Member Info for Andrew4444

Hello JDAU

The premise of your point is based on the assumption that there is a direct correlation between the world stock markets and an insignificant mining company with a MC of £3m. You referenced XTR going down not Aim in general.

There is no direct correlation. The sp of very small companies will be driven mainly by their own fundamentals and sentiment.

The irony is, when world stock markets fall the one sector that usually does well is Gold and Silver mining co due to the higher price in Gold and Silver.

The opposite (for XTR) of what you are saying should be true.

Hi James

I don't know anything about them either apart from this web link

http://www.mutapamining.com

They seem to have been around since 2008 so I assume they are established and professional. I would have hoped they have costed out the project and already have funds for it. I didn't consider MMP funding to be an issue or risk tbh.

Gixxer

Sino leaving would not be fatal but may see us needing a placing much sooner. I would be amazed if MMP left. I think they are going to make a lot of money from FB esp with higher POG.

Hello H50

Sorry if you find my post annoying. My advise would be to filter me then.

Thanks

Even if it's exceptionally bad news and sino have gone, there is still hope here (Imho) . A price of $17.5M was agreed for manica in 2016 (CB stopped the sale but price was agreed so fair value), since then DFS profit has nearly doubled to $800 an ounce against DFS so not unreasonable to double manica value $35M, lets say $30M to be conservative.

If CB has had enough and wants to jack it all in, he should get £23.5M for all of manica = circa 5p .What may have saved CB, and moreover Xtract shareholders, is the fortuitous higher POG .

Of course that's assuming he doesn't keep trying to make it work and keep diluting to raise money again and again and we end-up being diluted to %@!X

Gixxer

That's the alternative view, the exceptionally good one, which may be correct.

I can't believe this long delay could be down to the alluvial results being so bad. CB may be a lot of things, but he's not stupid, so he must know that this long delay is worse for the sp and sentiment than releasing poor alluvial results on time.

Which brings me to the conclusion, as I said a few days ago, the next RNS is going to be either exceptionally good or exceptionally bad ie.

1 Sale of all / part of manica / FB.
or
2. Sino have gone.

It's looking possible that alluvial income is very bad. I can't understand why they long delay if it wasnt very bad news. It's OK trying to wait and pair bad news with good (if that's what CB is waiting for) but the long delay in comms will do as much harm to the sp and sentiment than the actual bad results.

That's unless the news is exceptionally bad such as Sino MK2 have done what Omnia and Moz Gold did, and left. Sino are a Chinese firm, could there be an issue with Coronavirus.

All speculation, and hopefully wrong, but that's what happens if you don't get news.

Gwyn

Big answer..

https://www.lse.co.uk/rns/XTR/xtract-resources-plc-manica-hard-rock-collaboration-agreement--bfw915hjmd6ypax.html

IWTO

It's a gamble in that its not a certain bet. That doesn't mean its a huge risk. I guess it all depends on the what the judgement call is on future POG.

If MMP had taken the gamble just over 2 months ago, with POG much lower then, they would have 'won' in that the extra increase in POG on 23% share would be higher than the premium they paid in the buy-out.

IMHO the chances that they would 'win' the bet if they took the buy out this year would be 90% likely so imho not a huge risk. ie I think POG will be $200 + an ounce higher in 2 years than it is now.

Hello CE

I think you are, probably, correct that sp will be around 1p until we get HR income. However, with the very big rise in POG over last few months, I think the SP would have almost certainly risen if this co was not called xtract. Too much history and lack of trust for potential value to be credited imho.

btw, POG is at its highest in all, or nearly all, currencies apart from USD.

LW

It's up to MMP if they exercise the option so we don't have the option of playing it either way, only MMP do.

If they do go for the buy out it won't be $20M. That figure used by IWTO (which I think is too low) was the cumulative income value of the 23% over 7yrs LOM and to show why they wont exercise the option as the option would be higher than the 23% total value.

My previous post hopefully explains why they may be happy to pay the premium buy-oy option.

IF they do go for the buy-option, I've calculated that the price would be about $30M against the NPV calc and current POG. As I think the 23% cumulative value is about $25M (not $20M as IWTO believes) there would be a $5M premier for MMP to pay (by my calcs) .

Whatever the exact figure is, it will be more than $20M for the buy-out against current POG

Hello IWTO

The 23% is not relevant to the NPV calc as that 23% is not part of the buy-out calc. However, I agree that the 23% is relevant to the decision by MMP to take the buy-out option. I disagree with your valuation of the 23% share as I think the total yearly income over 7 years would be a bit higher than $20M.

However, I do believe that against any consistent POG the cumulative 7 year income of the 23%, would be lower than the calculated buy-out option. Therefore why would MMP pay more against the buy-out option than the 7 years cumulative income of the 23% share? Which I think is your point.

This is the point Jamesiecakes made last week, and one which I agreed with at the time. However, since then, I have also done some calcs looking at the disproportionate increase in profit there is against higher POG. Dave85 also did his own calcs and commented on this multiplier.

The reason why MMP may offer the buy-out option would be because they think that POG is going to rise over the LOM and that the buy-out premium would more than be covered by the additional profit against the increasing POG. By my calcs that buy-out premium could be covered by POG rising about $150 to $200 an ounce within the next 2 years. It is not difficult to find many who think POG will break $2000 ounce within 2 years.

Just a point re a buy-out option. The buy-out option would always have to be at a premium to the 23% cumulative income as MMP have the right to exercise the option, so if it were not at a premium then then they would obviously exercise this option and CB would be accused of giving away assets on the cheap and not acting in shareholders best interest. So MMP would always have to pay more than the equivalent 23% income share (against a consistent POG). Why give them the option otherwise?

