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I'm interested to know what you base your valuation of Keras, post distribution, on Marky.
I am a bit dubious of a company's "paid for" numbers. I don't recall an independent valuation, but I may be wrong. I think a lot of people are jumping in on supposed potential but I am more cautious, hence my question for someone like you with more expertise in Togo. (I haven't followed the Togo side but now will do so.)
I think by the end of the year, the impatient will sell out if there is no news, so I would suspect this isn't the bottom yet.
The big unknown is what Keras will be worth post distribution. If we treat Calidus shares like the market treats a dividend we get a very low valuation.
KRS = CAI + Togo so Togo market valuation is the current value less the value of the Calidus shares. (I.e. price drops by the value of a dividend.)
You buy 1m shares today at £5190 but they are worth the bid price @ £4725 (a loss of £465) but your free CAI shares are worth £4403 (approx) sold, leaving Togo worth £322 per million shares. That is how the *market* sees Togo _today_, virtually worthless, which conflicts with what Keras are saying.
By buying Keras for free CAI shares that you will sell now, you run the risk of Keras share price dropping hugely. So if you buy Keras now, then do so with the intention of seeing it through, i.e. wait a while to see Calidus and Togo grow in value. The MMs will do their best to screw the short termers looking for an instant profit.
Personally, I like both Togo and Calidus, but my expectation (nay, prediction) is punters will get screwed short term, which is why I will be reviewing progress say next Spring. Also watch for lots of sells pre distribution, so long termers delay your buys.
Yes bassguy, I will look at Keras post distribution. I valued Togo at 0 but now the situation has changed and I am greatly encouraged.
As for Calidus, I like it and I like DR, however I think they will have an uphill struggle proving themselves, if the future proves similar to the effect good news has had on the share price (i.e. none). I have an Interactive Brokers account so I can deal directly in ASX IIRC. So I will wait and see how the price goes in the months post separation.
I am glad things are turning out well for you long term guys. By hanging on you might do well. I found the whole ASX shares, holding and selling thing too complex. Now, it looks a rip off as far as dealing charges are concerned.
I've often looked in here and seen the average punter trading in say £1000 or less lots. There are many with sub £250 trades. I hope they realise that their expenses (once the dust has settled and they have sold their Calidus shares) will be significant and will diminish their meagre profit.
I doubt they are daft so I would expect to see a lot of small sales prior to the magic date. The MMs will also be aware, so look for a large price drop if they do.
LTHs will be larger holders but they should still work out their fees. At some value point it may be better to sell before and buy Keras after distribution (unless you intend to keep CAI in an ASX tradeable account).
According to _your_ maths, you get £44 less trading costs for an investment of £1000, in the _short_ term. That is why this share is a gamble not an investment. At one point, I thought the risk-reward ratio was worth it, when Calidus was worth a lot more. But now, even with Calidus looking a lot better than it was then, the risk of it staying in the doldrums is very high.
The other key variable is what Keras will be worth based on Togo alone. I have no faith in getting a licence, let alone a producing, profitable mine. So my projected value of Keras will be its tangible assets such as cash with zero for Togo.
In disclosure, my wife and I owned over 1% of Keras but as Calidus' share price dropped we sold out while Keras was ramped.
I have nothing against Keras or Calidus but they are mired by an upcoming distribution that lacks clarity. Togo rambles on but delivers nothing. Calidus has low grades and will take a while to build a mine. It may get taken over but I suspect the premium will be peanuts.
Do yourself a favour and stay off AIM. With an impending financial crisis leading to higher gold prices, buy a mainstream gold producer that has low production costs and sleep at night. I own Kirkland Lake Gold with a small stake in Wesdome and First Majestic (for a silver play). I recommended Kirkland Lake Gold on here some time ago and doubled my money on it since then.
People cannot or will not get their heads round the indirection of Keras owning an ASX share. Despite any inherent value the last year shows a large fall off in interest in KRS. I don't blame anyone selling. I have money tied up in Keras for a year that, had I put into Kirkland Lake Gold I would have doubled so good luck to anyone not willing to wait, and take a punt elsewhere. As you suggest canaries, the structure of Keras needs to change before it is rerated.
My expectation is that the price will drop back to the doldrums now until the more astute and adventurous buy in, when they see the prospect of free shares in a few months.
I've come to think the share price is not about the inherent value but how the company is perceived. They've done what they can though.
:-)
Who is he? Why should we care? Is his opinion on Keras better than those on here?
Myself, I'm waiting to hear that DR has bought KL shares and is pals with ES and QH ;-)
KL, NVO, PAC, CAI
An interesting commentary on the interrelationship between the above.
http://www.stockhouse.com/companies/bullboard?symbol=v.nvo&postid=28526906
That was the result of the hype. I keep saying I'm neutral on conglomerate gold but a lot of people aren't, some of them very rich, knowledgable or billionaires with access to people and facilities the rest of us don't. Yes, they could be wrong as some seem to want them to be. I will keep an open mind and cover my options by buying Kirkland Lake. (By the way it is a very good time to get in _if_ the price starts to lift. Don't buy until the short term MAs have turned up and are crossed by the price.)
