Member Info for ElectricLion

Congrats Seingred. Was going to mention it yesterday, but figured you'd pop in to let us know at some point! ;-) Don't think people like having their noses rubbed in it though. Just sayin'.

There'll be action here one day, I hope. You gotta be in it to win it, etc etc.

590 AUD is only 421 USD, so very low cost, but even so very encouraging, considering the jurisdiction is perhaps not the best.

Thanks for the comparisons guys, it does give me bit more confidence that my spreadsheet musings aren't just mathematical masturbation!

Where are you getting Condor's AISC from Simms? I've seen $690 and (presumably rounded up) $700, but not $797 before?

I would think a lot of the staff are contractors, so are probably only brought on when there is actually something to do. The fact of the matter is, we're trying not to spend any more money than absolutely necessary, so as to minimise dilution. Whether you agree with that decision or not, there's a limit to what can be done without splashing the cash.

We know we have lawyers sorting out the land deals. There are technical reports (admittedly from last year) on the website, which shows how much geology can actually be done even without drilling. What MC and the BoD get up to will mostly only ever be seen in hindsight. The results of their efforts can be seen in RNSs, but when those RNSs do eventually arrive - 100% land ownership, toll deal with Calibre, finance arranged, construction start, possibility even a takeover - well, that's what they've been working on. We just don't see it until it's announced, which is frustrating of course, but that's how it goes.

I think if GGP can hit a billion quid, then anything is possible TBH. The market is not always predictable. But yeah full production, while a bit further off, is the point at which these kind of numbers are most likely to be achieved IMO. Of course there's plenty of time for some highs and lows between now and then.

OK, I've been doing some Googling, and refined my estimate somewhat. I feel I must apologise somewhat as my earlier estimates were a tad optimistic, due to not accounting for income tax. The TL;DR version is that my £4 SP estimate becomes £3. A significant drop, for which I apologise, though still a very worthwhile investment! :-)

For those who are interested in the details, please read on.

This document from none other than SRK has been critical to improving my understanding: https://www.srk.com/en/publications/cost-inputs-in-a-mining-valuation

This document highlights two key points: that royalties are already included in AISC, but that incomes taxes are not. Somewhat less suprisingly but worth mentioning for completeness is that AISC does not cover any costs related to financing or working capital.

Having come to the realisation that income taxes needed to be accounted for, I wondered, with a somewhat sinking feeling if income taxes could be levied both in Nicaragua and also in the UK. This is rather outside my comfort zone, but this doucment suggests that will not be the case: https://www.saffery.com/~/media/Files/S/Saffery-Champness-V2/documents/publications/2016/Tax-factsheet-taxation-of-foreign-branches-of-UK-companies.pdf. Quoting: "Alternatively, under rules first introduced in 2011, companies can elect for profits of foreign branches to be exempt from UK tax."

According to Condor's presentations, the applicable Nicaragua tax rate is 30%.

So my revised calculations are as follows:

Gold at 1870 $/oz and AISC at 700 $/oz at 120k oz production gives $140m gross profit, which becomes $98m after tax. If total number of shares are 180m (say), then EPS is $0.55 and a guesstimated P/E ratio of 7 gives a $3.82 SP, or about £3.

On the upside, I think a P/E ratio of 7 may be low-balling it, and then of course there's upside from higher gold price and increased production. Therefore I still think £4 a share is possible at some point, despite my error in omitting tax from my original calculations.

Disclaimer: I'm not a mining guy, nor a tax guy, just some guy doing his best, so DYOR and don't take my word for it!

Right, so limited mine life, plus hefty royalties will go some way to explaining the low valuation. I guess if they have exploration success to extend the mine life, they may rerate.

No such issues with Condor. Something like 13 years already in the bag and plenty of land left to explore.

So I guess the question is, what exactly does AISC actually cover. I always assumed, it was, well, just about everything, but on closer inspection, it may indeed not cover some taxes. Corporation tax rate is 19% in the UK, so I guess you can take that off my profit numbers. I'm at the limit of my mining and tax knowledge here, so would love anyone else to comment on any of my numbers.

On the bright side, if anything my 7 P/E ratio estimate could be on the low side, and of course there's a path to 170k oz, and gold price could be higher. Still not sure how AAZ can only be making £20m after tax though.

Just reading the data for AAZ on LSE (yes I know it may be out-of-date and/or inaccurate), but, it says AAZ only made £30m in 2019. And that's before tax. Less than 20m after tax. So, one way or another, that's probably where the discrepancy lies. Those numbers are probably trailing twelve months, so if AAZ have ramped up production a lot recently, it might not be showing up in these numbers, or it's valuation just yet. I'm calculating $140m profit for CNR at 120k oz production. Could that be too high I wonder?

