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It's hard to see that Corica would sign a contract that could allow HUM to withhold 100% of payment because agreed volumes were not achieved. What if they achieve 97% of contracted volume but get paid nothing?
Surely any payment withheld must be proportional to the shortfall?
You don't make a deal with a builder to build 1 house per month for the next 24 months then pay him nothing because he's only managing to finish 1 house every 6 weeks? There may be something in the contract whereby you can claim damages based on non receipt of the rent that you missed out on because the houses were late, but that would need to be a reasonable and justifiable amount.
This $27m figure is a huge amount. I've no idea what the mining contract with Corica is worth or how much they have already paid them. This smells very fishy to me. I don't think we know half the story.
Corica are also asking for a deed of company guarantee
From Google - "A Deed of Guarantee & Indemnity can be useful for you in a number of situations. For example, you may look at getting one if you are lending money to a company and wish to ask the director to personally guarantee that they will cover the loan if their company is unable to at the date of repayment."
Who on Hum's BOD would -
1. Have that kind of money?
2. Be prepared to bail out Hum with it if needed?
Trying again to defeat the boards software bug...
skier,
A couple of years of gas averaging ~$4 will see the divi restored and DEC SP back up to the £20-£24 (corrected) levels it enjoyed previously.
Sour grapes for the likes of me and notrex at the moment. We both had the chance to exit when SP was £1.20 IMO the problem is not the company but the commodity price. In the short term I've made a bad call. In the long term I'm still confident I'll do OK.
Skier,
A couple of years of gas averaging ~$4 will see the divi restored and DEC SP back up to the £20-£24 (corrected) levels it enjoyed previously.
Sour grapes for the likes of me and notrex at the moment. We both had the chance to exit when SP was
I was not expecting a 67% cut. I was only expecting 50%.
I'm actually pleased they finally bit the bullet and did the right thing for the company and its shareholders in the long term.
I am invested BTW, this divi cut will cost me ~£28K/year in income, in the short term.
Most of us here know that FY24 will be a more difficult year for DEC than FY23 so why all the winging about the inevitable divi cut? Anyone who's surprised in living in a parallel reality.
It's only dropped slightly because an inevitable divi cut was already priced in. The cut was a little more than I had expected, I'd guessed a 50% cut likely, but I guess they decided to get it over with rather than have to cut it again later if there's still not enough cash. Sensible move IMO.
As a point of law there is no such thing a penalty clause, assuming Betts has used English contract law in Hum's contract with Corica. They cannot inflict a "punishment" charge for poor performance.
I'm sure the contract they have agreed will however allow them to claim liquidated and ascertained damages. That means if the contractor fails to achieve what he's agreed in a given timeframe, without issues such as inclement weather or others beyond his control, then the company, HUM can claim damages for delays based on ascertained losses.
The SP has only fallen back to where it was end of Feb. It's always been volatile. There have been no large sells. II's are not dumping. £25K is the largest I've seen which is peanuts.
This is an inconvenience and it may cost HUM a few million or maybe $10m or whatever in additional interest payments because of the additional delays, or they may need to employ a slightly more expensive mining contractor. Ultimately this will not be the thing that makes or breaks the company.
I'm not going to let it worry me. If the SP drops further on no new bad news I may sell something elsewhere and buy a few more.
In my experience as a contractor (not mining BTW) most disputes are about payment, whether that be late payment, disagreement over payment for variations to contract (extras or omissions) or "damages" as a result of delays.
Many of those could require HUM to produce further cash to resolve, hence why they may need to talk to the bank BEFORE they can be resolved?
for the avoidance of doubt i mean that at current levels, payments of interest, debt and divi will likely exceed fy24 fcf. cash reserves to pay the divi may run out in about a year from now.
i do hate it when people with zero understanding of a company's finances try to ramp up a share. novices read these boards and make investment decisions on this ****e.
"At this stage diversified has done nearly everything it can to resist the decline in stock price. All that remains is to finish the tender and increase the dividend."
Increase the dividend? In FY24 at current level it's almost certainly >100% FCF. DEC's dividend policy is 40% FCF. >100& is not 40%, comprehend? Do you think DEC should sell assets or increase debt just to pay the divi after the cash runs out? Do you have the faintest idea what you're talking about?
The SP is low because there are those who doubt that "commercial production" or the promised 150-200k Oz will ever be achieved, at least at a favorable AISC.
I've got not far short of 1,000,000 shares in this so I'll be gutted if it fails. That's the reason for the low share price though.
I dread Dan's RNS's, they usually result in another knock back to the SP
Attempting re-post with words omitted by LSE software changed -
I wish you well damofarl
I'm not a believer of the 50 year stuff either (I'll not be here then for sure). For me this is an investment for the next 5 to 10 years.
For sure the time to exit DEC was when the SP was >£1 (old money). Missed that boat and now, even with the divi looking very shaky for the next 12 - 24 months or until the gas price recovers to $4 this is not the time to exit. I made that mistake in autumn 2020 exiting Shell at less than £10. I took a big hit on Shell when I should have rode out the storm for a couple of years, took the reduced divi then sold out at a good profit on the increased oil price. I'll not make that error again. A long term gas price of ~$4 will make DEC holders very happy again and I can certainly see that happening so this is a hold for me.
I wish you well damofarl
I'm not a believer of the 50 year stuff either (I'll not be here then for sure). For me this is an investment for the next 5 to 10 years.
For sure the time to exit DEC was when the SP was >£1 (old money). Missed that boat and now, even with the divi looking very shaky for the next 12 - 24 months or until the gas price recovers to $4 this is not the time to exit. I made that mistake in autumn 2020 exiting Shell @
Damofarl,
"Always happy for anyone getting a multibagger! Albeit, I do think a reduction/temporary hiatus on the dividend front may extend your timeline!"
I'm under no illusion that this divi will be maintained for the next 5 consecutive years, and I'm starting from a position somewhat underwater. I do share your optimism that gas will rise in the long term.
Damofarl,
I forgot to say thanks for your kind words. Thanks!
On a separate note you said
"Further to my post below, whilst DEC hark on about 50 years of production, I see more like 15 years of profitable production,"
I would happily take 5 years of divis at this level which would make this a multibagger from here!