Member Info for goldgnome

The Royalty Companies are nearly all domiciled in North America, and the royalties are largely written for the US and Canadian companies (Australians hate them with a passion! for good reasons), like Endeavour, who have at least 2 royalties eating away. The World Gold Council set up the measure of AISC, to try and standardise the financial reporting of costs and profit (etc) of gold mining companies, as a LOT was hiddern in the fine detail. If you look at this link below, ...
Guidance note on non-gaap metrics – all-in sustaining costs and all-in costs there is a clear table and calculation methodolgoy for calculatinig AISC. Very clearly royalty costs/payments are meant to be IN the AISC. The fact that Endeavour choses not to apply this is, and hence makes their AISC non standard by this definition, ...then one must add the cost of the royalties back in, to get the TRUE AISC and a true comparison with others.

This does make me very suspicious of Endeavours transparency and their reporting, and I would be very circumspect of any figures produced by them.

Endeavour hence has
>large debt
>large royalty payments above and beyond those payable to government
and I have not read the fine print in detail, but I would if I was considering a merger with them!

In contrast CEY has
>No debt
>No hedging
>No gold loans
>No gold streams

My money is on CEY, but they need to improve their management. This starts with getting the CEY remuneration committee to better align (and generally improve their own perfromance!!!) remunaration with shareholder outcomes, which means alignment with the key operational performance metrics, as I have commented on before. Its easier to improve managment than to get sucked into a value destructive MandA! Although the gold industry and Mining Industry in general is famous for wealth destruction through MandA.

We have seen a recent rash of miraculous MandA with 4 deals at the end of 2019,
"It's the year for risky acquisitions in Australia's gold sector, and not just because everyone is buying at historically high gold prices. The common thread between the four biggest gold deals on the ASX this year is the acquirers' belief they can turn underperforming assets into something much better in a few years."
Is the belief well dounded? The track record of the mining idustry?
"Citi notes in 2015, for example, that the big five miners have written off 90 per cent of the M&A they have managed since 2007. As a collective, BHP Billiton, Rio Tinto, Glencore, Vale and Anglo American has impaired $US85 billion ($109.5 billion) of assets acquired through that seven-year stretch."
Last (not least), the case of a disappearing $500m and reputational damage ....in the early 1990's...
"The judgement - WMC was found guilty by a Nova Scotian court of conspiracy and negligence. In awarding costs and damages of $11.3 million,.... came five years after WMC spent $500 million buying an array of useless North American minin

Royalties are part of financing that some (not all !) companies undertake. Advantage is that it lessens dilution (equity raising) and does not load a company with interest bearing debt, with interest payable at the time of the loan being taken out, which maynot be when production or free cash flow happens. However, it does load the company with future obligations to pay cash or gold, and if latter at some agreed price.

A gold operations AISC should include the costs of financing, and these costs include royalty payments to Royalty Companies. One could argue about Royalty payments to governments, but to me this is a cost of the mining operation.

https://www.franco-nevada.com/our-assets/assets-list/rest-of-world/karma/default.aspx
https://www.franco-nevada.com/our-assets/assets-list/rest-of-world/ity/default.aspx

Definitions of AISC and useful discussion is at

https://www.gold.org/about-gold/gold-supply/responsible-gold/all-in-costs

Suffice to say, royaties can seriosuly dent a mines profitability, and one does have to watch these carefully.

best
the gnome

Extraordinary Capitains call by Trump. Makes his tweets and twots look tame Hard to think this is not going to cause some serious ructions, both in global security, trade and, last but not least the gold price!

cheers

Sorry, the reference to the quotes can be found here

https://www.centamin.com/~/media/Files/C/Centamin/documents/reports/2019/Centamin_AR18%20web%20secure%20medium.pdf

and the best and worst for 2019

TOP GAINERS

Alacer Gold - 202%

Turkish miner Alacer Gold (TSX:ASR) and its Çöpler Gold Mine shone in 2019. In October's Q3 the company had production of 290,127 ounces at consolidated an all-in-sustaining-cost of $714 an ounce. The company was able to increase guidance and add ounces to its reserve.

