The latest Investing Matters Podcast with Jean Roche, Co-Manager of Schroder UK Mid Cap Investment Trust has just been released. Listen here.
I thought so too Panama, It is a fantastic article and I was involved in a twitter thread with Charles where a renowned (albeit rather less vocal character nowadays) known to frequent Town halls knows as 'Rhino' was trolling him about the 5% value :-)
I pointed them to the GGPChat post I created after the 5% outcome and Charles has actually referenced the JVA terms restricting the so called FMV in his article, literally the first writer who has that I recall vs assuming it was true FMV. Shame the likes of John 'Cornball' Cornford can't do the same level of research and Charles really has done a very good job of looking at the various scenarios that might play out in the Paterson now that Newmont have cleared the hurdles to proceed with closing the acquisition.
Newmont moved quickly to meet their stated goals after the GoldCorp deal and had met their synergy and divestment targets within 9 months of the 18 month timeline they had given as I covered last week in a post. They made the divestments in months 6 to 9 from memory. They obviously have a draft plan to be able to state a circa $2bn target BUT I would assume will be gaining the insight of key NCM staff and full access to data etc. as owners before confirming their plans and need to integrate the assets into their own corporate structure too from all aspects such as H&S to financially.
However the sunset clause for the DFS for next April might create some incentive to come to a quicker decision on their plans for Hav/Telfer too, but perhaps a counter argument that if selling both assets perhaps the cost of taking into production since so much of the work already completed might help raise the price tag as a seller.
There are a lot of scenarios and a lack of clarity which may be in place for another 5-6 months if they plan to update and act on Hav/Telfer for their Feb '24 timeline, might be before of course but it is also important to remember that nothing is fixed such as the plan for an MRE by year-end. new events may come to fruition at any time causing GGP's team to be agile and amend any plans. probably best to be open minded and agile too as investors for any who choose to weather this period :-)
Some great industry insights in latest Ernest & Young mining and metals business risks and opportunities survey ranking the 10 biggest risks and opportunities.
Article summarising key findings:
https://www.ey.com/en_gl/mining-metals/risks-opportunities
Link to full report here:
https://assets.ey.com/content/dam/ey-sites/ey-com/en_gl/topics/mining-metals/ey-top-10-business-risks-and-opportunities-for-mining-and-metals-in-2024-v3.pdf?download
Some great industry insights in latest Ernest & Young mining and metals business risks and opportunities survey ranking the 10 biggest risks and opportunities. The largest being ESG which as a modern mine we should be well positioned for and secondly securing capital, something we also seem very capable of.
Article summarising key findings:
https://www.ey.com/en_gl/mining-metals/risks-opportunities
Link to full report here:
https://assets.ey.com/content/dam/ey-sites/ey-com/en_gl/topics/mining-metals/ey-top-10-business-risks-and-opportunities-for-mining-and-metals-in-2024-v3.pdf?download
Toffers - watch this to understand why JORC compliance is something that GGP having Oz assets and presence is unlikely to be avoiding in any way , no tactical advantage to your theory whatsoever. there are codes/standards around the world that serve the same purpose.
This presentation will also aid the understanding of why there is a variation of conclusions that the same dataset can present and still be compliant.
https://www.youtube.com/watch?v=rgpv-DaiGfg
@CP - Shaun mentioned one being in place for April in JVA in an interview but said 2023 so perhaps meant 2024?
He didn't go into granular details but applying a bit of logic you can assume a sunset clause means that if a DFS hasn't been issued by some date in or by April then it becomes 'due' as per the finer terms in the JVA. Remember it was the same for the 5% Option Exercise, we got details on the framework - not particulars - so perhaps under confidentiality etc.
