RE: can anyone10 Jan 2023 10:47
Some parts wouldn't C&P properly, but this gives you most of it :)
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Shanta Gold catches the eye, partly because the gold price is moving higher, almost unnoticed, and partly as the precious metal producer has only just finished with shaking off the attentions of a trio of predators.
Merger and acquisition activity is hotting up in the gold mining business, as evidenced by Agnico Eagle’s merger with Kirkland Lake and then Agnico’s joint bid for Yamana Gold, alongside Pan American Silver, which trumped a rival offer from Gold Fields.
Sceptics might say these deals are merely efforts by miners to extend the lifetime of their operations. Bulls will argue that they show there is value to be had in an industry that continues to attract little attention even as the economic backdrop remains a potentially fertile one for precious metals.
They seem to do best when markets lose faith in central banks and there has to be a risk that more questions are asked if they fail to deliver the promised “soft landing” while at the same time conquering inflation, given how they made a total hash of it with their argument that inflation would be “transitory”.
Any one of persistent inflation, stagflation or panicked rate cuts in response to an economic downturn could yet bring gold back into the limelight.
Buying a stock solely in the hope of a bid is a mug’s game but there is more to the Shanta story than that. Operational performance should improve at its core asset, New Luika in Tanzania, and the commissioning of a second site in the same country, Singida, should lead to sharp increases in production at a lower “all-in sustaining cost”.
If all goes to plan, shareholders could be in business. If New Luika sees a repeat of 2021’s troubles or Singida is late, or both, the shares could suffer, so the risks are clear even before potential gold price volatility is taken into account.
Shanta Gold key facts
• Market value: £105m
• Turnover (Dec 2022 estimate): $118m
• Pre-tax profits (Dec 2022 est): $8m
• Yield (Dec 2022 est): 2pc
• Most recent year’s dividend: 0.1p
• Net debt (June 2022): $3m
• Return on capital (Dec 2021): 2.9pc
• Cash conversion ratio (Dec 2021): n/a
• p/e ratio (Dec 2022 est): n/a
That said, there is some protection. The first-half results in August revealed net assets of $168m, or £140m at current exchange rates, so shares in the £105m company trade well below book value. Shanta could just be worth its weight in gold.
Questor says: buy
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