Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
For example, once the gold mining sector valuations normalise, every gold ounce in the ground would cost 100$ or higher. Only WK, with 3M Oz reserves, would cost +300M, i.e. double of current Shanta capitalization. +140k Oz production with Singida and NL reserves would come for free,
Current undervaluation is not only about Shanta. I am looking at many gold/silver producers in the US, Canada, Australia, and it is amazing how undervalued they are now. Gold mining sector has probably never been cheaper relative to the value. This is a typical vicious cycle:
Value Lower --> Portfolio Managers are fired and liquidated, retail investors run --> Prices lower.
The tide is turning now. Once gold starts testing the 2100 - 2500 range, I expect a lot of madness on the contrary. PMs will get hired back, new allocations will be given, the most undervalued stocks, like Shanta, will quickly re-rate. We don't even need any news stream from Shanta for re-rate. Anything on top, like drilling results, Singida expansion, WK progress, etc., coinciding with the upward gold move, will produce an overshoot in value.
Daisan, I totally agree. Shanta is a super convenient company to wait through short-term gold volatility until there is a financial accident or debt/budget crisis. It is much less comfortable to be in junior explorers/developers or miners with high debt right now. Some of them will get diluted to zero or go belly up trying to refinance or do placings, before the gold price goes parabolic. Shanta will get through fine, and it has a high margin of safety in the current price.
Gold price is not about a narrative now. It is about volatility, supply/demand fluctuations, and competition from high real interest rate products. Gold will shine only after something breaks. I traded gold in 2008-2011. At that time, the feeling was that whatever happens - gold always goes up. It was a no-brainer. We will see these times again. We would not be able to post here, though. The board will be flooded by hoards of new investors who know nothing about mining and do not care to learn anything.
Sure, I forgot to add "relatively overpriced". Gold mining sector is at historic lows relative to the value. Plus negative premium for LSE listing. I think CEY will likely double in price in this cycle (once the Fed starts cutting rates). However, SHG can easily triple or quadruple, and still not be overpriced. Hopefully, there will be no takeover.
I looked at Q3 Centamin’s presentation today. At Sukari, CEY plans to produce around 500k Oz starting from 2024 with 11 years LOM. YTD AISC 1386. 990M market cap, debt free.
Shanta market cap is 114M, around 1:9 to CEY. 100+kOz current rate of production, with adding a second ball mill increasing production to 130kOz in 2025. YTD Group AISC is 1160, i.e. lower than CEY. Even without prod increase at Sinigda, CEY produces less than 5 times more than SHG. The only substantial drawback for SHG in this comparison is the life of mine. Once Shanta LOM increased to 7-11 years, CEY would be at least 9:5 overpriced (or even more if you take AISC into account).
One thing I didn’t like is CEY buys gold puts at $1900 to hedge. This would be nice if gold price drops below 1900, but adds a huge unnecessary cost if gold goes up. Puts are expensive.
I am overweight SHG and underweight CEY atm.
Adding a few years to New Luika mine life seems to be a top priority. 5 years official mine life is what keeps the company unfairly underpriced in people's spreadsheets.
RAB seems to be In liquidation mode https://www.linkedin.com/feed/update/urn:li:activity:7102906171224645632/
The share price is not informative and does not matter until TK funding is signed. The stock is illiquid and vacillates on random surges of supply and demand. Once funding is signed off, the liquidity will arrive and the price will stabilise. Rule of thumb is that it should be around 50% NPV, and gradually approach 100% as the construction is finished successfully. https://independentspeculator.com/ppss-the-greatest-discovery-of-my-career
I wonder why people are so preoccupied with the price here. It is all about fundamentals.
Yeah, it is amazing that one finds stable gold producers with low AISC and no debt, at P/E around 2-3 in this environment. Much safer than buying explorers, developers and debt-burdened producers.
Even after the credit sign-off, there will be a lot of resistance between 0.7 and 2.0. There are traumatised people who, after holding for many years, will be selling at an average cost price or slightly higher, just to get rid of the emotional burden. That's a human nature. So the stock will be lagging until the long-term holders are replaced by the professionals playing the PPSS game (The Pre-Production Sweet Spot) independentspeculator.com/the-lowest-risk-strategy-for-the-highest-gains-ive-ever-seen.
"KEFI Gold and Copper Plc (AIM: KEFI) announces that following the appointment of 3PPB LLC ("3PPB") as the Company's non-UK investor relations adviser"
Any idea what this is about?
http://www.3ppb.com/about.html
"We believe we have the unique knowledge and crucial skills to provide value-adding corporate solutions for our clients in a broad variety of areas , including investor relations, merger and acquisition advisory and corporate restructuring."
It is nice that Ethiopian Minister of Mines goes to Perth, Australia to learn from the practices of the top mining jurisdiction. In general, both NBE and EMM attitude looks pro-business and they seem very interested in starting things going.
Why would you like to sell? I am happy to collect dividends for the next 7 years (and more if the mine life is extended). Any upside from WK is welcome too.
HAA mentioned in one of his Q&A sessions that KEFI's 25% share in Saudi assets could be valued by an independent party and then sold to ARTAR. I wonder what the valuation could be in the current environment. Surely it should exceed 20M USD and unblock the TK deal in the worst case scenario.
I think Ramula open pit could start producing already in 2025. Maybe I am too optimistic about that. I have no idea how long the permitting and resettlement would take. The construction part is pretty straightforward.
One thing to keep in mind is that with further drilling, WK has a potential to reach 5 MOz resource. That would make it interesting to one of the majors. I think it would be ideal in current conditions for Shanta to sell WK (or spin out) for anything between 100-300M USD.
Agreed, it is all about time horizon and risk profile. To make it simpler, one can think of Shanta's West Kenya project as Kouroussa, but 3 times bigger, higher grade and lower AISC. Once WK is deployed (which would take 2 years and capex), SHG would be +200KOz producer like HUM with lower AISC. HUM is producing now, which is a big plus. However, it is facing risks which I need to understand better - like stability of production and possible issues in Mali. Also, in an unlikely, but possible scenario, gold can drop back to 1600, which, combined with high rates, can derail debt-ridden companies like HUM. On that basis, SHG risk-reward looks more attractive to me now. I can change my opinion though with more data.
One can argue that SHG is even more undervalued than HUM (in my portfolio, SHG weight is higher than HUM)
Shanta:
Market Cap £106M
Production +100k Oz 1057 AISC over the next 5 years
Zero debt by now
West Kenya development 1.8MOz at 5.5g/t, $340M NPV, scoping 105 kOz p/a, AISC 665$
I think WK should be spin out to recognise the true value of the company. If we compare WK deposit to peers, its capitalisation would be north of 100M. Plus a cash cow - NL + Sinigda with 60M EBITDA for free.
A good example is a royalty agreement between Cabral Gold and Osisko Gold Royalties. Osisko will pay Cabral a total of US$5M for a 1% net smelter return (NSR) royalty on the Cuiú Cuiú gold project. Cuiú Cuiú is located in Northen Brasil, arguably a "safer" jurisdiction. Now, compare Cuiú Cuiú and Tulu Capi
1) Cuiú Cuiú is still at PFS stage expected to be done by Q4.
2) Cuiú Cuiú 21.6 M @ 0.87 g/t gold (604,000oz) and Inferred Resources of 19.8 Mt @ 0.84 g/t gold (534,500 oz). Tulu Kapi 20.2 M @ 2.65g/t gold, containing 1.72 million ounces.