Member Info for dictumdedicto

I keep widening my range. Just over a year ago it was quite narrow, 60p - 65p in share terms. The length of time this has taken has made me more pessimistic, and I widened it to 50p - 65p a couple of months ago. I now think an even wider range is called for, 45p - 65p. If the deal is cash I reckon we will closer to the bottom of that range, but if it's paper we could be in for more. It will depend on who buys, and how the market rates the acquisition. If it likes it, the deal could be closer to the higher end of the range.

It all depends...

No, it's the Bingo trade...

88

There isn't a deal.... until there is one. I'm inclined to believe the general feeling that we are pretty close to an announcement. Although I'm not seeing an uptick in buying, which often precedes an RNS, I sense that some people on these boards may have been given reasons to believe we are on the verge of something. Even Slim looked like a convert last week.

At a guess, March 29th.

I'm starting to think that the deal RNS and Annual Report will come out on the same day. If a deal is signed this today or tomorrow, an RNS could come out this week. I usually work on the basis that market regs expect price affecting news to be released within 72 hours, usually faster. If it's another week before signatures are on the dotted line, I'm guessing the news will be released with the financials.

Or are there any UK tax reasons that could push an RNS into the next fiscal? Nothing obvious springs to mind. Any views out there?

A pretty wide range in expectations, from around 30p on the pessimistic side to around £1 on the optimistic end. I'm still sticking with my own range, which moved from 60p - 65p a year or so ago to 50p - 65p today. Although PoG has moved in the right direction, underpinning an NPV calculation of over $600m at $2000 PoG, the reality is that the price will be set by the quality of negotiation and market conditions. The former may be in our favour (JM's track record) but the latter still mitigates against sellers. On a good day I'm thinking 60p (with a bit more if I'm in a really good mood), but on a bad day it's 50p (with a bit less if it's raining and the wider market is catching a cold). Valuation models will only take you so far.

Back to basics. Our price will depend on whether we are selling the NiC assets, in which case cash is more likely, or whether the offer comes in terms of something for the whole company. If the Chinese want the whole company, I doubt anything other than cash will be accepted (trust issues). If it's a UK/US/Can offer then paper, or paper and cash, could be the order of the day. This then might depend on what the market thinks of an acquisition. The SP could go up or down, depending on views. And then there is the bedding-in aspect. Do you bail out for cash straight away, or wait for an acquisition to bed in? Is there a prospect of dividends?

There are so many variables in this the only thing I've become convinced of, is that whatever I think on any given day I will be wrong about the outcome. Meanwhile, we seem to have a sense that something happening is pretty close, or am I wrong on this as well? Whatever the case, it's only a couple of weeks before the financials are due. It's going to be difficult to avoid providing an update, if nothing has happened in the form of an RNS in the meantime. After all we've had a news blackout for quite a while now.

I'm assuming all-in at around $500m, allowing for a bit of an uplift in expected PoG and some nominal valuation of the non-fully appraised stuff. I did dig into detail last year but decided that there were so many assumptions I thought I might as well stay in the 'back of the envelope' macro world. Ultimately, it's the negotiation that will set the price rather than modelling. In my view it basically comes down to how good JM is, sitting at the other side of the table. His track record looks good so I don't expect a lowball result, but there are limits set by current market conditions.

Had we got a producing mine I reckon we would have got a lot more for those other assets. But we haven't so I don't really think their presence will have more than a marginal effect.

I've still not really seen anything to suggest a change to my early 2023 range expectation of 50p - 65p. Spot gold is $2182, as I write, and is way above the mid $1500s this time last year. My range also emerged from average outcomes over a five year period, with quite a wide range of gold prices as reference points. It would not surprise me to see a revised NPV above $500m at prices closer to $2000 PoG.

And yet....

The market is still the market, and Condor will need to leave a really tasty chunk of money in the pot for the buyer. After all, it will be they who need to do the work pulling the stuff out of the ground. Let's say a $500m project NPV. An 80% discount does look too much, and a 50% far too little. 60% also looks like a stretch, so I'm coming back to the 65% - 75% area. Let's say 70% off the top line, or 30% of $500m, $150m. In GBP about £117m; over 200m shares and we are around 58.5p i.e. within my expected range. Now I could be wildly out. JM could be the best negotiator on the planet and get something better. But do we really think he could get 50%? $250m or £195m; or circa 97.5p? I'm struggling with these levels, but would certainly roll the red carpet out if he gets anywhere close.

