Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
I'm amazed at the amount of speculation going on here.
Are you all invested in KAV for 1 hole and 1 result? Is that what you call investing, live or die on 1 drillhole. This is the most important drillhole, that can make this company upon success but will NOT break this company upon failure. Let them ascertain what they have intercepted and report when ready.
Let's say this hole doesn't deliver a discovery, what's the worst that can happen? the shareprice will in the short term take a hammering, but will then settle before recovering with Ditau and KCB activity looking on the horizon.
Try to look at the company as a whole and not any single drillhole as a point of success or failure.
Cash
All, let's await the outcome of drilling and a proper detailed update through official channels. I think BT tweeting anything now, especially cryptic tweets, is ill advised.
JP2000
Re this passage from second hole;
"At end of shift at 0500 today, 17 September, Hole TA2DD002 was at 821m. So far the Company has encountered 170m of continuous Proterozoic mafic/ultramafic rocks. Kavango's senior field geologists have continued to make visual inspection of the core and have reported visible alteration and interstitial blebs of chalcopyrite in different sections of the hole. The lithologies range from coarse grained to extremely pegmatitic, the latter logged in zones that extend 20-30m in thickness"
Would you expect a section like that to be thick enough given what we are looking for (Cu/Ni/PGe/REE)? Of course grades will be the key factor.
Cash
Very important they rejig the business plan and focus on a cashflow strategy. They need to buy production to change the risk profile. Maybe get back to exploration/appraisal at a later stage. But they do need to regain credibility, build a solid footing and go from there whilst ensuring the business has a future. I3E is a good example - although it will be alot more expensive to do deals now. Better late than never.
Cash
Hi Keith,
I'm hoping for a discovery of the metals we are seeking or high value metals of any kind. I would be quite happy with Gold, but of PGE's even more so. Really want to get some idea from assays what's actually down there.
Cash
Keith,
I can remember Ben forwarding a tweet which mentioned how close in the periodic table Au was to the metals they actually being sought.
Cash
Finally, some good moves from the board. Growth plan to maintain and grow Canadian production, grow the divi, and share buybacks on the table (the absolute no brainer option at these prices). Combined it should deliver the SP and income offer that a range of investors would warm to.
Cash
All past exploration of the Molopo Farms Complex (MFC) has focused on finding Platinum Group mineralization similar to the Merensky Reef mineralization in the contemporaneous Bushveld Complex of South Africa.
This historic exploration did locate Platinum Group (and nickel) mineralization in individual drill-holes, but which was found to be laterally discontinuous. Our examination of drill core shows that the MFC is intensely deformed (away from the Jwaneng-Makopong Shear/Feeder Zone) by both ductile and brittle structures to explain the lateral discontinuity, both of mineralization and any lithological layering.
The deformation is accompanied by intense alteration of primary minerals, notably the replacement of olivine by serpentine and magnetite. The potential for major Ni mineralization was ignored despite anomalous showings of this metal in soils, borehole water and drill core analyses.
The primary target for KKME is Ni-Cu-PGM mineralization in the geophysically delineated major ENE-WSW Jwaneng-Makopong Shear/Feeder Zone through the centre of the MFC. KKME’s re-interpretation of the available geophysical data shows that individual lithological units are deformed into laterally continuous lenses parallel to the ENE-WSW strike of the host shear/feeder zone.
A second type of target is massive or disseminated Ni-sulphide deposits at the base of, or within the ultramafic zone of the MFC. Major nickel deposits occur in major structural conduits that link into the roots of large igneous provinces near the edges of old cratons i.e. in similar settings to the shear/feeder zone of the MFC.
Tony,
You must factor in buybacks preservation of cash in perpetuity for absolutely zero operational risk. Buybacks at 2 times earnings (or thereabouts) is insane. So it's not just what you save in year1, but every year after that. Also, it's inevitable the price of oil/gas will ease off - as it does, then they will need to maintain the Divi yield but with less cash available for payout - you can only do that via buybacks prior to a falling price environment setting in. Increasing Bopd will really help once out of a slump. There is a delicate balance to be struck, but I view buyback as best use of cash while they still have it and shareprice is this low. A downturn will mean that opportunity will disappear. A small buyback program alongside operations, thereby cleaning up the float while increasing bopd levels is the opportunistic and efficient way to go. Addresses both operating side and the value of the paper.
Let's be Frank, yes Serenity may have some merit. But no one is biting, does that not concern you? After everything we have learned from Liberator debacle - one of the most important lessons was to look at how the industry treats the asset - there were tell tale signs with Liberator. This is why I'm not fussed about how great MS and the team think it is. I prefer to see the industrys take on it. A deal will resolve it. As above, regardless of talks, no one seems to be buying.
Keith & others,
What are your thoughts on the below passage;
'Preliminary structural interpretations, combining the geology intersected in KSZDD001 with updated inversion models of the "Great Red Spot" magnetic anomaly, indicate that Karoo aged intrusives may have intruded upwards along structures that controlled the emplacement of the underlying Proterozoic gabbros (c.1.1 billion years ago). One of these structures could be the host lithology of the B1 Conductor.
Kavango's updated inversion model of the Company's aeromagnetic data indicates that the 60-degree dip of the B1 Conductor is aligned directly towards one of flanks of the magnetic high of the underlying Great Red Spot'
Given we know the area has quote a bit of magnetite that gives off lower readings, what else could this be? I'm hoping that JB chart is accurate.
