Member Info for bobbyaxelrod

Yes it's a crazy valutions relative to other equities. I would say that P/E is largely irrelevant, perhaps a red herring, due to lack of "continuing operations" past 3/4 years, and that discounted cash flows from remaining mine life and then probability-adjusting for mine life extension is the best measure. I think P/E or EV/EBITDA are more useful when continuing operations are established. Just my opinion though, and probably not entirely correct. I still think there needs to a mental adjustment for "free cash flow" (= cash flow from operations) to remember to deduct costs like exploration, non-sustaining capex, leases etc.

What I actually meant to title my post

The shares are very illiquid despite the market cap being around £100m, so in theory it could be easily moved by small buys and sells. That said, I agree that any discussion on here could be assumed to not be impactful in the share price over medium-long term. The continuing illiquidity is a concern, especially when it comes to selling shares. I have heard the CEO comment that trading volumes are now higher on AIM than TSX venture, but there is no sign of improvement. The last shareholder breakdown was given in around 2021 and it would be interesting to see if/how much this has changed now.

Your comments on Nigeria are fair and it's correct to be wary. The Nigerian Government has made tangible progress in its support, policy around and results in the mining sector over the past decade. It takes time for narratives to change, but Nigeria's push of its mining sector, given crude oil market dynamics, seem wise and unlikely to change.

When working out capex costs - would the original mine plan capex include sustaining capex? does the revise figure you give for mine capex include sustaining capex or have you just included non-sustaining capex? Are you able to use the balance sheet to map where the capex has been spent.

By to re-center my thoughts - can you think of any other business who will produce more than their market cap in discounted cash flows (even after allowing for exploration, capex,etc ) over the next 3 years? I would also be interested in investing in them. Someone on the board mentioned Capital Metals plc, but their mine life situation appears much worse than Thor's, although they currently have a buyback programme underway. Centamin have a dividend policy of something like "30% of operating cash flow pre-exploration for dividends" - it would be nice for Thor to produce something similar.

Thor remains my largest holding. I believe that the CEO and team deserve massive kudos for their work in getting Segilola off the ground - it really is incredibly impressive. Anyone who has attempted any project, even a small rennovation or property project, will appreciate the level of talent required to get things to this stage.

I appreciate the regular poster's proactive steps in contacting management, as well as some of the points he has raised. Of particular importance is indeed around auditing of accounts - I wonder how comfortable pepole are with this situation? I'm also not sure how much chat on this board really impacts the share price movement.

I do not think there are any fair concerns related to the Nigeria angle. Frauds etc are universal across all public companies and jurisdictional risk exists for many mining companies. Geopolitical unrest/ex-propriation risks exist, but do not align with the Nigerian Government's aims around its mining sector.

I will aim to contribute more when I have something useful to share. I do think a lot near term value creation will come directly from Life of Mine extension. As for capex costs, these being higher could be due to inflation but also "future-proofing" for a longer life mine. The additional ounces are there and the higher gold price should have improved this further.

Of note, has anyone looked at this company, Aurelia Mining Ltd. Similar to Thor, and also has cross-references to Thor on its website. https://aureliamining.com/

Https://oilprice.com/Energy/Energy-General/5-Highest-Paying-Oil-Gas-Dividend-Stocks-for-This-Summer.html

I was under the impression that the Nigerian Central Bank has an offtake order for 94% Segilola's gold production at international prices. Lots of interestig points made regarding gold production, gold poured and gold sales. There were initial teething issues around gold sales when Segilola began operations, for example around shipping but these were resolved.

There is a possibility that Nigerian Central Bank (or another customer if I'm mistaken) is having issues producing cash for the gold, but I think this is unlikely. The reason I say there is a possibility is because I have been reading about a massive Fx shortage that Nigeria is facing and I'm wondering if this has implications for the gold purchases. This Fx shortage has probably worsened recently due to problems with the O&G industry and increased imports of foreign oil for refining.