60p is not exactly a brilliant return, but it's better than 40p or 50p. I'll be disappointed if the outcome drops below 50p, and pleased if goes significantly above 60p. I just can't seem to get my head very far away from a 60p expectation, with a possible 65p and a (slightly less likely) 50p now that PoG is on a roll.

Can you use this thread to rationalise your own valuations to make it easier to see/debate perspectives.

ddd

20 effin years in FI shares; a third of my effin life. It was supposed to be a short term trade FFS.

At last, something to talk about…

And if US rates cuts do come along $2100 will be just the start of the journey. I don't think it's on the cards for March, but if the FED doesn't do it by June it risks accusations of playing politics as the US election draws near.

Meanwhile, in Condor land, every uptick increases the NPV and makes us all feel that little but more optimistic. In a sense it also creates a bigger problem for JM/MC in that the sales performance outcome will be judged against a recalculated NPV (at $2100+) rather than market cap. Perhaps it will be a wake up call for any bidders in that they need to nail a price quickly, or it may well go up with the PoG.

An increasing PoG may also bring investors back into the sector. Apart from nvidia, tech may be topping off (jury still out). If it does, all that money will need to go somewhere. And we are well overdue for a sector recovery. ...DISCUSS...

In the absence of sale news earlier, I'm expecting an update with the financials at the end of the month.

With the December financials due at the end of the month we'll get a better handle on current NAV. At 20p I reckon we are probably trading at somewhere between 15% and 20% discount to NAV. NAV of course is historical cost based and we are 15 years into this project, with all the associated price inflation aspects. It's highly doubtful CNR could get this far for what we currently have on the balance sheet. In a nutshell we have two pretty meaningless indicators of what the outcome might be; Dec '23 NAV and the market price, the latter of course showing dramatic moves on the whim of tiny volumes.

So, we have a Nicaraguan stand-off. Mellon has dug his heels in, and the Chinese want to get away with a steal. I've tried to rationalise the outcome via average price of assets in, and on, the ground, but the reality is that we are in an auction situation. The Chinese are playing for time, probably thinking that Mellon will eventually buckle. If both bidders are in fact Chinese it's pretty reasonable to assume the dead hand of the state directing bid strategy for both. Pin a bid at a low threshold, and show some faux competition from the other bidder adding a few more points. Maybe; maybe not. It's impossible for me to say. Are we in the midst of a Game Theory situation? Again, there are no facts to work with, so it's impossible to speculate. Is there effectively just one bidder, the Chinese state? In other words, to paraphrase a political nutter, are they both two cheeks of the same ar.e?

I haven't been as wrong in my optimism for about 15 years. In February 2023 I thought there was an outside chance of a deal by the end of March 2023. Never in my wildest pessimism would I have thought that a deal announcement by the end of March 2024 would look like optimism. I can't actually recall any sales process I've watched, or been involved in, taking this long. Even £10bn M&A has been done and dusted within a year.

Now, after 15 years, if I'm thinking that it's no surprise that people with a shorter investment timeline are bailing. It doesn't mean the assets are worth any less, nor will it likely affect the ultimate outcome. But it certainly explains the boredom/frustration of pretty much everyone. Perhaps JM is just a world class negotiator, but for me I really think it's time to close. I long ago accepted that 100p+ was a developer based pipedream, but really, anything less than 50 -60p really would signify failure. A failure to even achieve the sort of average prices achieved by dozens of juniors over a multi-year period. But then again shi. happens.

Usually in the last week of March. It's going to be difficult avoiding giving a meaningful update at that time. While a progress update could be given any time it may be that they are going to use the release of the 2023 accounts as the announcement medium.

I'll stick with the top end of my (now year long range) of 65p, but given the slow process I've starting to believe that bidders have been effective in talking the price down. Instead of 60 -65p, I would not now be surprised to see something as low as 50p. Thoughts of £1+ went out of the window when the decision not to forge ahead with production was announced.

Nicaragua could nationalise anything, although if it did have a go at Condor it would effectively shut down almost all inward investment for years. No rational government would want to take that risk. My guess is that they want to continue to prove to the world that the country continues to be investable. Even the Chinese would be spooked by talk of nationalisation. In their shoes I would apply pressure by continually asking for updates on progress.

Yes. My whole 60 -65p (share price equivalent) estimate was based on in the ground average valuations. That was pretty much a year or so ago. Some things have changed to the positive since then (gold price, some M&A in the sector) and factors less so. M&A in the junior end still feels pretty flat, and market valuations for the sector are still disconnected from the robust gold price. In other words you could argue that 60-65p is low vs. PoG, but the reality is that investors are still not excited by the sector as a whole. I'm thinking Condor's bottom line is £100m (say 50p) with a push for, maybe £125m, although our two punters may have other ideas. The deal will be likely is USD, so maybe my £100m baseline expectation is too optimistic; maybe it will turn out to be $100m (£80m, or 35p - 40p after some costs).

