Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
I dont think a div makes sense while the shares are so cheap , I think the best thing for the company to say is we aim to maintain a cash balance of $100m , any excess held over this will be used to buy back shares in the market
thats an easy policy to follow and will enable them to be flexible, I think we stay around 90-120p until we get concrete news of the pipe re-opening where we shift to 150-180 and then grind back to 250-300 as the cash finally flows again ....
The funny thing is that in some ways these guys do not want to rush the closing of the deal, the longer they wait the less actual cash gets paid, the cash from the recent offload is going to mean the net payment when azule settles will be very low and when they finaly do close the oil in storage will also have built up to. a decent ammt ...
The news I am really waiting for is not going to come for a month, the Azule transaction needs final approval and then settlement will happen about a month later, it is the settlement details that are the real interesting thing that will show how good a deal it was ( we know it was good but exactly how good ... ) then we need final details of what the new fiscal conditions are , these will be important going forward, Looking at recent deals such as the Harbour purchase of the BASF oil portfolio at around 35k per flowing barrel I think they should post azule have capacity sto spend around 100m usd on the next deal which should get around 3k barrels, however the same spend might get a lot more organic growth or more Angolan assets at cheap prices ...
I have been trying to model up all the deal cashflows to see how things will look after the Azule deal closes, , I think at the end of this quarter, post oil sales and azule close we should be around net debt and oil in the tanks of around 10m usd, which is a pretty amazing result, at that point we will be trading around an ev per flowing barrel of 17k , which is around 1/3 of similar risked producers , therefore a target of 1.00 is not u nreasonable in the medium term
As far as large deals go I think that there is plenty of organic growth to be had cheaply from the blocks they hold or are bidding for, the onshore stuff should be very quick to move on with a very high chance of success, given what has been already created in such a short space of time I am very bulling here ...
Three lumpy sells there at about 1% of the outstanding shares in total ... I wonder if someone has had a sniff of the results, I think one of the main issues here, and I have held these since 2012, is that while I am happy for Ben to take a huge salary while he is adding value and compounding the shares which in the past he has been excellent at, nowadays FPO probably takes up 10% of his time and his new role as a Nigel Farage in waiting is taking the other 90%, while I do not disagree with his politics I would rather he spend some more time at the FPO coalface.
Also interesting fact is that Iluka plan to put the Sierra Leone rutile mine ( worlds largest ) on care and maintenance , the mine has been a quagmire for them , grades falling , cant keep qualified staff and constantly causing problems, better to remove 5% of global supply and enjoy much higher prices for rutile and ilmenite, the removal of this much supply could push prices another 20-30% higher and benefit all players ...
The assumption is that Rhodium is priced way too high now and will fall straight back to 2000 at some point soon, however one really needs to look at what a fair value would be, this is going to be a function of scarcity and usefulness, if something is useful it is going to need a price that makes it worthwhile to mine given the available grades, Rhodium now is at the point where it is needed but it is too rare to quickly bring on more supply, consider this table of how much of each element is in the earths crust and how value of each much 1,000 tons of average rock would contain
earths crust ratio
ppm spot gram px $ per 1000 ton
gold 0.003 1,895.00 60.93 182.80
silver 0.075 27.62 0.888 66.61
tin 2.3 13.45 0.030 68.18
copper 60 4.78 0.011 632.11
nickel 80 8.00 0.018 1,410.56
cobalt 25 20.00 0.044 1,102.00
plat 0.0035 1,191.00 38.30 134.04
rhod 0.0004 25,500 819.94 327.97
iridium 0.0003 6,300 202.57 60.77
palladium 0.006 2,835 91.16 546.95
uranium 2.5 30 0.066 165.30
As you can see from the last column the prices of each element tend to correspond to the parts per million in the earths crust with Tin and Iridium being the stand out cheap elements as priced by the market and copper, nickel and cobalt being expensive, I think for copper the fact that all the high grades have been already mined and the fact that we are now mining grades 10 times lower than 50 years ago mean maybe copper is not so bad, but in general Rhodium even at these prices are not crazy and tin is a screaming buy along with Iridium .....
Also worth bearing in mind that most of the gold and a lot of the silver ever mined is still around in vaults but the Rhodium Iridium and Tin all have basically zero stock piles or warehouse inventory ...
to get some perspective just look at where metals prices were 2 years ago at the end of May, the shares were trading at 110 and since then we have also banked some serious cashflow ... rhodium 2,840 , pd 1360, pt 790, iridium 1480 and lowly ru 260 .... if you had been told the current spot you would think the shares would be over 10 quid ....
