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Even if you just take the £5m of cash/listed shares/ideon stake and discount the very high probability 9m payment by 50% to 4.5m and say the news today is worth £1m

That gets you to £10.5m

I would think it’s worth at least that right now when you weigh what it could be worth if the 9m does indeed arrive, a favourable outcome with the Ideon stake, a successful operation in Costa Rica and the 15% government stake still to be resolved.

Has to be worth 13m if one of those works out and 40m if all of them do.

Started a position here today straight after reading through the last few years of reports. Looks to me like their products are in demand wherever local economies are doing okay as evidenced by recent growth everywhere but China. You have to imagine that Chinese pig farming can’t remain unprofitable in perpetuity. The strength of the balance sheet and their ability to turn the dials of R&D spend up or down as necessary means that there is almost no threat of dilution or insolvency whilst we wait for all regions to be firing at once. Also it should always trade at a premium in p/e terms because of the intangible asset value and aforementioned balance sheet strength. I’d guess that 6/7m of profitability would equate to a 150m market cap quite comfortably. Happy to give them a few years to try and achieve that.

GLA

I just went through the last four years of reports as Bushveld was next on my research list. I have to say I was getting mightily excited, seems like they had finally got both plants ship shape and ready to to hit the medium term target of 5400 annual production, supply of iron ore is secure for the long term and demand for vanadium both for use in steel and batteries is very robust. Only problem looked like the balance sheet but with the new shareholding in Mustang there is soon to be easy access to liquid cash should they need it in a crisis. Add to that the pop in vanadium prices and it was looking like the profits were about reach escape velocity from the fixed cost base right into the tens of millions.

That was until the load shedding… that’s a big problem and one that is mostly out of their hands. I still think it’s a better than average bet that things will go well here especially with a management focussed on debt over dilution as often as possible, it’s just the risk of total loss is a bit too high.

https://oilprice.com/Latest-Energy-News/World-News/Embattled-Adani-Embarks-On-A-Coal-Fire-Sale-To-Boost-Liquidity.amp.html

Sounds like OPG might even be getting their coal for even less than the already depressed market price right now due to a motivated seller in the region.

Hi Quad,

I believe that we have the right but not the obligation to sell our 5% stake to Ascendant within a certain timeframe after the DFS is delivered. So I’m not even sure that we need the full project to be financed at that point, as long as Ascendant have enough liquidity to pay us 5% I think we can ask for our cash.

Obviously these things are complex so I could definitely be wrong about that.

https://youtu.be/8w8EoHGUarI

Suggests that we will have DFS by end of April. Which will be more than the PEA. Although unclear if this is more in value or minerals. It’s possible that mineral content could be higher but post tax NPV could still be lower due to increasing discount rate from 8% to 10.5%. My guess is they more or less cancel each other out which would leave the put option valued at about 9m GBP.

Good to hear that they already have multiple parties interested in funding the project in case we decide to hold our 5%.

Given that we already have 5m of liquid assets, a near certain 9m incoming within a matter of months and some interesting but hard to value things happening at Golden Sun… I’d say you’d be hard pushed to make a case that the equity value of MAFL right now is any less than about 10m.

I think it’s more than likely that coal/freight normalise at some point and tariff prices will be kept at a level which allows OPG to make a decent profit.

I reckon at some point in the next 5 years they make £10m and trade at a 6x or 7x multiple of those earnings.

That’s my guess, for whatever it’s worth.

Hi GMS,

One small amendment to that is that the cash payments are carried in the NAV at a discount (believed to be around 50%) to their value before they arrive. So only the other 50% is NAV accretive on arrival. I believe this would reduce your estimate by 13.5p.

Looks like everything in results was good for FY22. FY23 will be tougher as they adjust to new interest rate environment but should be back to decent profits again thereafter.

They make mention of two large players in the industry, Orchard would seem like an ideal takeover target. The opportunity to acquire a 16.5m net loan book that is almost completely free of impairments at a discount… Chuck a couple of synergies in there and it’s an acquirers dream!

Thinker, I thought you were out at 12.7!?

I will be flabbergasted and delighted in equal measure if the price rise doesn’t hold this time. The opportunity to buy at a 3-4m market cap with the increased certainty we now have would be a rare gift indeed.

The difference this time around is that we have just received 1m dollars in cash and are now certain to receive another 2.5m dollars imminently which underpins a significant portion of the market cap. All the previous jumps in the share price have been caveated with the uncertainty that we may not reach the point that we have now very definitively achieved.

Well there you have it

Yes it would be nice to get clarity. However, 5% of an operational Lagoa Salgada, £2m of listed shares, £0.9m Ideon stake, £1m or thereabouts cash in the bank, £2m payment due in December and the value of Golden Sun has to be worth multiples of today’s market cap.

Admittedly there are a couple of assumptions in there but im not gonna be far off with those numbers.

Trading just above cash does seem a bit silly.

I don’t think it’s complete madness, there is a case to be made that some of that cash is going to be burned opening and closing a warehouse in Europe for 18 months while, at the same time, demand is destroyed at home for 3/4 years.

But that’s the worst case scenario. Anything other than that and it’s good value.

Possible funding sounds promising. I’m all for anything that goes towards solidifying that December payment.

Once that’s in we have a £5m-ish tangible floor in the price. Then it’s just down to letting peoples imaginations run wild about a Portuguese polymetalic deposit, a Costa Rican Gold mine and a possible Canadian tech IPO.

Got to be worth another £5m at least!

Jeez results weren’t that bad! Still profitable and now trading below net cash.

If you discount the hedges which should even out over time, you have 1.1m of net profit (2.2m annualised). With impairment provisions significantly increased to 9.6m.

If those impairment provisions are accurate then at 38m market cap it’s probably fairly valued, if not, slightly expensive at 38m or 17x net profits.

It’s a big play on impairments now. If those provisions prove to be too high it could easily make 4m or 5m this year but if they’re too low it could be loss making.

So the long and the short of it is that you have a business with £57m of tangible equity that just made £4m which was less than last year even though they had much higher revenue. The drop is attributable to increased finance costs from the $50m loan and increased general costs as they grow the asset base.

They should make more than that in the next few years as the fund money gets allocated. Save for the risk that they have one big boo boo that costs them millions. Which is probably more likely now than before as they are operating in larger cases, in unfamiliar territories and with the added pressure to allocate investors money possibly leading to riskier investments. That’s not to say that more likely is necessarily very likely though. This may be an increased but still very low risk.

I’d say it looks attractively priced at £90m when you consider the LCM only tangible assets, the growing third party asset base and the historical record for compounding those assets organically.