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As the preliminary license for Coringa approaches its worth considering what value is incorporated in the current share price for that asset.
From the Coringa Preliminary Economic Assessment the Net Present Value (with a 10% discount and gold at $1450) is $56mn or 76p/share.
Q1 gold sales averaged $1550 so NPV - $70mn? or 97p/share.
The base case payback for Coringa with gold at $1275 is 2.25 years so at $1550 12-18months?
So with current production of approx. 40k from Palito / Sao Chico, the ore sorter and all the recent exploration news are we a little undervalued at 84p? GLA DYOR
This was supposed to be the Golden Quarter for SRB and if we manage c-19 it still can be.( there have been quite a few reported cases in the industry and it seems the policy is test, quarantine and carry on)
Anyway;
- Greenstone deal done.
- Coringa payments to Equinox deal done.
- SRB will be debt free in 6 weeks time last Sprott payment end of June.
- the ore sorter is "singing" MH and "better than hoped" CL
- despite c-19 measures the mine produced 3500oz in April - MH crux
- production continuing well into May - CL brr so hopefully we heading for 10500ozs
- because we had 900oz of gold inventory carried into Q2 realised sales should also be at least 10500ozs.
- Record revenue 10500 x $1549 (Q2 Au avg. should be higher)= $16.25mn
- 85% of mine costs are in Brazilian real the devaluation of which is expected to impact Q2 costs - CL
- Will Mr Luis Azevedo get the Coringa permit over the line now permits are being issued again - Altamira Gold received an Environmental License last week.
- Sao Chico mine extension drilling excellent potentially joining up to Cicada deposit to the West
- Exploration results released 2 weeks ago were above expectations - Calico, Mata Cobra, Juca, Cinderella - enough to get the big boys on site.
- maybe Equinox will put some of its $350mn cash pile to work
The potential is there MH and co. have just got to realise it. GLA DYOR
Surprised the sp didn't hold above 90p today, considering the POG ,the successful step out drilling program and the successful commissioning of the ore sorter.
Call me cynical but the large shareholders can do what they want with the sp and the potential 76p placing to Greenstone may look a little cheap if the sp was £1.20 going into the meeting next week.
Would it be reasonable/feasible for SRB to ammend terms considering the current bullish macro environment and the recent news?
I see Peel Hunt reiterated their BUY rating for SRB on Friday with a target price of 157p, you would hope they know a little more than us so presume up to year end all on track?
Still anticipate some good newsflow over the next few weeks( trading update due around the 17th January), worth noting the sp was 85 - 90p the last time gold hit these levels .
Cash should be somewhere between $15mn - $16mn depending on sales and what SRB are putting into exploration, Coringa preparations and Sprott repayments, so payment in full $12mn would leave $3-4mn, so yeah a little tight maybe.
The existing Sprott loan term ends in June 2020 but for balance the ore sorter should be online anytime adding 5-10k oz/yr relatively cost free to the bottom line. So the typical balancing act between cash in hand, forward cash flow, existing loans, future capital costs for Coringa and the timescales attached.
Unfortunately the sp is drifting lower albeit on low volume as the market waits for some clarity from SRB. Lets just hope MIke can deliver 1 or 2 company changing RNS before year end for the shareholders. GLA
Coringa final payment next week? Cash in the bank waiting to realise an asset bought at the bottom of the market.
Could it be worth double price paid?, considering the PEA and the current / outlook for the POG.
Also looking forward to some positive news from SRB over the next few weeks especially regarding permits and confirmation the ore sorter is commissioned and working as predicted.
GLA dyor
Yeah positive results with quite a muted response from the share price (I expected to £1+ at this point)probably because most of the information was already out and the dip in POG. Exploration activities are definately picking up $500k spent so far and Coringa preparations intensifing.
Possible news flow up to year end that should be positive for the share price;
- Final payment for Coringa
- Permits for Coringa
- ore sorter commissioned and online
- exploration drill results
- JV partner/s
BBN,
Thanks for information much appreciated.