Thanks for the reply. According to my calculations, Thor is trading below intrinsic value on the basis of Segilola's last 3 years of production alone, and that's allowing for all other costs (exploraiton, capex, leases, debt, royalties etc). I am assuming a 100% chance of Segilola LOM extension - I would prefer they produce this sooner to make the most of the tax holiday but they have spent more time building up the nearby/underground. I think the PFS for Segilola underground in 2019 said $13m capex for 33,000oz per annum, which remains a pretty attractive return.

With Douta, I think they are right to take their time to build the resource up as big as possible. Obviously, this may be annoying for shareholders whent he PFS is constantly sign-posted as nearly ready and then repeatedly delayed. The economics won't be as compelling as Segilola. The main concern will be the execution of financing for Douta, and whether this results in punitive/constraining debt-financing, further gold stream/royalty deals and a lack of possibility for near to medium-term dividends. Thor are in a better position this time, both balance sheet, operationally and in terms of reputation, so hopefully they can execute Douta financing well.

Lithium may well happen fast, given it's in Nigeria and Thor have significant support within Nigeria to get things done. For this reason, I would be in favour of developing more Nigerian projects, given tax holiday, government support, expertise on the ground, machinery, etc.

On gold price, I see it as being continually supported by the higher gold production costs. When the DFS was done, it was telegraphed at $662/oz AISC for LoM, but at present we are nearly double that (could improve). All gold miners have seen significant cost rises that seem to have stuck. At the same time, there has been little investment in finding new supply. This suggests to me that the gold price needs to rise higher (whether it will or not, who knows) just to properly incentivise new supply to come on board. Thor being at the bottom of the cost-curve is a comeptitive advdantage, as it will survive gold price falls against more marginally profitable producers.

I think there is a chance that Thor's AISC comes in lower, given they have amasssed a huge stockpile and continue to do so. I don't think, thus far, there has been any wasteful or questionable cash spends from Thor. It seems very unusual that the market has given them no credit for where they are at right now, LoM extension at Segilola and Douta, but the market is not always efficient.

Can anyone access Alternative Resource Capital's broker research on Thor Ex?

While the Naira continues to depreciate and therefore makes Nigerian labour cheaper for Thor, they have previously reported their two most impactful costs were Compressed Natural Gas (CNG) and Ammonium Nitrate for explosives, which presumably would not be affect by Naira depreciation. How much impact to you anticipate Naira devaluation has on AISC?

Further, I wonder if they will accumulate an increasing stockpile of ore in excess of the initial Resource, hence giving a non-telegraphed mine life extension. I am hoping they run through the higher grades over the next 3 years to make the most of the tax holiday.

How much of that $30m operating cash flow annualised is actually free cash?

Https://oilprice.com/Energy/Energy-General/Nigeria-Looks-to-Lithium-as-Its-Oil-Industry-Struggles.html

There's a very good post on 25/05/24 by 40fathoms on the advfn board. I've sold out for now (usually a sign that the share will now explode) and will be watching from the side lines.

The recent management talk did not show much progress, which is concerning. They continue to claim focus on building the order book but to reiterate "this is very much a metric that is given based on the opinion of management rather than totally objective".

It seems obvious, given expenses and slow/uncertain progress, that they will need more cash - either this year or next. I can't see a place for debt due to uncertainty around future revenues and existing institutional backing. So they will have to raise to rebuild their cash balance. Towards this end, they will likely demonstrate increasing order book - how accurately this translates into revenue is not clear - in order to support sentiment around a raise.

The other potential option is delisting, or an low ball take-private acquisition.

My holding is less than 0.5% of my portfolio, and so even a suprise white knight acquisition will make little difference to me. They have struggled to even make make progress around succession planning and this is likely an indicator of short-medium term business prospects. There has also been no movement on board salaries, which represent a huge proportion of costs.

Open to any alternative and more positive views?

DragonFire getting more publicity

https://www.bbc.co.uk/news/uk-68795603

From Wiki - DragonFire is a British laser directed-energy weapon (LDEW) technology demonstrator. It was first unveiled to the public in 2017 at the Defence and Security Equipment International (DSEI) conference in London and is being developed by UK DragonFire, a collaboration consisting of MBDA UK, Leonardo UK, QinetiQ and the Defence Science and Technology Laboratory (Dstl).