The share price has not moved but in the long term this will be a great deal for them, they will have acquired for very little cost a decent volume of high grade oxide tailings in a very safe jurisdiction that will probably give them 5-10k ton copper and 20k+ oz gold a year from a 20-30m usd heap leach operation , maybe 20-25% of carry will end up with the jv partner but this will be an excellent outcome and a great use of the jlp expertise ...
perfect , I bought cares a couple of weeks ago as Cyprus is a great story for copper, I also have Chesterfield, Cyprus is full of tailings dumps that have been there for 5000 years in some cases, it is the perfect place for JLP to operate ....
The sandfire quarterly update shows that the Botswana project is 100% full steam ahead, also with 100k copper in the ground at the highest grades they have the A4 will be the first resource out the ground, the royalty on that will be a very quick 20m usd at current prices and then they will bank 2m usd a year on the T3 , and none of these royalties are priced into the balance sheet ...
It is also well worth having a look at how advanced the cupric canyon project on the doorstep is , high grade undergound and very close completion of 60k pa production, it is a big project and will prove the value of all the other ground mtr have an interest in ...
https://www.khoemacau.com
What is most interesting about palladium is that Nor Nickels q1 results just came out revealed that although the mine closures significantly reduced nickel and copper production the long lag in smelting processes and use of chlorine leaching residues have meant that they actually had large increases palladium production over the first quarter with palladium production up 40% quarter over quarter, so the markets have been tight despite this big increase when we assumed there was a supply shock in the other direction, to me this indicates that pricing is not a short term blip and indeed we may actually see a fall in supply the future as the smelting is such a long process ....
Hi
Looking into this new Vulcan Plant and trying to see what the impact is when it is operating, I see at the moment they are mining 18% chrome and recovering 62% of it so we have 6.8% chrome in the tails and this will reduce to 2.7% if they get to 85% recovery , so from 4 million tons of tails they should be able to get another 400k tons of 42% chrome product, the only reference I see to operating cost is about $5 per ton , so is that per ton of tails or per ton of product ? Do they make a 50% margin on the $100 sales after $50 shipping costs or is it 95% ?? seems the ebitda impact will be 20m usd a year to 40m ? not bad for a 50m spend ....
https://www.polity.org.za/article/decision-soon-on-pgm-process-that-can-save-a-medupi-power-station-worth-of-power-2020-10-26
From about minute 7 on this interview this guy talks about how much working capital can be released from smelting yourself, this is before pricing doubled so a plant can be paid for from a 1 month reduction in smelting time or time to get paid ...
https://www.sharesmagazine.co.uk/video/tharisa-ths-phoevos-pouroulis-ceo
Interesting to watch this video which I don't know if it has been posted here yet, I see now they are talking about battery metals and technology as being a focus for them, this started me wondering if they are going to start to try extract the Copper, Nickel and Cobalt which are present in the reefs they mine but have not been economic in the past, I note that one selling point of these Kell smelters is that they can refine previously lost Cobalt and other metals.
Another point of these smelters which ties in nicely to the recent disappointment in the cash level at quarter end is that looking at the Tharisa accounts we see that the shipping the ores for refining to larger PGM producers mean that there is a huge delay in getting paid and when prices rise first receivables explode and then only 4-5 months later when Tharisa is paid does the cash rise, at year end we had 150m usd+ in receivables and inventory and this is before the huge hike in prices, this number is going to explode, One sales pitch of the Kell smelter is that it turns the ore into saleable metal fast, so we can probably completely finance the smelter from the quicker turnaround in revenue by cutting out the smelter from the chain, I am sure that by reducing the terms of trade by a couple of months the smelter will be fully paid for !
The last point I would like to add is an amazing property of the metal Iridium which it would seem that no other metal posesses, that special property is that its price never goes down, for over a year every day the price has either gone up or stayed the same, all the way from 1500 usd to 6250 , only up, yes this metal has a special gravity defying property that no other element can match ....
Would also be nice to get a little update in the quarterlies on what they are planning round the smelting/refining plans, what they expect the kit to cost and how much it should add to the bottom line , hopefully they have funded it with cashflow over this quarter ...