On reflection Calidus are not geared up to mine conglomerate gold so at some point they would probably have sold off the rights. Nonetheless it is done now and I look forward to our increased resources. I just hope Calidus doesn't become a sideshow in Oz in comparison to other Pilbara companies. Even GGP is faring better!
It is because the market, rightly or wrongly, anticipates that conglomerate gold will come good even if it doesn't yet know how. You only need to look at the US/Canada mining boards to see the fever and the high esteem placed on Sprott.
Agreed
Agreed SBK, tangible value though.
I am not advocating that Calidus pursue conglomerate gold. People seem to be reading more in my responses. Let me clarify.
Conglomerate gold is being pursued by a number of companies. In particular it is indirectly being pursued by a company I hold in the highest regard insofar as I hold five times the value I hold in Keras. This is Kirkland Lake Gold who have a holding in Novo. KL are traditional miners, pursuing great success in Australia and Canada. Tony Makuch who runs it, has a great track record.
Yes, Novo have a lot to prove and perhaps have not gone about it as well as they might. Nonetheless, Eric Sprott has a large holding in both KL and Novo. Sprott has had his failures but has a high regard for Quinton Hennaigh of Novo.
Now, DR is not in the same league as these gentlemen, but I _do_ respect his conservative approach in this small part of the mining universe. However given that there is no need for the cash, my consideration is why be so keen to sell now? Why not leave it in our back pocket a bit longer until we see what happens with conglomerate gold? DR will have a good reason but I would like him to spell it out to his shareholders.
Personally I think Sprott has too much influence on KL and I wonder why Makuch bothered buying Novo. I am neutral on conglomerate gold until Novo or someone else proves it worthwhile.
However DR has nicely ensured Calidus still has a piece of the conglomerate gold pie, albeit indirectly through Pacton (where Sprott now has influence). Makuch and Sprott clearly do not influence DR :-)
I am not in a position to judge. DR is. I merely expressed an alternative viewpoint. If Calidus is running out of cash then perhaps this was the best move. If conglomerate gold takes off massively then perhaps this would be a costly move. I have no insight into the future or the accounts. Time will tell.
Calidus' negligible pice move indicates a certain lack of enthusiasm.
Given that Kirkland Lake, Novo De Grey, Artemis, Pacton and several other miners believe the big money is in conglomerate gold, I hope DR has not sold a significant part, perhaps even the best part of the family jewels.
I see the Australians are not impressed.
BJ, you make an interesting and worrying point. From the 2018 interim report it states "the intention of the Directors is to distribute those shares to Keras shareholders at that time, subject to any Calidus shares which maybe realised to provide working capital.".
I had assumed the distribution would be pro rata, and net of any retained for working capital. I think any other mechanism is unlikely. However there is still the question of how much working capital they need.
As to profits being made through Keras shares rising, there will be some sort of escalation in price that will be determined by market forces. If you regard the distribution as a special dividend then have a look at what happens when a company declares a dividend. Its share rises then drops by the value of the dividend when it goes ex-dividend.
So when we get closer to "D" day the price is likely to rise to Keras' non Calidus perceived value plus the market value of the Calidus shares. Being AIM there might even be a momentum factor as the latecomers overpay in ignorance of the true value. Those getting in now are the clever ones, assuming Calidus shares come out of the Doldrums.
So you are partly correct in your thesis. If you sell just before D-Day your profit is due to an anticipation rise in Keras' price. If you sell after D-Day your profit is made up of Keras' residual non Calidus value at the ex-distribution price plus the value of the Calidus shares you receive.
It has made me think that, were the distribution mechanism somehow detrimental to me I would sell my Keras holdings before distribution because that guarantees my profits are kept in tax protected accounts, without the hassle.
I keep a close eye on Keras' value through a simulation model I don't post it now as it is too complex to explain and people prefer their own calculations. Also purely on Calidus' price at the moment, Keras is only slightly undervalued so there seems little point.
We have highly knowledgeable shareholders here trying to help each other. Yet we have no definitive answers. The company has made a few noises in our direction about changing the situation. How much is this putting off potential shareholders I wonder?
Here is what *I* think I know:
I will get some free Calidus shares in proportion to my holding.
Here is what I do not know:
Do these shares go nominally to my HL accounts, albeit being sold on my behalf and the proceeds go into the account that holds the Keras shares?
That is what Mr Leeming needs to tell us. If asked now I would hazard a guess he would simply put us off by saying "we are working on it". How about you consult your shareholders Mr Leeming and ask what they want?