Member Info for Daisan

Korg, I suspect demand for gold in the short to medium term to be more based on investment. That makes it rather 'hot' demand with the volatility that goes with it. Short term I expect factors that may well hold gold appreciation back.

Well, they seem to be finding it more and more difficult to buy the stock at these prices. I believe that they have a choice now. Either they stop for another pause in buying in the hope that the share price drifts and that gold assists them in this (it is trying to). Or they push on up to their limit at the risk of spiking the share price. The former is just likely to delay an inevitable spike given the lack of stock and they don't have the time for significant delays. Of course, the much more interesting question is what happens when they get to their target or decide that getting there will increase the share price too high? The more I think about this the more I believe that they will go for a complete takeover. Whether they consider this an investment but with no intention to mine or with an intention to mine makes little difference. It seems that Labro consider gold the place to be, at least in the medium term, so in both scenarios it would make sense to munch up as much of the asset as possible and if they think that they could get the whole lot for 15-20p that would still represent a very low price per ounce in the ground considering the asset. I believe that a takeout price of 15-20p would be successful at this stage but if gold makes a significant rally (I think that there is every chance that it will do so in 2017 even if we experience some weakness in the short term) then it will become harder and harder to persuade shareholders that this represents fair value. $1500 gold would potentially double a takeover price. As such, it would make sense for them to go as far as they reasonably can without spiking the price before seeking to takeover the company.

OLI12, I tend to agree. But once the game is afoot let's see where it goes. Given that they have paid 10p or less for a lot of shares recently, if they pay up to 20p they probably will still only have paid 15-16p on average for the lot which is a low price for a multi-million ounce deposit. I suspect that they have just about soaked up the 'I've had enough, 10p is good enough' shares available. The next lot are going to be far more difficult.

It must have been the one share that triggered the rise this afternoon! Interesting that Labro couldn't get many at all in their latest reporting which suggests that finally the supply is drying up at this level so if they wish to continue building their stake it should start to push the bid price up. Personally I feel this should be an optionality play. Cut all costs, sit on the asset and wait. If gold remains where it is then the wait will be long indeed but I am anticipating higher gold prices in the not too distant future and there will come a time when this deposit will attract interest.

You need to use Enterprise Value rather than market capitalisation zanthrus. I suspect that the difference will not be so great on that basis. Whilst I think that AAZ has more upside than CEY, the latter will inevitably trade at a premium owing to its position as a mid-tier producer. As such, it will be considered safer but will also be a more likely takeover target by the majors.

Useful information. Shanta is excellent value and moving to higher grade underground mining (with a risk caveat on the process of course). One point - Kolar have never mined any gold and are way off doing so, so I am not sure where that AISC has come from.

It would appear that they do not want to spike the share price so are taking it pretty easily, relying on the impatience of investors to allow them to gradually collect shares. I think that they are right to do so and I suspect that they have read shareholders motivations correctly. I do find it hard to understand that shareholders are willing to sell out cheaply in this situation but there you go. You have to think that, given the current situation, 2017 is the year that this will all come to a head.

Actually, having read the presentation now available on the Shanta website, this goes into more detail about the cash outflow. The shortfall in Q4 ($0.1m outflow) compared with Q3 ($11.1m generation) of $11.2m is largely due to the difference in sales (15,285oz v 23,426) (rather than production) but also contains a prepayment of $2m to suppliers and a $3m VAT repayment that can be reclaimed. It looks like the pre-payments to suppliers are due to the historic financial position of the company. As its credit rating improves with the reducing debt profile, they should be able to move to better terms. I also note from the presentation that they have indeed (almost) got access to a line of credit should they need it. It would appear that the letter of credit that they have retired was to be rather expensive, hence the reason that it has been retired. There is no doubt that the next six months as they move to underground operations is to be the most challenging over the next few years but they have put in place a number of things to mitigate the risk, not least the $15m cash balance, the 90k tonnes of good grade ore stockpiled (containing 13k oz - a substantial part of a quarter's production and worth $17m at the hedge price) and the access to an overdraft facility should it be required. Given that they have been confident enough to retire debt and pay for the new power plant through cash flow, they obviously feel that they have enough in place to mitigate the risks.

Dibs, I agree that the increase in working capital should be more fully explained than "supplier prepayments and VAT on all capital and operating expenditure", the key being whether these are largely one off costs or indicative of an ongoing commitment (in which case they should be reflected in the production costs). Unfortunately I have not managed to go on the analyst briefing this morning but I will see whether I can get an indication as to what these costs are and whether they are going to be repeated. As they have paid down debt quite aggressively (implying confidence in future cash flow) in the last quarter, I suspect that they are one off but this should not be assumed. Personally I suspect that the fall today is due to the production numbers. I believe that AIM investors tend to look at the headlines rather than the details.