Also, and to a lesser extent, another aspect which may also be a factor is that CB has said there is potential to dig down at FB and the likelihood of higher grades. Although not as an important an issue as rising POG, this may also be a consideration to pay the buy-out premium.

In short, I think CB is saying to MMP do you want to gamble? On higher future POG and, to a lesser degree, possible better grades as they dig down.

I’ve posted very recently that if MMP buy out our 23% share some will think, on day one, this a great deal (possibly for the reasons you have stated – it seems MMP have paid too much and have been stupid) but within 6 to 24 months, against a substantially higher POG, I think we will look back and see it as a bad deal for us, and a good deal for them.

Maybe MMP will also see it that way to, so that’s why they may take the option??

AIMHO

'how good it would be to get a dynamic and motivated fellow at the helm with Bird sitting in the background using his contact network if required'

Great idea. We should get that Jan Nelson as CEO and CB in the background overlooking things.

Ohhh, hold on a minute ......:)

Lucky

I wouldn't focus too much on the alluvial results. They may well be poor - hence the delay. Or they may be good, but they wont be the catalyst for any rerate. Alluvial results may be the cause of a 20% fall or spike, but I think the SP will probably mean revert a week or so later.

HR news is what will substantially move the SP - be it up or down!

Coffee

The buy-out option is with MMP, not CB. Option to purchase only the FB concession. From RNS.....

>>>>>>>>>>>>>>>>>>>>>
The Company has granted MMP an option to purchase the Fairbride concession, subject to all parties receiving necessary regulatory approvals including, but not limited to, the Company obtaining shareholder approval, for an amount equal to the greater of:

· An amount equal to 80% of the net present value using a discount rate of 15%; or

· US$20 million

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

Assuming POG keeps rising, then the longer MMP delay taking this option, the higher they will have to pay.

I hope they don't take the option. It may seem a good deal for us on day one, but imho wont seem a good deal to xtract 6 or 12 month later - when POG is a lot higher than when buy-out agreed.

With POG going-up recently, and still rising today, I thought I’d compare NPV figures over last week. Using same previous assumptions, obviously apart from increasing yearly cash flow due to extra POG rise over the last week, NPV has increased by 12%. However, POG has increased by just 2.7% over same 1 week period.

Shows how disproportionately a higher POG affects profits.

So that 12% increase in NPV takes the buy-out sp from 5.5p to 6.16p in just 1 week against a POG rise of $43 oz (2.7%).

Colin, if you’re reading this, drag those buy-out negotiations out for a bit longer until we get 10p buy-out offer. Shouldn’t have to wait that long :)

Daz

When you get to the NPV, don't multiply that by 0.23%. 23% cut is not relevant in this calc. If it were we would never get a higher valuation than the $20M reserve price - unless POG went to $3K !!

Daz

There is a standard and recognised calculation to determine NPV. The link below is an on line NPV calculator. All the ones I have seen on line give the same answer (obviously when using the same assumptions) and was the same result as the way Dave 85 did his long hand calc.

Whether anyone agrees with the calc or not, is not relevant because I can't believe xtract and MMP will not be using the standard NPV calculation (and taking 80% of for buy-out figure). So to accurately determine the buy-out price we have to use the standard NPV calculation.

NPV Calcultor link:

https://www.calculatestuff.com/financial/npv-calculator

It appears you are not discounting the yearly cash flows. This % is the interest cost against the original capex and it makes a big difference if you don't take this into account. It greatly inflates the final figure if you ignore discount %.

As Dave said, there are assumptions when adding in the variables and some may disagree with the figures used for these variables, such as, Capex, yearly cash flow and, LOM. You will obviously get a different result using different assumptions but the basic NPV calc should be used - which has a discount rate compounding each year.

If anyone has an NPV price more than $45M (using NPV calc) I'd like to see what assumptions they used. I may have missed something in my assumptions.

Hello Dave

Further to your post re NPV afew days ago, I have looked at other on line NPV calculators and they have all confirmed your NPV figures using your same assumptions. However, you may want to change some of your assumptions.

1. CB has always dismissed the $40M capex as this was from a quotes which, in his opinion, would always be inflated. He has said last year he thinks extra cost is about $14M to upgrade Omnia’s plant. I believe the Omnia’s plant cost about $11M so total capex of plant should be about $25M. CB did say 2 years ago he thought the $42M capex could be about halved so $25M capex does seem more realistic.

2. At the AGM last year it was reported that CB confirmed we would not get full POG but 85% of POG as sale is in Dore bars. This would reduce the year 1 cash figure, and obviously future years.

3. Also at the AGM it was reported that we have to pay $17K per shipment of Gold and there will be 2 shipments a month, so $34K a month.

4. Finally, in the 29 May RNS it stated that we will receive $20K a month from MMP when production starts.

Not too sure if 3 and 4 effect the NPV calc but obviously 1 and 2 do.

By pure chance, the revised calc total doesn't change much, as the positive at no.1 equals out the negative at no.2. So still circa $40m NPV so $32M buy-out = £25M buy-out .

Of course that figure is at 12:09 today. Maybe higher in 1/2 an hour :)

Just broken $1600 and rising.

The delay in news here is probably due to MMP/ CB trying to agree buy-out price. Every time they think they have agreed a price POG and therefore NPV goes-up and they have to start again :)

Hopefully that's the reason !