Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
Do we have any mining finance industry experts among us that can shed some light on the importance of this step?
Is it the case that once an MLA is appointed a formal offer of funding is pretty much a slam dunk?
Or, do MLAs get appointed all the time without leading to an offer?
I’d argue that they were in profit for FY23 after normalising for decommissioning and non cash impairment. However, Gas prices today are less than half that of the average for FY23. Which begs the question, are they on track to be profitable in the current period? Probably not as operating profit will be nothing like FY23 but admin expenses will be similar.
Thanks Nom.
I’d say that it’s mostly positive. Sprott are willing to keep funding the project so they obviously see something of value and EDM are clearly still very involved in the conversation as well. I’d have liked to have heard something about the UKEF but, on balance, I’ll take it.
As frustrating as it’s been holding orchard the last couple of years, the relative performance has actually been quite good. If you’d have bought at the AIM high in September 2021 you’d be 31% down but have collected approximately 12% in divis along the way. So that’s net 19% down vs 44% for the most appropriate benchmark. I’m not sure why I’m posting this. I guess it made me feel a bit better about having held orchard all this time. Maybe it will do the same for others.
Sparkling results in the context of the current macro environment
I notice there is a Simon Thompson article out this today. Has he mentioned it before or is this an initiation of coverage?
Does anyone have any clue how much a liquidation such as this costs? I’m completely in the dark myself but using a (hopefully) high estimate of 1m to work out what shareholders should get.
Greatland and Ariana shares are worth about 6.5m at today’s prices. So even if you discount the other residual holdings to be sold pre liquidation and discount 1m for professional fees, we’re looking at 5.5m coming back to shareholders plus or minus Greatland and Ariana share movements in the couple of months or so that the process will take to complete.
Is that about the size of it?
Watched an interview with the manager of Octupupus investment fund talking glowingly about Sanderson a little while back. Either he’s changed his opinion or (more likely) this is a prime example of what we’re seeing all over. Funds forced to sell decent businesses against their will.
Just checked their net asset value and looks like it’s down well over 15% in 6 months. Obviously that’s not all redemptions, it’ll be performance as well.
I can see a couple of reasons. Lower fees and an increased compensation ratio from 41% to mid/high 40s. I believe that a 5% difference is an increase in staff remuneration of 9m (assuming constant revenues).
Good for clients, good for staff, bad for shareholders.
I’ve added today. The next year or two will be tough for them but they have such a strong balance sheet that I think they can withstand even the most severe market downturn. For example, the Ilke administration will hurt their balance sheet and profits this year, but they could withstand another two or three events like that one without the need for debt or shareholder dilution. I doubt many of their competitors could say the same. The market will eventually improve and Tamdown will still be standing when it does. Possibly in a less competitive environment as well.
To have said in July which is after the end of the period reported today that 'we are pleased to report an improved trading performance…’ was an absolute scandal in my opinion.
Everything about trading was down except for gross revenue which was only up because of the acquisition. Moreover, what’s to be gained from this kind of chicanery when we were all going to know the truth a couple of months later anyway!? Disastrous management.
You don’t often see a genuinely profitable business (Not just EBITDA profitable) that has a responsible management team with a good track record of returning money to shareholders trading around cash plus properties held for sale.
There may be companies available in the market with more upside potential but you’d be hard pressed to find anything with less risk than Volvere.
Agee’s Nom. I make the listed portfolio plus Ideon (at the private equity valuation) plus cash about 5.5m.
That means you’re getting golden sun, any future cash from the 5% PUT and the Hail Mary of 15% government stake in the price for free right now.
Getting towards no brainer territory as you won’t lose much even if none of those come off but you’ll double your money if just one comes off (the one that happens to be a contractual right!).
I emailed the company last week regarding the Supreme Court ruling. Just to make sure they have no exposure as there was one paragraph in the results that was slightly ambiguous (to my untrained eye anyway) as to whether they engaged in litigation funding. This was the email:
‘I just have a quick question regarding yesterday's supreme court ruling. I notice the following paragraph in your recent year end results....
Certain contingent fee arrangements are undertaken on a partially funded basis. In such arrangements, the funded portion of fees is not contingent on the successful outcome of the litigation and in these instances the revenue is recognised up to the amount of fees that the Group is entitled to bill for services performed to date based on contracted rates. The remaining consideration is variable and conditional on the successful resolution of the litigation. The variable consideration is recognised over the duration of the matter and included in revenue based on the expected amount recoverable only to the extent that it is highly probable that the amount recognised will not be subject to significant reversal when the uncertainty is resolved at that point in time.
Do you expect that these arrangements will be effected by yesterday's ruling?’
This Morning I received the following reply from the CFO which I found very helpful. So thought I’d share for the benefit of others:
‘Good morning
Further to your email below, the ruling by the Supreme Court will not have any impact on our business.
We do not have any funding agreements within the business that fall into the category covered by the ruling.
Many thanks
Kate’
That’s precisely why we should be concerned. Today’s ruling states that litigation funding must be a DBA. Any funding contract that is not currently structured as aDBA is invalid and unenforceable as of today.
It may be as simple as amending the contract to say DBA somewhere in there but I don’t know for sure.
Agreed.
He could easily run his mouth about the put option but I respect the fact that he’s keeping it in his pants until he has the official feasibility study figure from which to take the 5%.
For what it’s worth I believe it’s carried at around $2m but true value is likely to be $6-10m.
So we can add at least $4m to today’s £8.4m NAV.
Plus whatever we think a Hail Mary for the government’s 15% is worth!
It's the same facility that was used recently by the Indonesian government to fund a contract with SRT marine systems to provide $180m of maritime security.
I think it's a response to the recent realisation of just how vulnerable the UK (and the west in general) is to relying on hostile nations to supply us with natural resources. It seems prudent to support the development of mining in friendly countries.
As long as there’s nothing going on that we are unaware of then this is a crazy price IMO. Even at reduced margins they should make 6m in FY24. If they can grow those margins, increase their revenue or date I say both! Then today’s price will look very silly indeed.
I just went back and re read the RNS in which the put option was agreed. I realised that I’d completely overlooked a key point. I had been under the impression that Ascendant had raised $15m of liquidity. The implication being that this would be more or less enough to pay for the feasibility study but not enough to pay us our $8-10m should we claim our 5% immediately on completion of the feasibility study. Therefore if we asked for it but Ascendant couldn’t raise anymore capital then we’re out of luck.
However they actually raised $30m of liquidity, $15m directly from Sprott and $15m of secured loans from an affiliate of Sprott.
So once the FS study is completed then we can immediately ask for our 5%. Not only will Ascendant be contractually obliged to pay but we can also be reasonably certain that they will have the liquidity to do so.
I feel like this is a big revelation but it might also be the case that I’m the only idiot that missed it!
Surprised not to see buying here. Maybe unfortunate to be releasing results into this week’s market.
It’s worth 40m at least.