Leauge-Addict kindly created a transcript as I was in India dealing with my father passing while he was on hols, link below:
https://ggpchat.co.uk/viewtopic.php?t=711
Interview here and listen for a couple of minutes on form the timed link - but the clause is mentioned specifically at 28mins 33secs:
https://youtu.be/B4G95KvbyjM?t=1579
@YNWA91 I agree and that is the issue right now... for both shareholders or prospective investors there isn't anything much to combat the ambiguity and lack of clarity for the Havieron project which is the real driver for attracting investment unless we make another discovery or acquisition. No substantive evidence of any particular scenario so what is a new investor investing into, a JV, buyout by NEM or GGP structuring a deal on what terms for Hav/Telfer?
TBF it isn't GGP's fault that Newmont swooped for Newcrest and that applying common sense they of course would want to review everything before confirming any plans they have for divesting or developing pipeline projects as part of their circa $2bn USD target for portfolio optimisations. Obviously they already have a draft plan looking at their history as I did last week on post GoldCorp transaction activity where they'd hit synergies and optimisation targets within 9 months.
Being the majority partner they have the control on DFS release although appears to be a sunset clause for April (which could be mutually moved I presume) or were the decline to hit the ore body before April, it would be required to continue the development of the stopes etc. from Shaun's comments - so there is a driver for a decision to be made for them with some urgency too IMO.
When it comes to TZM, IMO they will just fund Moz governments settlement in a claim and had probably built that unofficially into their business case for the project. They and the Moz Govt. were well aware of what they were doing and potential implications in a BIT case against Moz Govt.
I sense a settlement will be reached eventually which is why AAG were happy to take the case onboard on the agreed terms after Due Diligence and that TZM will be the ones truly funding the payment behind the scenes.
Toffers - it's an Oz asset, releasing a non JORC compliant MRE doesn't serve any purpose IMO and greatly reduces any potency and weighting the market would give an MRE - you do realise why these kind of standards are required globally and exist?
There was a reason the independent MRE created for the Option Exercise went through the process to make it compliant to the code to aid a positive outcome. Shaun's made it very clear that he is asking NEM to be involved in a peer review and not given any indication it wouldn't be JORC compliant.
What if NEM state they would wish for Shaun to not release an independent MRE and intend to continue the JV but wish to release one in 2024 around a DFS release or around their own annual reporting of resources, which falls around February each year. Can't dismiss a scenario where Shaun may have to play a good partner if a JV is continuing, would really only mean a small further delay and IMO it is clarity on the future for GGP around Hav and a DFS/DTM that are key to a sustained rerate.
The PPSS study really had some great insights so hope folk have taken the time to read the report or the summary I created, hoepfully GGP proves to be north of the general average by some extent due to the quality of the project.
Hi 5x5 - you definitely make a good point about thorough due diligence not being available to PI's bar public data released in results and studies. Some F2F is possible in some projects as the Town Halls in GGP in London every few months. I went to a couple to date and were great in getting more detail on headline information from the CEO directly and clearing up some areas for me, so if possible always a good idea to attend these events for those stocks where you have a good management team in charge.
My playbook as such that I am forming for this sector is that I do think discovery plays are worthwhile for those 10 baggers potential if you invest post discovery in the stronger projects where early indicative signs are good as drilling commences and against other factors such as jurisdiction vs geopolitical risks, financing environment, regional infrastructure which feeds into funding requirements and the management in the company and JV potential or existing partners also need to be researched - as it correlates to still cheap but relatively low risk entries to picking 20 explorers initially with no indication of a discovery.
Also to avoid the Orphan Periods for non producing juniors having experienced GGP and UFO for instance so invest back in during the PPSS seems ideal if you still favour the projects. And of course if they make another discovery you can always jump back in but ideally, take your money out after maiden MRE seems a good idea for most.
As for PPSS - I've been hoping to gain insight on production rerates so was very happy to come across this study , it seems that 90% plus of mines commenced are completed so I think at the stage a project gets to this level you've got a lot of data on the project from studies so a well researched investor could make some good decisions but for lesser gains probably for most projects - balanced against less risk of course. I think you have to also factor in the macro outlooks too and the summary shows it's still possible to lose money so apply common sense and do the homework to build your knowledge and make more informed decisiosn.
