Member Info for Fundamentally

up 3%. $7000/ton :)

If Craig was removed involuntarily then he might be entitled a hefty pay-out, at our expense! I think it more likely that he jumped, either because he is not happy about certain issues - or maybe he got a better offer elsewhere? If he jumped due to 'issues' (i.e some major operational concern or disagreement with the BOD or Orion), I am a bit nervous about the possible implications for WTI. Hopefully, all will be revealed in due course. I have a strong feeling that the forthcoming quarterly production report will not make cheerful reading. We have already been warned that production will be less than nameplate for the second half of 17/18.

as a couple of years ago, when it really did look like a basket case. Copper was around $4500 to $5000. Copper is now about $2000 higher and WTI has acquired Kitumba plus the majority of Berg Aukas, both at bargain prices. Hmm, it is very hard to make any sense of this..... Clearly, WTI badly needs copper to continue higher still. Will this happen eventually? Emphatically, yes! Will it be this year? Maybe not. I do not expect the April quarterly production report to bring any cheer. A lot of patience is required - sorry all.

Very true, Boffin! I notice that you have needed to give similar advice on several previous occasions - usually prompted by someone posting an extremely improbable conjecture concerning Orions' future actions!

This certainly is a case of kicking the can further down the road. Tschudi cannot generate spare cash of $56.4 million per year unless copper is above $8,000 / ton! I am left wondering, what is the point of this 'important' re-scheduling?

from Bloomberg https://www.bloomberg.com/graphics/2018-china-pollution/ https://www.bloomberg.com/graphics/2018-tesla-tracker/

There appear to be expectations on this board, but it is not clear to me that the results of loan restructuring discussions necessarily need to be announced today?

in the world's largest solar power project, 200GW to be installed by 2030. Financed by Softbank. Construction starts in 2018. Total copper used will be about one million tons. (One GW uses about 5,000 tons). https://www.wsj.com/articles/saudis-softbank-group-announce-worlds-largest-solar-power-project-1522214824

Rovers, I see WTI/Orion in exactly the same way as you. Well said. F.

Agreed, Bistob. Sentiment is a powerful and fickle thing. It certainly 'looks like' there has been a huge move up and down in the price of WTI. If we consider the SP in isolation, this is true. However, a more inclusive and realistic valuation model is based on 'enterprise value', which is market cap plus debt. This has moved up and down by less than 20% since January. Not really a lot, given he news released in February. As always for WTI 'it mainly depends on the price of copper'. If this heads higher WTI has an extremely bright future. If it goes down, WTI will struggle. TBH I am not expecting any great news over the next few months. WTI has already warned that total output for 2017/18 is not expected to exceed nameplate. I hope this is only due to the slow leaching issues plus (maybe) some seasonal rains. I still take a long term view of this stock. I expect major price rises for copper by 2019/20 as the predicted supply deficit gets closer. By this time, Central Ops plus Kitumba may be close to production. Patience is still needed.

http://www.icsg.org/index.php/component/jdownloads/finish/114/2672?Itemid= "World refined copper balance for 2017 indicates a deficit of about 163,000 tons (including revisions to data previously presented): Nothing remarkable IMO. Numbers are quite similar to those reported in November. I do not foresee any major price rises in 2018 unless we get major supply disruptions.

Scrubby, inventory changes do indeed affect accounting numbers. As inventory is up about 5.5 million compared to 30/6/17, cost of sales is reduced by the same amount. Sales will likewise be reduced, but by a larger amount, as inventory is valued only at cost price. (Profits are not counted until inventory has been sold). Allowing for a gross profit margin of (very roughly) $2 million, sales would be about $7.5 million higher if the extra inventory had been sold on or before 31/12/17. Therefore, the operating profit would have been roughly $2m higher. These 'timing differences' are familiar for accountants, but can be very confusing for everyone else! Fortunately, they are eliminated in the fullness of time. If, for example, inventory at 30/6/18 reverts to 'normal', these timing differences wil be reversed. The increased inventory has reduced the reported sales revenue by (my estimate) roughly $7.5 million, as tons sold were lower than tons produced. This timing difference does indeed make the average selling price per ton (in Boffin's calculation) appear lower than it really was. To get the correct number we need to divide sales revenues by tons actually sold, not by tons produced.

is trading at about $15 to $16 per pound, = about $34,000 /ton. This is about five times the price of copper and about ten times the price of Zinc. Berg Aukas has measured vanadium pentoxide grading at 0.33%. Therefore, this is equivalent in value to copper grading at about 1.7% and zinc at about 3.3%. As the combined zinc plus lead grading is about 19% (in the core area), the vanadium could potentially add about 17% to the total value of minerals capable of being extracted. This is assuming that it can be separated/processed from the ore without interfering with the lead and zinc extraction processes. Concerning this last question, I have no clue.