Fair point, you're right. What's your view on the persistent undervaluation and lack of institutional interest? I'm holder, and not bearish on the stock, but do appreicate open discussion. I don't think they can "spin-out" MSALabs as, as far as I know, they do not own the IP and are only acting as distributor/operator. Chrysos is also very overvalued to consider acquiring it. They pay a small dividend and have high ongoing capital requirements through maintenance and reinvestment.

One possible thought on what could be causing the undervaluation is the cyclical nature of mining. Although recent utilisation rates have been increasing and are high (I think), compare them to 2015/2016 when they were a lot lower. Perhaps insitutions worry about this playing out in future, with CAPD being left with lots of surplus underutilised costly equipment therefore reducing returns. Difficult to see if one subscribes to the "commodity supercycle" or "age of scarcity" theses, as well as the general need for increased macro capex at a global level.

Great points. A lack of insitutional interest (assuming that them simply being unaware is not the sole reason) suggests unaddressed or unavoidable permanent weaknesses in CAPD's underlying business model or irresolvable risks. I think your second may speak to these underlying weaknesses; mining services must be highly commoditised resulting in the worsening margins, high amounts of capital will always be required for re-investment and maintenance (poor cash flows for investors for ever) and a high cost of capital now and in the future (although CAPD is using internally generated cash).

CAPDs high cost of maintenance in its fleet requires it to be a "price-taker" in a well supplied market otherwise it would face significant capital costs, and the larger this fleet - and competition's fleets - the more pressure to race-to-the-bottom on price. On the other hand, CAPD has high (I think although not sure of any benchmark) utilisation rates, suggesting there should be wrong for price increases and enhanced margins. The only reason that they can't do this, must be competition?

The contract tendering process, similar to all, also has similar flaws for companies that "win" contracts ( in this case being given contracts due to giving lower prices that cause problems further down the lines).

On MSLabs... while the growth in sales in fantastic, I understand CAPD's relationship with Chrysos (the actual owner of the IP and I think producer of the machine for MSALabs) to be that of a "distributor" and perhaps "operator". My main concern is the lasting strength of this arrangement. Could Chrysos partner with someone else in future? Could they push CAPD on margin? Could they remove MSALabs whilst benefiting from the scale, marketing and market created by MSLabs? Etc.

Https://www.plc-awards.co.uk/nominations-overview/

Now trading at a capitalisation of £3.99m with £2.8m cash. They should have sufficient cash to year end Sept 24, possibly Sept 25 if costs can be controlled, but, if things continue as they are, then I think there is fair chance they will have to raise. Given small numbers of directors, with 1 leaving this year, then the raise would have to be mainly institutionally backed. But I find it crazy that the shares are 93% down from their all time high. I am personally nearly 40% down on my small holding.

The director salaries of £634k in FY23 (up from £618k the year before) seem excessive given the state of the business. There has not been any staff cuts and it is hard to see where a genuine effort is being made to cut costs until business picks up.

Reassuringly, their pipeline is growing, but this is very much a metric that is given based on the opinion of management rather than totally objective. They promised in their FY23 that "IXICO is uniquely positioned to partner with innovative analytics organisations to provide a market channel to the global biopharmaceutical industry" and that they were "hopeful to announce our first significant partnership agreement early in 2024". I'm not aware of any such announcement being made yet. The departure of the CEO adds to IXICO's challenges this year, although saving £300k plus in salary may be useful... but it remains unclear if it is an attractive proposition for a quality candidate.

I think it might be useful to gain better insight into their historic pipeline numbers and how these converted into revenues. With revenues unlikely to pick up until FY26 at the earliest, the only indicators are pipeline. They will likely "grow" their pipeline to justify business operations (i.e. their salaries) and a future potential raise to keep the lights on. I still think this would make an attractive acquisition (costing only £1.2m to someone after taking out the cash) and I am still on the fence about adding to my holding or not - more likely to add on positive news around IXICO or around the clinical trial market (which seems to be very cyclical and currently entering/in the amidst of a downturn).

Very interested to hear the thoughts of others...