The reality is that valuation estimates are really not that useful at the moment. It's a negotiation rather than a rationale for a first bid; a peg in the ground. There is a possibility that two bidders are actually competing with more compelling offers. At least I hope that's where we are at this stage.

And none of us have any idea whether the whole company will go, or just the Nic assets. Even that aspect might be colouring the negotiation.

It felt close before Christmas, although it now feels like an achievement if the deal can be cut by the end of March. The financials are due in the next few weeks. In the absence of anything major to announce, the BoD could be waiting to provide an update via the 2023 results release.

It's probably more a reflection of how quickly low volumes can move the SP, both ways.

Current SP is still likely a penny or two below book value. In other words our market value reflects zero value-add for 14 years of effort. Indeed, below cost. As ever, market value for juniors, AIM stocks in general, is simply a mark of sentiment and mood than worth. There is a bit of optimism today, and maybe the rumour mill is up and running again. Thus we get some more buying.

Having made that point, there is always the possibility that we are on the brink of some sort of announcement. We all know better than to predict it given what has happened in the past, but the clock will strike at some point.

I noticed two trades for 433,571 each, or 88.88k

Did you know....?

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Well it amused me...

I should have added, notwithstanding the webinar a few weeks ago, I am a bit dubious of two Chinese companies 'competing' for the assets. As we all know, the hand of the Chinese state works most of its industry like glove puppets. I guess we'll see what happens. Maybe a North American outfit will appear out of the woodwork.

Apart from the obvious question of the exit price for the assets, the other key question will be how the assets are paid for. These are obviously not exactly unrelated.

I think your wider range of 45p-65p is where my head is, although I'm oscillating in terms of positive or negative as to where in that range it will fall. Today I'm thinking 50p; on another day, with two competing bidders, I'm back up to 60p.

The question of how the assets are paid for plays into that. If we are negotiating on a better price, but one that includes paper, it will have some sort of effect on how we can get a payoff. A clean cash offer for the Nicaraguan subsidiaries will be easiest for us to handle, just paying off the inter company loans will repatriate tens of millions into the Condor holding company. I'm guessing that part paper in a Chinese entity has no appeal whatsoever, even if (on paper), the offers appears higher than a cash option. I'm dismissing any non-cash offer, or part thereof, unless it was part of a bid from a well respected Canadian or U.S. mid or large cap. In which case it might be taken seriously. A challenge for Condor would be if they received a part cash/part paper offer from such an entity, and had to compare that with a cash offer from the Chinese.

The offer is likely to be in USD and I highly doubt that anything less than $100m will get a hearing. On paper that would be worth about 40p pre -transaction costs and taxes, likely to lop a few more pence off its value. You then have to ask whether, say 10p, on current (rough) balance sheet NBV (of about 24/25p) is a sound payoff for about 14 years of investment - not really. So a buyer is going to have to do a bit better to get hold of a $1bn asset in a mining positive jurisdiction. Hence I come back to circa 50p. Excluding taxes\transaction costs I reckon that is around the $125m -$130m point. I think we'll need about $150m for around 60p; a stretch perhaps, but not impossible if we have two serious contenders for the prize.

I haven't posted for a while, but as we seem to be getting closer to the finishing line I'm sharing current thoughts. January did look like a stretch given Christmas, but February would seems manageable. To be honest a deal this quarter would warrant a celebration given how long it's taken.

Seems like the time to buy is now if you are not already in, given the SPs recent faltering.

I know this is a distortion, but a price to book of 2.5 is not that much to expect given that even in a depressed 2023 mining/metals industry it still averages 2.8:

https://csimarket.com/Industry/industry_valuation_ttm.php?pb&ind=108

Back to Condor. Will we get another hint of how close we are to a deal in the new year, or will the next update be a deal announcement?

Bear in mind that against December 2022 financials we have a price to book of about 1. Our market cap today is roughly equal to the balance sheet net assets. For me all we have experienced since 15p is a trek back to zero. The Santa rally seemed to fizzle before it started so I doubt next week's low volumes will do much for us, albeit you never know if there are one or two genuine buyers in the market. I've a feeling we might tread water for the next few weeks around these levels, although I would love to be proven wrong. My guess at the moment for year end is 25.5p mid against a 25/26 spread.

How about a bit of pin the tail on the donkey?

Price expectations for CoB Friday 29th anyone......