A quick Google throws this up: https://seekingalpha.com/article/425081-10-gold-producers-with-undervalued-p-e-ratios

A few years old now, but don't see why it wouldn't still be relevent. P/E ratios mentioned are: 22.84, 12.58, 22.33, 21.55, 13.88, 11.61, 10.76, 10.81, 7.04, 10.23.

Now we can argue until the cows come home as to what an appropriate multiple might be for Condor. It's possible that there may be some factor, tax probably, that I'm not taking account of. I'm no accountant after all. But your AAZ example at 80k oz at low AISC doesn't sound right either, unless of course it's just stonking good value, which is possible of course.

If AAZ is all you say it is, then frankly it implies that gold mining juniors are simply not being valued the same as most other companies on the stock market. Which is possible, but would be strange. Price-to-earnings ratio's are a standard metric in the rest of the stock market, and 7 is hardly considered to be a challenging multiple in most other scenarios.

Production oz's is less important than profit as far as I'm concerned, but you say AAZ has low AISC as well? How much money are they making then? Something doesn't seem to add up somehow. Do they have a short mine life or something? I could see the market marking down a company if they were just about to run out of gold...

LMAO!

Hard to say Simms, but I tend to think that we ought to be valued on a P/E ratio basis, once production is established (might take a couple of quarters to get up to speed and the market to start believing it). So you attempt to work out what that would be, and that's the valuation gap to be closed between here and there.

There's quite a few variables to work out that P/E-based valuation, but the biggest one under our control is the size of the plant, and the associated dilution that'll go along with the financing. Until we know whether we're starting at 50k oz, or 120k oz, and given that toll mining may, or may not, add another 40k oz or so, with the profit split in some fashion... it's very hard to put any concrete numbers on it.

Another important variable is what P/E ratio might be appropriate. There's quite a range to choose from, but Seingred mentioned one recently which had a P/E ratio of 7 (and was considered to be good value at that price).

My personal spreadsheet numbers are something like this: 120k oz production (timeframe uncertain), $1870/oz gold (today's price, may be higher, unlikely to be much lower over the long run IMO, BWTFDIK), gives $140m profit (after AISC, but before debt repayments or other expenditure). A P/E ratio of 7 gives just shy of billion dollar valuation (which seems fantastical now, but unless there's a flaw in my maths, conservative if anything). 180m shares issued at that point gives just over £4 a share.

So that's the gap to be closed between now and the market assigning a fair-to-under-valued P/E ratio to a 120k oz operation. Exactly how and when that gap closes, and how many more false dawns we'll have to endure, I really can't say.

mb, did you say you sold the 22K shares you bought yesterday? Is that right? What new information did you have when you sold that you didn't have when you bought?

I said a few weeks ago that I was suprised the gold pullback then wasn't longer and/or deeper. A good pullback is healthy in a long bull market. And yes may throw up some bargains as a result. A buying opportunity though IMHO, rather than any reason to question the overall gold (and Condor) investment case. I follow this guy on twitter for most of my gold technical analysis insights FWIW - https://twitter.com/Northst18363337

No, don't think so. Sounds like that date relates to another issue.

Sorry, link appears to be broken. This site has similar info: https://www.pinsentmasons.com/out-law/guides/the-model-code-on-share-dealing

Agreed AF. The rules around BoD trades are often misunderstood. Directors cannot buy if they are already in possesion of price sensitive information. They also cannot buy in a closed period prior to interim or year-end financial results.

Since JM has bought, we can assume he isn't breaking these rules, but all that means is that he isn't aware of any news that the market is not aware of. eg. That the land purchases have already been completed or that Calibre have agreed to a toll mining deal. It does not mean that there will be no new news for x amount of time, merely that JM didn't know of any when he bought.

More here: https://shareinvestors.co.uk/2017/04/21/understanding-the-rules-and-intent-of-director-share-dealings/

If one is inclined to believe book5 on ADVFN, then it sounds like we have entered into compulsary purchase proceedings for the remainder of the land. Assuming this is true, then this represents the beginning of the end for land purchases. No idea how long the proceedings will take of course, but it shows that we're entering the final chapter of this particular piece of the puzzle.

cf, Liquidity is likely more of an issue than his personal finances. Nothing to suggest he wouldn't like a few more million, but buying them on the open market is probably impossible without the price going nuts. That's why guys like him like placings and warrants. Plus, buying a small amount is better than selling a small amount in my book!

sam, would I be able to persuade you to cut back on the posting a little? You seem optimistic and friendly, so I mean this in the nicest possible way, but I don't think it's really adding a lot to the conversation and it's getting a little repetitive. No offence meant.