Member Info for Daisan

Which is basically what I was saying several months ago! However, whilst India is horrible from a mining perspective, it certainly is a country where some businesses thrive. IT is an obvious example. The jury is out on the gold platform being set up here but the concept at least seems appropriate and well timed given the resistance likely to come from the reduction in notes (these processes are generally considered authoritarian although a cashless society appeals). I actually think that the gold property in Finland has promise and would like to see what comes out of that. In what way do you believe that the market smells a rat Dibs?

Yes, interesting. Thanks for the steer mtagem. This only represents 10% of their potential requirement (6MW) and less than 10% of the rating of the new power plant (7.5MW) so it will be interesting to see how far they take this renewables route.

It has a part of a quality gold resource. However, it is looking a bit expensive to me now. Since I bought at just over 1p I decided to take profits on that. I am sure that it will continue to do well but sometimes you just have to take money off the table!

As of 14th October SHG had forward sold 20k oz up to February 2017 at $1275/oz. I suspect that they may well have extended that in the meantime but even so the effect of a short term fall in gold on SHG's margins is small. If the fall is sustained then obviously this will begin to erode SHG's hedging margins as well. From what I can see from the technical analysts I read, $1180-1200/oz is a bit of a battlefield. If gold breaks below that it could well retest the lows experienced at the start of the year at which point it should bounce very sharply. If it doesn't break below then it has a good chance of bouncing significantly from here. Dollar strength is the issue currently with levels being reached that we haven't seen since April 2003. As I understand, a weekly break above 100.21 for DXY could open the way for a shot up to as much as 120 which would be problematic for commodities in general and gold in particular. It stands at 100.97 currently.

Fenci's post got me wondering whether AIM companies indulge in share consolidations partly to fool investors who only look in occasionally. I think this very unlikely but you don't see many consolidations that actually 'work'. In fact, of the companies I follow, MARL is the only one I can recall that has done well out of it. I think, if you work it out, CGNR has actually done a lot worse than KDR over the last few years.

I hadn't realised how close to the wire KDR were running. If you look at the final results, their current assets were €553,105 (receivables of €211,368 and cash of €341,737) and current liabilities were €485,500 as at 31st May i.e. AFTER the last £250k raise. That means they only had €67k left at the end of May. It also suggests that there was a period of time when they were 'a bit naughty'! I am curious as to how much work they can be doing and how much they are paying themselves if they only had a net €67k left at the end of May. I would also drag timescales forwards for any raise. They have nothing left and we are getting close to the Christmas shutdown in terms of raising anything significant. It has to be said on the flip side that they are trading at a significant discount to NAV. I wonder how subjective that NAV is and whether it could actually translate into cash at some point should they need to realise it.

Investors in AIM miners tend to be focused on quarterly reports with particular attention given to cash generation. For good reason as this tells how close to the wind they are sailing and whether they are going to come back to the market for more. But for me there is a more important event taking place for SHG scheduled for Q1 2017 - the revised mine plan. If you look at the reports and presentations you will see that they are at pains to point out that over 500k oz resource are not included in the base case mine plan and that they are putting a great deal of effort to enhancing the resource/reserve base as can be seen in announcements made about Ilunga and Elizabeth Hill for example. Their continuing exploration is significant and should result in not only a better understanding of the ore bodies but also, significantly, an increase in their reserve base. So why is this so important? SHG wants to maintain a mine life of at least 7 years but currently NL is only scheduled to have a life of less than 5 years at full production (approx. 84k oz per annum). Increasing the mine life materially increases the value of the asset as it projects further years cash flows that can be discounted back to present day values - this is how Net Present Value figures are calculated. So an increase in mine life should increase the value of the asset which should, ideally, add to the attractiveness of SHG as an investment. Judging by the results of the recent drilling and resource upgrades together with the bullish attitude of the leadership, I would suggest that it is very likely that the revised mine plan will indicate a mine life of 7 years plus.

88alun88, A difficult thing to answer simply as they have a number of things ongoing and they are at various stages of completion. If you look at pages 10 and 11 of their latest presentation you will see how many. However, it does indicate on page 5 that they are undertaking a "Fully funded capex programme". They are in the thick of this at the moment with Q3 2016 - Q1 2017 expected to be the highest in the current programme. Whilst there are some one-offs that boost the figure (such as the power plant pre-payment in Q3), I expect capex to be reasonably consistent ($6-10m per quarter) going forwards even though some significant projects will complete. I know that people would like to see debt paid down more rapidly and open the way for dividend but I see SHG focusing on identifying resource and bringing as much as they can into production as soon as they can do so in line with their goal to be a "growing mid-tier producer". For me, to be a "mid-tier" producer they need to be producing upwards of 200k oz (at least) per year consistently. To do that they will need more than one mine and more resources than they currently have. New Luika and Singida are the obvious main mines but there will also be satellite deposits that will boost production. I also think that they will need another mine at some point to consistently achieve 200k+ oz with a decent mine life. But it will be worth it. A mid-tier miner is valuable to the majors and you would expect to pay a premium for it compared to a smaller operator.