We've got similar figures for Q3 profits and I tend edge on the conservative side when valuing a stock. I've allowed for a little retrace in gold ($1385 is $100 below a key support level for gold $1485), I've used the lower end for production guidance, the higher end for AISC and relatively low P/E for the sector. Anyway, I think we both agree the sp is undervalued.
So whats going to move the sp ; (most of the info below is from that last presentation - a must watch if your interesting in SRB )
- I can't see anything in the sp for the introduction of the ore sorter currently being commissioned, if it works as good as the CEO expects it should increase the ore grade by around 25% and decrease the volume through the plant by around 25%
This could take Q1 2020 gold production to more like 12,000oz.
- Then there is Coringa, which was purchased almost 2 years ago when gold was $250oz cheaper, now with a positive PEA I just wonder what the asking price would be today for such an asset.
Possible news flow in Q4;
- Q3 results
- Public hearing / Further permits for Coringa
- Final payment for Coringa
- Funding agreement to get Coringa into production
- Drill results for Sao Chico / Cinderella
- JV deal for regional exploration
Q3 just ended so my guess in simple terms;
10 - 10500 oz for Q3 to meet guidance
AISC costs of $1085 or less as per last results
Gold price received must be $1385 or higher
10000oz x $300 profit = $3mn / £2.5mn / quarter
Going forward £2.5mn x 4 = £10mn
pe of 8 = £80mn/ 61.6mn fd
You would expect the sp to be nearer 130p
Obviously future gold prices, the ore sorter, exploration, finance for Coringa, farm outs etc will
effect the sp. dyor
Worth a read ;
https://www.sharpspixley.com/articles/lawrie-williams-d233;j224;-vu-in-gold-silver-pgm-prices_296520.html
Were still using the 2013 resource statement the new resource upgrade was promised late 2015 in the 2014 annual report.
So in 2014 at zones 2 + 3 we drilled 22,000m , 2015 - 48000m, 2016 - 31000m, 2017 - 40,000m + 20000m surface drilling at zone 8, 2018 ? zones 2,3,5 + 8 and exploration drilling at Sangongdi and ****ouhulun. I'm not sure why GFM are holding back what should be an absolutely stellar resource upgrade.
With regards the license and GFM potential in China the link below is well worth a read.
"delegating the power to approve to lower level administrations"
https://uk.practicallaw.thomsonreuters.com/Document/Ie45f885eb9c511e79bef99c0ee06c731/View/FullText.html?navigationPath=Search%2Fv1%2Fresults%2Fnavigation%2Fi0ad7401300000164b7cfb58ae8f9bb6c%3FNav%3DKNOWHOW_UK%26fragmentIdentifier%3DIe45f885eb9c511e79bef99c0ee06c731%26startIndex%3D1%26contextData%3D%2528sc.Search%2529%26transitionType%3DSearchItem&listSource=Search&listPageSource=c16866887a424531dbedd92d874efee1&list=KNOWHOW_UK&rank=1&sessionScopeId=bcff2d582005f1dabcebf8c9c7e79e8394820b64b17ba4d4d47b3b5c2f94eea4&originationContext=Search+Result&transitionType=SearchItem&contextData=%28sc.Search%29&navId=5ED557A1AC4C3F737A11626AF8748DFF&comp=pluk
Yes the zinc price has come off but its summer and its cyclical. All the metals have been squeezed over the last couple of months knocked by the stronger dollar, enviromental checks in China the second round of which end in August and the Trade tarrifs which Trump will want sorted by the mid term elections in November.
Roll on the interims, a potential dividend and maybe even a resource update. GLA DYOR
Good post GS - A few decent sized buybacks would underpin the share price and send a little message to Panmure and IC who have done us no favours,when the interims are released I expect Cantor to reiterate its 190p buy note.
On my last post on iii I mentioned an increase In M&A in the sector, the South 32 aquisition of Arizona mining and Orion mine finance aquisition of Dalradian Resources both 50% + above their current sp and both not fully developed resources, the market may be undervaluing quality mining stocks.
Do we have any news on the 'Project Final Acceptance' its time the mine moved towards full capacity.