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Visitor, good to see you are on board here and ofcourse I am happy for you to quote me.
I always believed the difference in the valuation of MPE and AEP was just because of AEP's reluctance to distribute any cash to shareholders. I have been following this for over a year and Madam S K Lim's passing away has opened the door for a change in stance from the BOD. The director biy last month was a major hint. Also worth noting, all the directors earn c£2m at MPE compared to $194k at AEP in 2022.
I know where I would rather invest my money in.
The BEE minority interest holder were given 5% of the company's outstanding shares at that time (Feb 2022) c13m shares in return for them giving up their right to 26% profits on Tharisa Mine. That Shareholder also has representation on the board (non exex directors). They have now sold c10% of the shares granted to them (c1.3m shares) to settle their tax liabilities as a result of this transaction as the RNS states. I have been told that the deadline to pay tax is end of March in South Africa so the timing is understandable. This explains the selling last month and in my opinion is good news for the share price as overhang cleared.
That's because I don't use this BB much. I occasionally have to drop by and read some of the nonsense you post. You may know that the current production rate on Orlando is c4k to 5k boepd. The abandonment of the field will take years. As Mitch has clarified this will not have any significant impact on the valuation and its not very difficult to do some math to come to the same conclusion as him.
CNIC Corp acquiring a 5% stake in Mercuria is old news now.
Orlando only accounted for c2.5m in 2P reserves. At the current rate (5k boepd) will be done in a year or so. The field abandonment would take much longer.
Always worth doing some research before speculating.
The $1.2bn supplementary charge losses don't have a lot of value but the $1.3bn ringfenced corporation tax losses have significant value at 30%. These will be utilised within the next 2 + years and are worth c£300m, you cannot ignore that.
Barry, the rules are much tighter now. Auditors of a plc cannot do any advisory work anymore. They can choose one (either audit or advise) which is why you see EY looking to split up their audit and non audit business so that continue to do so. Rules more relaxed for entities not listed.
Visitor, had they liked the asset they would have just acquired that. The fact that they are acquiring the balance sheet suggests that they have a bigger incentive here. The tax losses (if they exist, i have no reason to doubt Serica's claim here as if untrue this is just fraudulent) are valuable to the extent of beind slightly > than the total payment for this transaction (excluding debt). I also agree that management should provide more clarity on the tax situation but may not do so to not generate any negative press around the issue.
EY (if they audit Serica) cannot be all over this. They would have used another tax advisor as the auditor cannot advise. Rest assured these deals aren't done without looking at these details. They are acquiring a company and not just an asset and accountants and lawyers are normally all over this before they agree on a deal.
Hi Visitor,
There isn't an easy answer to your question but like someone else mentioned on this board tax losses can only be recognised (Deferred tax asset) to the extent of future taxable profit estimates by management. The tax losses can exist within the wider group and not specifically in the company accounts you are looking at. I obviously can't be sure if $2.5bn of tax losses exist but I am taking Serica's word on it and that figure now being widely reported by the media including FT.
The way I understand it is they have got $1.35bn of ringfenced taxable losses (which are offset at corp tax rate of 30%) and additional $1.2bn of losses relating to the Supplementary levy (10% offset). A blended rate of 21% could be used on the total $2.5bn losses to show the true value of these to the wider group which is $525m (£438m).
The tax charge on the P&L could still arise due to various adjustments but the company in the case of significant tax losses (and no EPL in 2021) shouldn't have paid any tax and looking at the cash flow statement I can't see if they actually paid any tax whichbis consistent with what I would expect.
Mercueria are acquiring shares in Serica so its an investment on their part.
I am not sure why everyone is discounting the use of their tax losses. If those $2.5bn tax losses exist for real then there is no reason why they can't be used to offset Serica's future profits (not past) excluding the EPL which can't be offset against tax losses. It is quite clear to me.
This deal cannot be looked at without including the tax benefit to the wider group.
Hi CaneToad,
If you are looking at historical numbers, that could be largely down to the Supplemental Petroleum tax (SPT) which until 2019/20 was payable on realised oil price of >$50/bl. Other than that their hedging strategy may have had a to play a role. The SPT is now applicable on realised oil price of >$75/bl until end of 2022 at least. More reforms expected in this quarter as indicated by the energy minister.
HI Mike, your comment about inventory being unsold at year end applies both ways, so the inventory from FY21 will be sold in FY22 so it should balance things out to an extent. We will have to wait and see what the freight costs are in 2022, there is early evidence that these are now on a downward trajectory albeit still quite high.
I was looking at the Stockopedia forecasts as well and they have got NPAT in excess of $100m in both FY22 and FY23 although that I agree may be a bit ambitious.
also important to note that the PGM basket price in FY20 was $1700 and they produced 143k PGMoz when they had an EPS of 16.2c so getting to a lower number with production at 170kPGMoz and basket at $2400/oz and a much larger chrome production with lower variable cost/unit doesn't make sense.
Hi Mike,
Your numbers don't tie to what I have got. I get closer to 29c EPS for FY22 based on $2400/oz PGM and $160/t Chrome. Your numbers also look strange because they are lower than FY20 when Tharisa produced 143kPGMoz. I understand the cost pressures but still look pessimistic. The USD ZAR exchange rate right now is much more favourable than the average of FY21 which should also help. Vulcan should help reduce the cost per unit for chrome. I remember Phoevos saying that the variable cost per each additional unit produced from Vulcan would be c$10/t. Based on that I expect a c10%-15% reduction in the unit cost of Chrome. I have used 170k PGMoz and 1.8mt chrome in my calculation as that is the mid range of the guidance.
Also regarding your theory that the next 2-4 years of Tharisa's profit would be invested in Karo. This may or may not be true as I am certain that the project will be financed using project finance. Ofcourse Tharisa will have to fund a % using its own cash but that amount could be as low as 10%-20% depending on the deal they get with their lenders. I am anxiously waiting for more info on Karo as I need to see that to make my own view on whether I want to stay invested or not.
Hi Mike,
I agree the figures are much lower than my forecast and also lower than Peel Hunt's forecast of an EPC of 54c which was more in line with my c$140m forecast. It seems that the strong ZAR against the USD may have had a role, plus high diesel costs plus freight costs have really had an effect. Also curious to see the additional admin expenses they have accounted for in relation to Karo, Salene chrome etc. It is still a remarkable result but admittedly I was a little disappointed.
Hi Mike,
Thanks for sharing. We are now less than 2 weeks away from finding out. Even though the FY results are on the 2nd of Dec, I expect there will be an RNS a week before (25th Nov) due to JSE requirements as the YOY increase will be greater than 20% (similar to what we had in half year).
and I am not a member on the other board but I can see your question on the impact on NPAT of Capex including Vulcan. The answer is none. The Vulcan Capex costs would be capitalised on the balance sheet so it doesn't impact net profit at all, all should be reported as a fixed asset. Only expenditure on Karo DFS study would be expensed. Salene Chrome would be capitalised as well as its going into production.
It will still be interesting to see what the impact of freight costs on chrome profitability was however I fully expect the lower unit cost on Vulcan to offset any impact going forward.