I've been having a look over their last few years quarterly reports. The production profile is yet to be what I would call stable. Generally speaking it is comforting to know that quarterly production will be a certain figure +- a little but currently this is not the case for SHG and is unlikely to be until they have moved to and stabilised underground production and can create a significant ore stockpile of varying grades to enable them to mix effectively. They have built a ROM stockpile with the equivalent of around one quarter's ore but this is to cover the movement to underground operations in 2017. However, there are a couple of clear things from the reports. Firstly, like most miners, during the year their guidance tends to change. Secondly, they have a tendency to beat targets that they have in place in the second half of the year. This year their guidance has been consistent since the start at 82-87k oz. They would only need to do 13.2k oz to achieve guidance this year. However, given their tendency to beat the upper target, I expect them to do considerably better than this with my best estimate being 20-21k oz, assuming there is no repeat of the 3.5 days lost to maintenance in Q3 and the grade remains consistent or slightly lower (significantly lower than H1 2016 as flagged by SHG). 20k oz would push production beyond upper guidance towards 89k oz and would represent an excellent result for the year. Indeed, a record year with record low costs. 20k oz production in Q4 should also generate cash of $10m+ for the quarter and bring total cash generation for the year of around $47m (note: there is a question mark over this owing to the disparity in cash generation figure for Q1 between Q1 report and Q2 report)

Now received so another $5.25m in the bank to provide further cover for the ongoing capital investment. Given current production and gold prices achieved, I wonder whether they might not need to draw down the power station funding. Given that they are steadily becoming an ever lower risk, at the very least the financial situation gives them the opportunity to retire more expensive debt options and replace them with cheaper financing. AAZ are managing this very efficiently and I see no reason why SHG should not also benefit. All going rather well for SHG at the moment and even a substantially lower gold price (still a possibility based on technical analysis) should not derail the company or affect its plans.

irishmouse, Shares have a nominal value (distinct from the share price) below which they cannot issue new shares. So if the share price falls to such a level that this is below the nominal value they can no longer raise funds. For an exploration company that would be the end of the road as they cannot utilise debt (having no hard assets or revenue streams) and the equity market is the only place they can turn to for funding. But do not fear! A simple capital reorganisation will result in a considerably lower nominal value and they can issue shares and raise funds again. So from this RNS you can deduce several things: 1. They are probably running out of money. This may not be imminent as a reasonable company plans ahead but running out of money soon is likely 2, They are going to do a placing in the not too distant future. As an explorer this should be expected 3. The fundraising will be lower than the old nominal value 4. As a result of '3' they have clearly taken the view that the share price is not going to recover above the nominal value any time soon. This is actually a prudent view. Those, I believe, are reasonable assumptions. There are others that are possible but not guaranteed. For example participants in any fund raise may sell in the run up to the placing. This is actually illegal but it certainly doesn't stop it from happening. The share price has reacted accordingly. The market believes that there is a discounted placing coming. Hard to argue with that point of view.

Thanks. Better than September as well by the looks of things. Let's hope this continues into the winter months although, inevitably, there will be a reduction as the weather worsens.

zanthrus, Revenue is not a great determiner of value. Earnings from the point of view of PE calculations are defined as net income - dividends. The key thing to look at is the 'net income'. Investopedia has a good definition of this: "Net income (NI) is a company's total earnings (or profit); net income is calculated by taking revenues and subtracting the costs of doing business such as depreciation, interest, taxes and other expenses." So to reach an accurate PE you need to take pretty much everything off. There are many other earnings calculations (e.g. EBIT and EBITDA) but these tend to leave things out that are required for the calculation. I actually prefer to see how much cash the company is generating, particularly for a company like AAZ as this can give an indication of how quickly debt is paid off or, indeed, whether they are likely to require to raise more cash.

Yes. You are mixing revenue and earnings. The comparison to CMCL is useful. You need to consider enterprise value and on this basis the valuation is similar. AAZ has higher production and somewhat better costs and the presence of the debt means that it is likely to outperform as cash is generated.

Yes, I believe it does. Have a look at the quarterly report and you will see that it reports copper sales in the same manner as gold sales i.e. including and excluding Azerbaijan government cut.

"a bit like a baby gold version of CVV:TSX". Well, if they had any gold, you may be right! But what is it to be? Zinc or gold? Actually, they don't have any confirmed resource in either so it makes little odds. Don't get me wrong, I like CON and would love it to do well but I find the way in which these things are manipulated as nothing to be applauded.

Indeed. Very easily. A lot of these companies have become traders play things. There is no doubt that they move quickly should you get buying pressure but the converse is also true of course.

Well, Ireland is certainly a world class zinc/lead area and Connemara certainly have licences in decent areas but I'm not sure that 'CON are active in that area' is strictly correct. Whilst Stonepark looked very promising given its location, they (via the JV with Teck) have not done much with it for a few years now beyond a couple of drill holes with limited success earlier this year. More recently the focus has turned to Donegal in the hopes of finding a Dalradian type deposit but it is relatively early days on this and the initial results didn't immediately suggest that they had hit a multi-million ounce deposit. Not sure why PJ is suddenly focusing on this although he does like to pick highly illiquid miners that he can buy a chunk of and then promote on Twitter. CON certainly fits the bill on that account. I would have more respect for PJ if he completely severed his ties with MTR and eliminate the obvious conflict of interest he has there.

It doesn't hurt but the copper production is essentially just a credit. If they produce target production for gold (70k oz) and copper (2k tonnes) then the value of the gold is 7 times the value of the copper.

I'm not sure that there is much more logic in that stance! We have no idea what is going to happen in the run up to suspension being lifted. Granted it is likely that the share price will open lower in the absence of any positive news but it is possible that there is an offer in the meantime. Is it a strong sell in such a circumstance? So I go back to the point that there is no point in an opinion, whether sell or buy, on a suspended share.