Some things that need thinking about:

1. Distil declined the opportunity to increase their investment to £5m, likely due to lack of cash and need for a raise. Or was it due to Ardgowan not representing as good value as previously thought? My thought is that if Ardgowan was good enough for the initial £3m loan, with a raise supported by major shareholders, why not for another £2m after more progress has been made.

2. Ardgowan has been well supported with £1.2m equity investment from existing holders, £3m from Distil (24% owned by Roland Grain), £7.2m directly from Roland Grain and nearly £1m from the Scottish Government. There is tourist demand, export demand (for Scottish whisky) and hopefully inherent durability (should be around for decades to come). Ardgowan have recently agreed a £100m deal for a decade long supply of cherry casks.

3. Major shareholders of Distil: Roland Grain 24%, Cooley 7%, Rothschild 19%. It is likely that Distil moves in the director Roland Grain's choosing.

4. Distil has a market capitalisation of £4.4m. If Ardgowan was worth £30m, then in 10 years we might expect this to increase and over decades increase significantly, making Distil's chance at conversion increasingly valuable (depending on the success of Ardgowan).

5. We do not know if Distil plan to convert or not. Distil may have existed solely as a means to use public markets to increase funds for Ardgowan to Roland Grain's benefit, but not convert later (and thus reduce his own share of Ardgowan). Thinking it through logically, it might be Roland Grain's self-interest to not convert Distil's loan into equity as he already has equity in Ardgowan, unless the £3m outstanding is not available to pay back.

6. A best case scenario would be a conversion into 10% equity of Ardgowan after receiving interest back, a massively successfully whisky product for distil with production taken care of and the other brands growing and trading profitably. Of course, again much of this relates to understanding exactly what the directors have planned.

I know both these posts are very wordy. For full disclosure, Distil represents less than 1% of my portfolio. I've held for a few years and am thus holding at a loss. I do think Ardgowan seems opportune, although I am yet to research profitability, durability and prospects for Scottish distillery businesses, so have no idea if a £30m pre-money valuation is fair.

If anyone has any thoughts they would be greatly appreciated.

Similar to my previous post, I am increasingly valuing Distil based on its relationship to the Ardgowan distillery.

1. Although they have lots of brands and a track record of sales, espcially RedLeg, it is fair to say that these have struggled to achieve a consistent or significant increase in traction. The sales of each are probably still too small to attract a buyer, and most buyers (with similar or better distribution already in place) would likely be able to quickly create their own product. In sum, I think Distil's original stated strategy of building and selling drinks brands is not possible unless they have a blockbuster or nascent blockbuster brand.

2. That said, Distil remains debt-free and has a history of trading profitably/being cash generative (ignoring recent raises). For this reason and my first point, I ascribe neutral value to Distil's trading business and brands and even consider them in "run-off". Obviously, there is room for suprise to the upside here. More positively, there has been an acceleration in sales with Q3 looking to be similar to Q1+Q2 combined.

3. After a raise, Distil gave a £3m convertible loan at 5% pa to fund Ardgowan. I believe this was a good decision for shareholders. I am more concerned by the recent raise for working capital until March 2025. For the loan to Ardgowan, this equates to £150k in interest received per year for 10 years (£1.5m over the 10 years) and then the return of £3m loan OR conversion of this loan into a 10% equity stake into Ardgowan (convertible at £30m pre-money valuation). In my mind, it (would likely) make complete sense to convert into equity in the final year of the loan.

4. Production at Ardgowan Distillery is due to start in 2024. It is ancitipated to produce 1 million litres per year in the initial phase. Distil has claim to 10% of this production (of malt whisky or another product of their preference) for the duration of the loan, possibly initially equating to 100k litres.

So, a lot of the valuation of distil relates to:

1. Whether directors plan to convert the loan to Ardgowan into equity, and whether this will be worth it.

2. Whether Distil is able to use the production at Ardgowan to sell more drinks. As far as I know, Distil have not been supply constrained but demand constrained for their brands.

3. How the directors plan to use Distil to achieve their own aims and how this relates to other shareholders.

I don't thin MSLABS could ever be spun out given that Capital Ltd is simply a distributor for Chrysos (also publically listed with very different valuation profile to Capital Ltd) and doesn't own anything.