But ultimately- you can't escape risk in this sector to make potential high gains so if you're constantly struggling to do so, you may need to look more so at alternative and passive methods of investing in the sector vs individual plays.
Hi SMILLER, that was just a average 100% gain but Lobo as unable to find any correlation linking the cases for the top 5 winners who achieved nearer 750% gains in average in the 124 cases studied. So this PPSS covers the period from Construction Decision to First Pour and 9 out of 10 mines that go into construction are completed vs the high odds on discovery plays.
Here are the basic findings for all 124 cases:
- The whole exercise is aimed at measuring the typical gains for speculation on the transition from exploration to production.
- 91.9% succeed at building their mines (making it from CD to FP).
- 95.2% succeed if we count mines built after a takeover.
- 568.8 days is the average time from CD to FP.
- 97.0% is the average gain from CD to FP.
- 111.0% is the average gain from CD to CP.
- 745.5% is the average gain from CD to FP for the top five cases.
- 20.2% is the average gain during bear markets.
- 132.4% is the average gain during bull markets.
Summary:
- Not all PPSS investments are successful as many have huge issues so an average increase doesn’t mean success is universal
- One thing learned in 2022 is that PPSS plays can be highly vulnerable to cost blowouts and many that the report tracks were making headlines due to major cost increases
- PPSS plays are relatively low risk speculations — but only relatively. They are NOT risk-free.
- Top 5 winners average 745.7% gains and top 5 losers average 70.4% losses so due diligence is still critical
- Over 75% of all PPSS cases yielded some sort of positive gains, but that doesn’t mean that all of these were substantial
gains.
- Of PPSS companies that built their mines, 21.9% failed to yield any positive gain at all
- Some 32.5% yielded negligible or minor gains (less than 20% over almost two years)
- And a good 46.5% yielded only modest gains (less than 40% over almost two years)
- While lower risk than discovery plays - Due Diligence is still paramount.
Try this mate:
https://www.youtube.com/watch?v=b8Oxt25VyWY&t=1465s
hi all, been looking through an annual report from lobo tiggre after watching an interview about his discussing the ppss. obviously of interest for us here as han**** project is almost in this phase and we would hope for a rerate.
for anyone who is interested i've pulled together a summary of the ppss report (link to download report is in the thread in on the ggpchat forum in the 1st post on there), i focused on the gold and silver miner stats for a section of the summary but the complete report does cover industrial minerals as well and the consolidated findings are covered in most of my summary.
https://www.ggpchat.co.uk/viewtopic.php?p=4786#p4786
interview:
https://www.youtube.com/watch?v=b8oxt25vywy&t=1465s
For anyone who is interested I've pulled together a summary of the PPSS report:
https://www.ggpchat.co.uk/viewtopic.php?p=4786#p4786
Highlights from Sunday Roast Podcast - 15 OCT 2023
https://www.ggpchat.co.uk/viewtopic.php?t=811
Link to PPSS Report:
https://independentspeculator.com/img/uploads/media/files/PDF/PPSS-2023.pdf
HOST
Okay I think we've gotten through quite a bit today it was always very interesting are there any final thoughts that you would leave investors with?
LOBO
Well we also mentioned the success in progress that's not a full-blown report but if you go to the website and search for Success you'll see successful progress and that's just another strategy like. I’d it's actually for exploration it's my preferred speculative strategy because before Discovery the odds are so hard, I mean even if you have a multiple successful mine finder starting a new Junior exploration company it can take decades before they find the next one if they ever do right so it's just it's not that I hate exploration but I understand how very high risk it is and if you miss
the discoverable a lot of people think well that's it I missed it.