Wesdome Gold Mines - 121%

Much like Alacer, Wesdome Gold Mines (TSX:WDO) did the same. It's exploration program announced some good holes, and the company was then able to increase guidance in November's Q3. The mid-tier gold miner has operations in Ontario and Quebec.

Kirkland Lake Gold - 136%

In the last Q3 Kirkland Lake (TSE:KL) had production of 248,400 ounces, a 38% increase from 180,155 ounces in Q3 2018, and its AISC per ounce sold averaged $562. Kirkland could very well have been the top performer if not for the attempted $3 billion takeover of Detour Gold. Investors worried about the hefty premium and the company's switch from high-grade underground operations to low-grade open pit. Shareholders vote on the acquisition in January.

TOP DECLINERS

OceanaGold - 23%

In October OceanaGold (TSX:OGC) warned of lower output at its Philippine's mine, Didipio, due to a disagreement with the local government. The company also struggled with water issues at its Haile Gold Mine earlier in the spring.

Nexa Resources - 25%

Zinc is just a tough metal to be mining right now. The Latin American miner (TSX:NEXA) said production was up in Q3, but the zinc average price decreased 15% compared to Q2 2019.

Turquioise Hill - 76%

Political squabbles with the Mongolian government, cost over-runs and lackluster copper price in 2019 all led to a slumping share price. The Rio Tinto-controlled company (TSX:TRQ) operates the massive Oyu Tolgoi Mine...AND THE 900KG GORILLA...LOVE TO SEE THE PROJECT NPV , IRR FIGURES AFTER THE LATEST DEBACLE REGARDING INSUFFICIENT MAPPING IN ADANCE OF INSITU ROCK STRESS....WHAT AN ABYSMAL EFFORT !

"The underground Oyu Tolgoi mine is now not expected to start producing copper until between May 2022 and June 2023 — a delay of 16 to 30 months (!!!!) on the original completion date.

"Preliminary estimates for development capital spend on the project … is now $US6.5 billion to $US7.2 billion, an increase of $US1.2 billion to $US1.9 billion from the $US5.3 billion previously disclosed (!!!!!!)," Rio said in a quarterly production statement to the ASX.

AND SO IT GOES...
However, as Rio has found with the giant Simandou iron ore project in the West African nation of Guinea, dealing with mining projects in developing countries is fraught with problems...

And their are still corruption charges in Guinea being heard in the courts inthe US, and..china
SO HOW BAD HAS CENTAMIN DONE? HOW WORSE COULD

Thanks Cowichin

I often wonder what the CEY Board thinks they are getting paid (handsomely) to do !? Sitting on their hands is one obvious conclusion, and sitting on their a$%# is another. Other hints are in the voluminous annual reports (a good report is not necessarily a long one) and I quote, briefly ...

"The performance of all Directors is constantly reviewed by the Chairman
and, periodically, by the Nomination Committee. The Company deployed
a formal process for evaluation of the Board, the Board members, the
Board’s committees and the Chairman during the relevant period, led by the
Senior Independent Non-Executive Director"
...results?

In everyday language this seems to be saying, we all turned up rather regularly for board mtgs at the aponted time and place, when requested (after spending several hours reading board notes and previous minutes), held hands, completed a group yoga session successfully, sharpened all of our pencils as requested by the Chairman, considered our navels and then retired for a G and T before lunch..

"The Board has also had training
sessions on various topics during
the year, carried out by external
legal advisers."
...what about training sessions from real commerfcial managers, real technical managers, exploration managers..etc....a fly in the ointment of course....

and of course the remuneration committee overextended itself again

"revised targets for the 2018 awards
under the Company’s Performance
Share Plan were agreed as a direct
result of shareholder feedback
following the AGM. "

Note shareholder feedback, they do listen?

