One thing you left out was the trustworthiness or otherwise of the BoD. I know from other discussion boards e.g. SHG have a visceral dislike of Mr Betts and his fellow directors and in their defence I note that the dilution effect of all the warrants/options being issued is increasingly steadily. Although the cosy relations between the various parties in the Dugbe deal including, it would appear, family members does also give me pause. By comparison SHG although having many negative points does seem to be a model of simplicity in comparison.
What are views of any in this discussion board?

Yes the use of metrics only gets you so far with these gold AIM companies. Partly for education and partly for a bit of fun I got into a debate with the participants of the SHG board. Whilst we all agreed that cash flow is the main driver of value we couldn't agree which version to use (well at least some of us agreed - some holdouts didn't) but interestingly I noted that when extrapolated out the PE of HUM was around 3.5 whilst SHG was 83. So much for a much used measure being of any use in this area of the stockmarket!

Oh nothing scientific I'm afraid. 40p was the price that the share was when the coup was announced. I was already grossly overweight this stock so selling out my newly acquired stakes would just bring me back into line to what I originally was and free me up to invest elsewhere...
I.e I saw my new stakes as being purely opportunistic whilst my existing ones were strategic. The coup did not change that position

Completely agree Playboy - it could all go horribly wrong and yet and yet. In my experience of having long followed African politics most of these coups end up not having any effect on extractive industries. The one thing the political protagonists can agree on is the extractive industries is the one stable source of hard currency without which no administration is going to work given the need to grease the wheels of the patronage machine. I've got shares in gold mines in dodgy places like Zimbabwe which, if anything, are in a worse position with Mali and they have been going gangbusters recently. Pretty much any country except maybe Canada & Aus where AIM miners operate can go pop at any time.
For my money the share price of HUM has over-reacted. You might be right in which case congrats on assessing the situation or you may be wrong in which case I cash out when the share price goes back up to 40p. Ceteris paribus of course!

Hey dude! Not so fast. Accounts do matter. To illustrate the point let's do a thought experiment.
Suppose SHG decided not to sell the gold mined? Result terrible cash flow, big bank debts but probably no problem. Why? Because the gold acts as collateral for the bank and as a ready store of value.
Now suppose a wondering geologist swings by and points out that half the pile of gold is, in fact, iron pyrites. Result disaster, the share price collapses.
Well accounts payable is also a store of value and can act as collateral for bank loans (it's called factoring).
Now I know that perspicacious fellows like yourself can see the illusion the management are weaving that, namely just a little bit more waiting will result in the full payment and have adjusted their personal valuation for the share accordingly. However, many investors won't have done and it won't be a pretty sight when the company finally does fess up.
Let's wait and see...

Well Colonel I'm reporting back from my posts in late July. If you recall we had a debate about the relative merits of SHG versus HUM which I at least found very enlightening.
In my post of 22/7/20 16:25 I gave a target for HUM to generate $16m in cash for H1 to match the figures to those which SHG had reported they had generated. Well HUM have reported on their operations and the relevant figure (allowing for gold inventory) is $13.2m. Consequently SHG on comparative figures "won".
I know that on the HUM board yesterday there was much speculation as to whether cash had gone on paying off trade and other payables plus the fact that they are building an airstrip for the site requiring oodles of investment cash. However, against that they received $2m from the Dugbe prospect deal. So all's fair in love and war SHG are the winners in this particular contest.
Does that mean I am selling HUM and buying SHG? No!
So why not? Well the HUM RNS was not brilliant but they do seem to have good prospects for reserves and resources as per their latest drilling results and a rising gold price tends to float all boats so I'm sticking for the moment despite the shenanigans of the Betts family.
I do have spare cash so why not invest in SHG? Well because the 2 big issues I have with it have not gone away. VAT receivables at $21.9m in the 2019 accounts have been adding up at 0.6m per month. At the end of July that would mean the figure would have risen to over $26m million. This has NOT been provided for in the accounts and would be a significant write down if the company finally admitted the money is not going to be forthcoming.
And my second issue? The Kenya gold deal. Still no announcement still POG goes up. It must be blindingly obvious by now that Barrick are not going to sign on the dotted line without significant revisions. Indeed this is beginning to look like a repeat of Acacia. Shareholders got right royally screwed then with Barrick sweeping up the remnants for a tidy profit. Why not again?
So no to SHG pending further news and no new money for HUM either. More interesting opportunities beckon elswhere...

Thanks too for the url.
Somewhat mollified after seeing it....

Agreed, and like I say I'll come back to this board with HUM H1 results irrespective as to whether they are good or bad.

A selective cut and past you mean. Come come Colonel.

Two can play that game:

" In reality who knows?"
"Yes I don't trust Dan Betts much "
"In the end it's an intuitive personal decision."
"Shanta looks a better (and better understood) bet than it did yesterday"

Look for the record I hold AAZ, CNR, TSG, SPGP (ETF), CEY & Caledonia Mining.

I have my work cut out just keeping tabs on them all. No time to fall in love with any of them in particular unlike I would say some of my interlocutors on the board.
But like I say it's been a worthwhile experience and I genuinely wish you good luck with SHG.

A bientot!

I got my info from a presentation on youtube on 11th May 2020 where Zurrin stated that the deal would be finalised in 6-8 weeks. If that was reiterated on another presentation in June as 3-6 weeks well that in itself represents and admission of delay from the original estimate. Have to provide the url if your interested

Colonel
Time to do your homework.
Go back and look through my posts. I have never explicitly said that HUM was a better bet than SHG. You may have thought that I implied it by holding HUM and not SHG but that might just have been a bit of history e.g. being aware of HUM before SHG.
I think I've been humble enough to admit I've learnt a bit from our exchanges and if I were investing today I'd be pretty indifferent towards either. All I know is that I would absolutely want to be in gold miners particularly AIM ones that are actually mining the stuff because they are such bargains at the moment. Their one weakness being in dodgy countries with dodgy property rights can be ameliorated to some extent by diversifying across a number of them. That is what I have done and SHG presents a further opportunity to do no.
Nevertheless I shall wait for the 2 o/s issues to be resolved one way or another.
Finally, look out for my post around early August - I'll update this board on HUMs net debt postion. If your interested that is.

Colonel,
You're a hard taskmaster. Also a stingy marker. As MrBond acknowledges the VAT is a real issue for you to consider and each month adds to the unclaimed amount.
Anyway to answer you question about the "debt pile". HUM are due to report on H1 at the beginning of August.
For SHG the six months resulted in going from net debt of -14 to cash of +2. A difference of $16M. For HUM net debt was -31 so to match SHG in debt reduction we should be looking at H1 net debt of no more than -$15m.
I'll keep you posted.
Finally, keep an eagle eye open for SHG announcing completion of the deal with Barrick. That announcement is late...