But it's not true, between that Discovery Hole and producing a 43 101 report you know a deposit that matters, never mind the pre-productive sweets point of life. Actually so like the Lassonde Curve, you have this big sweep up in Discovery, that's where the 10 Baggers are then you have the orphan (Orphan Period), the boring engineering phase and then you have the pre-production sweet spot right. Well that first Spike the discovery… it’s not based on one single drill hole, it's actually a process that this is as far as I know I'm the first one to look at this too you know after the first discovery hole and the first 43 101 report or that you know awareness that this is a discovery of significance, there's a there's a substantial game and I don't have numbers on this like PPSS.
I can't give you a percentage or something like that my gut feeling is that it's on the order of a double or a triple after the discovery but you risk at that point if somebody is drilling like they have a model it's a vein it's a Porphyry, it's a whatever and they're they're drilling that and they're consistently hitting each one of those holes each fence that they drill and a fan that they drill from those fences right adds value in the ground, it makes it bigger and you can see it happen and and the stocks are usually rewarded for that so it's um maybe not as sexy as 10 bagger Discovery
Holes but the risk is so much less that I think that it actually makes for more consistent money making than swinging for the Bleacher Zone. I mean you swing for the bleachers every time and you're going to have a lot more Strike outs.
***END
HOST
And they are they're very interesting numbers, I've seen obviously not the new report but the previous one it's very interesting and somebody was reminding me today about this concept and was saying that this is the time when companies tend to get ignored because it's that time when not I mean obviously a lot is happening, but it's a little bit more quiet and so yeah I guess that that fits into…
LOBO
Well I guess one other tidbit we can put in advance is that the pre-production sweet spot is not linear, it's not like the price just goes up from the construction decisions your first pour or first plate or whatever the first production is, PPS works for all of them uh it curves of course and the biggest gains are actually in sort of the last trimester of pregnancy if you will when you're gonna give birth to this beautiful baby or whatever it is um and… so if you if you miss the construction decision or if market conditions are such that you're not in the Market at that time unless you're in that final ramp up…
You know because it takes a long time you gotta clear the Earth you got to do all this uh civil engineering and stuff and when you're blasting holes underground it's not visible but once you're getting into that Final Phase and suddenly the buildings are going up, you know the framing is there the cladding is there and the trucks are there you start seeing all this stuff it becomes much
more visible and and you're realising oh my gosh you know they're going to start cash flow stuff and you can usually on average statistically we see that in the ramp up in the share prices. So, in my view that makes any Market lulls that you have an opportunity to go back and pick up PPPS plays that you might have missed before.
***continued
That was interesting, thanks MH01, I'm definitely one who agrees with Tobbo and Middlekoop that post discovery hole is a great entry for these plays but also interesting to see furtehr confirmation of the pre production potential. Middlekoop mentioned 100-300% rerate in his view in an interview but also favours the post discovery hole entires for risk/reward balance.
Lobo's updated PPSS data 24m, 25 secs
https://www.youtube.com/watch?v=b8Oxt25VyWY&t=1465s
LOBO
Pre-production Sweet Spot is available no, pre-production sweet spot (formerly known in my past life as the 'Golden
Runway' is basically the time between when a Explorer becomes a producer, and this doesn't count when somebody already has multiple mine builds a new one. It's not any mine build it's that change from literally pouring money into holes in the ground when you're drilling to getting money out of a big hole in the ground when you're Mining.
And if you think of it that way of course there must be a revaluation and my claim to fame in the industry is that as far as I know I'm the first one to actually measure that and it turned out that the gains in that period are much larger than people had appreciated. On the average of about a double, and you know we just did a new round of research with several new examples in the database and the numbers changed a little bit but roughly the same. It's a very robust finding and given how few examples of this there are every year you know just a handful um I don't know that we got them all but the the sampling the the database is quite complete.I'm not I'm not like sampling one percent and hoping it's representative of the world, I mean I I think we've got most of these in there so the numbers are real.
***continued