"Base salary
Andrew Pardey and Ross Jerrard are
to receive a 3% increase on their base
salary in 2019 in line with the increase
in cost of living. To reflect his change
in role, Josef El-Raghy will not receive
any salary but will receive an annual
Directors’ fee of £250,000" (poor soul, must have been horrific?)

"the more robust approach that
will apply to the bonus structure
going forward (e.g. bonus deferral,
higher weighting on financial
targets, more detailed target
disclosure etc.) should be taken
into account; and.."...zzzz

...

"Summary
I hope that you find the report clear
and informative and are supportive of
the various changes we have made to
our remuneration policy and practices
in light of the feedback we received
from investors last year.
I am always happy to hear from the
Company’s shareholders and you can
contact me via the Company
Secretary if you have any questions
on this report or more generally in
relation to the Company’s
remuneration.
Edward Haslam
Chairman of the Remuneration
Committee
1 March 2019"

Edward, my messages to you

1. Consider retirement now
2. Get someone who can really sharpen, align and incentivise the performance of the management of the company to deliver real value now and in the long term to (long) suffering shareholders.

Hope you are listening

Best
the GoldG

Capital Drilling seems to regularly takes "equity in lieu of cash" drill contract positions in early stage companies, companies they like and companies that are struggling with cash flow. I SPECULATE that this was the case in one or more situations with the development of Centamin in Egypt, and maybe the case with some of their drill contracts in West Africa. Other drill companies have done this in West Africa and broader (e.g Geodrill). Its an arrangement which can work well for both parties.

HOWEVER, such an arrangement should obviously not be a rod for a companies back, and cannot inhibit competitive performance by the drill company, and an ousting from the contract if certain performance hurdles are not met.

In regard to grade control, Capital drilling woud provide the rigs and personnel to do the grade control, but would not be responsible for setting the grade control drill intervals, sample design, QA and QC and analysis and interpreation of the results (at least I hope not). Grade control issues can result from a number of issues/processes, including the veracity and timing of the analysis of samples, poor geologcal interpretation...etc...

For my New Year activities I am going to buy a new Laptop, as the old girl I have is departing optimal performance !

Happy New Year to all, and may gold sail past $1600 per ounce, and CEY pass GBP1.5 !!!!

best
the GoldGnome

Thanks Sotolo

Sorry for disturbing the thread with my obessions of tax evasion and arms trading.

Great to see Vanguard topping up, and Gold price appreciating nicely on a number of time lines. us$1600 in 6-12 months is on the cards.

I am very surrised there is interest in Endeavour"s paper, given its mediocre performance.

Abysmal perfromance by Centamin to get themselves into this position.

CEY board? As they say, a fish rots from the head. My personal view is that NEDS should be limited to a 5 year max time. They put their views and contribute to strategy in this time frame, and move on. I get the very firm view of a few of the NEDS as being "relaxed and comfortable", and a few others I have no idea what they would contribute in a timely and positive manner to company strategy and performance. Hope this is the wake up call for them, and with gold in ascendency, we need a better offer, and some real paper!!!

best

the gnome.

Thanks Bob and Cowichan

Fair questions, and be very interested in their replies! One would assume they would want to protect those that fly under the british flag from attacks by "pirtates, and alike".

I have been reading a book called the LAUNDROMAT (Jake Bernstein), which is based on revelations in the Panama Papers (what a read! highly recommended!). Interesting reference to "Endeavour Resources" of the UK, not Endeavour Mining of Canada),on page 86 of the book, where the book references a report by Amnesty International which included reference to an Endeavour Resources, in a report on the "weapons trade". You maybe able to see it at the below link...if you are interested