Metalhead 9:25,
Good shout, if area C does not go ahead, then could well end up back in A should conductor be confirmed in time. The shareprice action over last few days has been strange to say the least. Could well be onto something in both A and B but you would never know it looking at London markets response.
I really would like them to start ops on KCB soon. Hugely promising acreage and POW is a good partner to have in that play. Ditau sounds good, let's see how that progresses.
It's all very interesting. That 8,200s target we are about to drill would be too great a conductivity result for Magnetite going by JBs conductance chart - so we really need to drill and see where it's coming from and what it is. I note, based on regional AEM, there would seem to be even bigger 'Great Red Spots' in the southern parts of the KSZ.
With POW raising the other day, I think a timetable for ops to begin at the Ditau/KCB area maybe announced in due course. KAV announced drilling shortly after TDEM survey results started coming in so not far off.
Lots going on here. Any drop will be an opportunity to top up.
Cash
I've said it before, the only thing that can change the Serenity perception (& shareprice) is an industry partner biting. Otherwise Serenity will quite rightly be valued at 0. The market does not trust this one and wants to see 3rd party validation. Two options; get that farmout done or sell it. The environment for offshore oil and lead times to development mean such assets are not worth it anymore. The costs and risks inherent are far too great to go it alone.
Have we not learned anything from the Liberator saga?
I see the NS now as an expensive distraction to real business in Canada that has serious growth and relatively straight forward development potential. I wish the bosses had not bothered dangling the Serenity carrot as they did for so long. This company cannot move forward until that's addressed.
Fresh air
They chose to increase it just to get the Cenovus deal completed as they did not want to go down the debt route. That's done now and they have grown to scale from that deal. They now have options.
Buybacks are a waste of money when done at peak prices like so many companies do - it makes no sense as it would be better ploughed into growth. But when prices are low, absurdly low in some cases, then it's very good and opportunistic equity and longterm cash management. It's not all about greedy bosses, sometimes there is a strong rationale behind it.
Majids lack of conviction will come back to bite him if he is not able to deliver a partner for Serenity.
Joesoap,
Even Warren Buffet launched buybacks of BH stock. The underlying performance was not being reflected whilst general equities were becoming too pricey. It can make sense in the right environment at the right price.
I think they should consider small buyback program if this heads towards 10p. Only small - nothing that will affect development programme.
Fresh air,
Agree with you re Serenity - it really depends on 3rd party validation and involvement to share risk. As for buybacks, discussed on advfn this week and a few days here. It all comes down to efficient use of capital and sometimes it's more efficient to reduce the float at very low prices. It has a two pronged effect, it immediately reduces future cash/Divi payouts on those shares (less money out the coffers) without having to increase Divi to maintain a respectable yield level. The effect of this is not one off, every payout will be lower and that is cash that can be ploughed back into ops. Why is this better ? Because it has no operating risk whereas ploughing that money into the field does, just to achieve the same outcome.
Agree with both of the posts below, buybacks are a very efficient use of capital when the equity fails to reflect the benefits of underlying performance. It's also a way of preserving cash from future payouts and maintaining the Divi yield at a respectable level.
Frankly, I see Canada as the only safe way forwards here. The NS needs closure via a partner biting or they sell on for whatever they can get for it. The costs are so high that, like Liberator, an offshore exploration campaign could hammer the company should it not deliver the expected results. Serenity has been an ongoing saga for awhile now, and no one is biting after having seen the data, dejavu - worrying!
You see, the industry will make a proper assessment of its potential, which no amount of PR of hype from the board can disqualify.
I would like to see Magic Majid buy stock. How about shoe some confidence in your own plan and buy some stock. Worked for Andrew Austin, his shareholders (inc. me) back him 100% to deliver on plan. Majid comes across more like a consultant, I want him to come across like us, as a shareholder who's wealth is linked to performance at the equity level.
Hi Keith,
Whilst it looks rather positive we have a conductor in the second hole, what false positives do you think may also give rise to that?
In the past, they have mentioned saline water being a problem. What are your thoughts on depth?
GGG,
A good considered perspective. I think much of it is plausible. But my many years of investing in NS and other oil&gas exploration keeps me cautious. My observations and concerns are varied.
Serenity, whilst seemingly a valuable asset in our coffers, like Liberator, will only become valuable when a third party bites, independently assesses and attributes value to it. That never happened with Liberator - even after third parties saw the data. It was the 'canary in the coalmine' we all should have realised back (for those who were invested back then). The key is getting a deal done on this asset. I do not appreciate they keep mentioning it and occasionally dangling it like a carrot. So much promise. But we have been here before. Also, for offshore, I would much prefer gas over oil in current investing climate. But that is X seperate matter.
The debt argument is fair in longterm rising oil environment. My concern is not the debt itself, but the covenants that come with debt - regardless of hedges, if price of crude falls below certain floor prices, they will automatically trigger covenant related payments. I have seen the ugly side of that when oil crashes below $50 towards $40. It is a form of leverage that magnifies to the downside.
As for Assets, I think the smartest move is to plan and crack on with development of the Canadian assets. Serenity should not hinder them and it's time to begin developing many many sites.
The industry and those who went into the dataroom were telling us all about Liberator long before the cretinous management did. The signs were always there.
I ask, just how good is Serenity, really. And is there an independent assessment of it?
Frankly, I would like them to ditch it for highest price possible and just focus on Canada/onshore assets. The NS and investing offshore is not what it used to be. A company like I3E should learn from the past and maximize value soon, before it's gets to stage of having to fund expensive ops in an offshore environment.