I wonder how many will read the RNS and just see the headline production numbers? These could be construed as disappointing if you only pay cursory attention to the company even though they beat their full year target. They are also making sure that people are aware that this will continue into 1H 2017 so numbers will be low then as well. But AIM investors are fickle beasts with short term investment horizons. I suspect that a lot will miss the parts of this that suggest confidence. Paying down such a significant amount of debt before moving to underground operations is one such expression even though they have $15m in the bank. Personally I would have preferred them to keep the cash but I suspect that they are confident of short term facilities should they require them. I am impressed that they seem to have hedged at the last peak in gold prices! Should give them a nice basis to work from. The next 6 months should be interesting and should lift production to a 100k+ rate in H2. Depending on the gold price, this may mean serious appreciation in the share price at that point if plans progress smoothly but there may be challenges as a result of the lowered production numbers, if there are disruptions to the move underground prof the price of gold comes under serious pressure (I would expect any such pressure to prove temporary).

Was that an exercise in how many mistakes you can make in a post?! I think you mean $1215 and $1250. And no, it wasn't a good update but at least the debt position is falling and the gold price is supportive. I suspect this would have been rocked should the gold price be weakening but it looks like gold is saving the day currently. Long may it continue!

Visitor, All true and definitely positive. I was just focusing on those things that I feel can move the share price currently. I don't think that the copper/silver production and lower costs capture the markets imagination at the moment although that would change if their plans for significantly higher copper production continue to develop. One further thing that would help is an exploration update. If the new ore bodies prove significant in the drilling programme then this could have a material affect.

Rather disappointing as predicted. Not sure what the figures were for December but they seem to have continued November's trend and figures for the full year have come in below the target which itself was already revised down. Unfortunately the reason appears to be lower grade ore which concerns me somewhat. If the plant wasn't performing then you can fix it relatively easily. Ore grade not so easily. Two positives currently. Despite the poor production numbers they managed to continue to pay down debt and the price of gold looks to be remaining supportive. The flip side is that we are now into the time of year where production traditionally struggles with Q1 producing the weakest numbers. The price of gold will be key to determining the direction of the share price as usual but the production numbers will determine by how much it moves.

Not sure why this has taken a tumble on low volume. Possibly a sell in the background would explain it but the price of gold seems reasonably firm. I suppose the key phrase is 'low volume'. There doesn't seem to be much selling to support the fall currently so will probably recover just as inexplicably. We await the monthly/quarterly/yearly production figures which should come out soon. I am expecting these to be slightly disappointing.

I agree Dibs but just wanted to present a balanced view. As you know I like to look at the pros and cons to get them straight in my mind if nothing else. Debt is well under control here currently and expected investment should, as you say, come from cash flow unless an unexpected opportunity presents itself.

There are a few factors that need to be considered. 1. Enterprise value is a better indication of the value attributed to the company rather than market capitalisation, so you have to add in the debt which, whilst well under control and reducing, is still relatively high compared to the market capitalisation. 2. The sentiment towards gold shares has taken a bit of a knock in the last few months as the gold price has weakened and Shanta is impacted by this regardless of the fact that it has a significant hedge (the unhedged part is still going to be impacted). 3. Whilst Shanta is making strides towards increasing the life of the New Luika gold mine (and I am expecting news on this during Q1), it is still currently a little on the low side so should be factored in That being said, the fact that the debt situation is being rapidly addressed, sentiment may well be shifting back in favour of gold shares and mine life extension is almost a given as suggested by the most recent presentations all suggest that this has significant scope to increase. At the moment it is difficult to see what is going to derail Shanta's progress.

Indeed. I suspect that the production numbers will not be quite as strong as we would hope given the November figures. Let's hope that there is a bit of a bounce in December's figures. The financials should still be positive although obviously these are impacted by production numbers. Unfortunately we are coming to the weak part of AAZ's year as winter limits production in Q1.

Well, somebody is buying. Gold isn't setting the world alight at the moment so presumably they liked the name change!

Interesting name and quite canny of the board.

When most other goldies are getting a bit of a relief bounce on the back of gold stabilising somewhat (too early to say whether it is reversing although it is a bit oversold in the short term and the dollar overbought), AAZ has dropped sharply again with sells going through in the 19s. I suppose it is a case of what goes up the fastest comes down the fastest and there are a lot of people here protecting significant gains but I suspect that the disparity will not last. Either the others will fall to match or AAZ will rise. The current market cap. seems very undemanding but until gold shows signs of bottoming it will remain under pressure.