My overall assessment is that these results are 'steady as she goes'. No major surprises, but none were expected! The second half of 2017/18 should be stronger because (i) copper is hedged 1,000 tons a month at about $6500, compared to about $6100 in H1, and (ii) hopefully there will never be another 'bad quarter', like the Sept 17 quarter. One positive is that WTI has actually repaid $1,525,000 of its $3m 'working capital' loan from Orion. I know that $1.5m is small beer, but this is the first ever repayment of debt. This is a positive signal that cash flow is healthy. The same signal is given by the decisions to buy Kitumba and Berg Aukas, for cash. I do not expect any excitement over the next few months, unless we get some positive news re debt restructuring or some 'unexpected' corporate development. I doubt that there will be any major news re Central Ops/ Kitumba / Berg Aukas. For these reasons, I do not expect any significant upside to the SP in the next few months, UNLESS copper heads a lot higher. I think this is unlikely, unless there is a major industrial dispute in Chile/Peru. Copper is down today, but so is the ZAR, down more than 5% from its (silly) high. Zuma is gone (and facing prosecution for corruption) but there is no 'quick fix 'for south Africa's economic woes. F.

Agreed, Boff. If we look 'really hard' we can see that there is actually a loan repayment during the half year! WTI has repaid $1,525,000 of its 'working capital' loan, to Orion! Cash flow is positive as the numbers are after depreciation, which is not a cash expense. If we ignore depreciation, WTI made a net profit of $2.3 million. F.

I think you are right Boff,, i.e. "currently the supply and demand is essentially in balance with no sign of a substantial shift anytime soon." 'IF' there are no major supply disruptions (industrial action etc.) in 2018 we may even have a modest surplus of copper. However, this is a very large 'IF' !! I think the best bet for significantly higher 2018 prices is due to strikes at one or more of the many major mines in Chile/Peru where contracts are due for re-negotiation this year. I totally agree with everyone who argues that in the medium to long term, there will be a major shortage (possibly a critical shortage) of copper as projected supply cannot meet projected demand. However, I think it will be at least another year or two before this starts to have a significant effect.

What can inject some bullishness into copper? Some industrial unrest in Chile/Peru? Anyone know the time schedules for all the expected 2018 wage negotiations at the major mines in South America?

It is always nice to see copper heading north. WTI has always been a highly geared play on the copper price. The effective 'gearing' has at least doubled since the announcements re Central Ops and Kitumba. With Berg aukas now 90% owned, I estimate that (very roughly) 20% of WTI's future performance could be determined by the price of zinc. Diversification of risk is a bonus. IMO WTI's only major business risk (which could potentially spoil the party or even sink the boat) would be a major fall in the copper price. I do not think this is likely, given the widely agreed supply and demand projections for copper. I think the opposite is much more likely, i.e. WTI will be probably be producing upwards of 50,000 tons a year at a margin likely to be in excess $3000/ton, by 2021/22.

posturing about starting a few 'trade wars' appears to be affecting sentiment for industrial metals generally. If this really happens, world economic growth probably would slow down. Will the USA actually engage in any major trade war? According to some expert commentators I have heard, probably not. Almost everyone (except maybe Trump) believes that there could be no overall winners. Trump tends to make threats as a form of 'opening gambit' in his negotiating ploys. Does any of this affect the long term picture for WTI? I doubt it. I am confident that world copper demand will increase every year for the foreseeable future, for all of the reasons explained at length on these boards. However, with all the talk about trade wars I will not be surprised to see some short term weakness in the prices of copper and WTI.

I hope that I am dead wrong about the appointment of Strand Hanson implying a possible capital raising via equity. There are many possible explanations, we are pretty much blind-guessing until an announcement is made. Maybe some kind of corporate activity is planned? Looking at WTI's recent announcements, I do not see any obvious need to raise any extra cash at all, during 2018. Cash flow should be comfortably in the black, providing net inflows of around $7 million per quarter based on C1 assumed to be at or below $5000/ton. Also, WTI has drawn only a small amount of the extra $10 million facility provided by Orion last year. Development of Kitumba will not start until 2020, after a BFS is published. The timeline for Berg Aukas is not specified, but it does not appear to be imminent. The re-opening of Central Ops is likely to happen before the other projects, - but this should not be expensive. Cash flows from Tschudi should be sufficient to cover this. So, the reasons for appointing Strand Hanson are a mystery to me. If anyone has any inspired suggestions I will be very interested.