The report provides linakages with provision of crop spraying air-planes, which got "retrifitted" ...
United Kingdom – Ukraine:
On 25 May 2004, an End Use Certificate (EUC) apparently issued by the Military Industries
Corporation of Sudan authorized a United Kingdom company, Endeavour Resources UK Ltd, to
negotiate for the supply to Sudan of twelve Antonov 26 cargo planes and 50 Antonov 2 "crop
spraying" aircraft from the Ukrainian arms export company, Ukrspetsexport.(49) The Antonov can carry light cargo or up to 14 passengers, and is reputed for its suitability for parachute drops and landing on very short, rough runways. This EUC and others (see below in this report) were obtained by a UK newspaper.(50) The UK authorities are currently investigating whether the UK firm violated UK law, including a law which entered into force on 1 May 2004 which prohibits the brokering of arms by UK nationals and residents to destinations which are subject to UN, EU or other arms embargoes."
https://reliefweb.int/sites/reliefweb.int/files/resources/026C54AF8B372690C1256F4E004DD5FE-amn-sud-16nov.pdf

Does anyone know anything about this? What happened? True or not? I have a strong interest in the arms trade, and companies that move in this space.

best to all
and wishing you all A Happy, Prosperous, Healthy and LUCKY NEW YEAR!!!!!
[go gold!]

the gold gnome.

Dasut

Lack of underground mining Management and general experience is a major worry, this is hard to come by.

best
the gnoome

Mining News
Centamin-Endeavour leaders meet in Perth to discuss merger
Monday December 16, 2019 16:19

The Endevour Mining and Centamin tie-up is still grinding forward with leaders of both companies examining feasibility of a transaction, said Endeavour in a news statement released Monday.

"On December 14, 2019, the CEO of Endeavour and the Chairman of Centamin met in Perth, Australia, to discuss the merits of the proposed transaction and proposed next steps," said Endeavour in a news release. "Ahead of this meeting, on December 10, 2019, both companies entered into a mutual non-disclosure agreement, which did not include a standstill undertaking."

A stand-still agreement governs a takeover process between businesses.

Per regulatory rules Endeavour (TSE:EDV) is required to announce a firm intention to make an offer by December 31, 2019.

ok, bring on the new year !

best

thegnome

Trump's plan to smash world trade rules
Jacob Greber

Washington | The Trump administration is vowing privately to swing its focus next year to breaking down and rebuilding the World Trade Organisation after clinching a "phase one" ceasefire deal with China to end their all-consuming 21-month trade war.

After rounds of bruising tit-for-tat escalations, setbacks and recriminations that have sown uncertainty throughout the global economy, Beijing and Washington are now rushing to nail down the final details of their accord before a formal signing – mostly likely in January.

Should be a great year for gold! Zero interest rates, zero growth ...etc

best
the gnome

If El-Raghys prediction fails (again) this time, lets say his reputation is dusted, if it has not been already.

His father did well. The young buck has a way to go

best
the gnome

Red!!! That means Colbyn is going to get in! LOL.

How many shares does endeavour now own of CEY?

Is there ome continnuous disclosure obligations on Endeavour to discose at certain times or at certain acquistion quantities how many shares they have?

Is there an obligation on Endeavour, or related parties, to disclose their short positions?

You would think if CEY directors really think the SP is undervalued they would have spoken by putting their hands in their pockets and bought some shares on market...or is there something stopping this?

best

the gnome

Gold tumble? How dare thee?

with the mayehm of the economists advisning political parties and the odd maverick politician, not to mention the directionand indiscretions of the major banks, disruptive technology, trade wars, conflcited advisory companies (big 4 accounting forms who write the international taxation rules commonly referred to as rorts), and a rock solid partidge in a pear tree....gold is going up, up...

the gold gnome

If the board of CEY could get off its backside the investors in CEY would realise that CEY has assets in (ITS NOT A SINGLE ASSET COMPANY?!)

1. Egypt - producing and do they ever really talk about the brownfields eploration upside=not really
2. West Africa (fastest discovery area in the world) they talk about discoveries and resources, but nothing about production, scoping studies, feaisbility studies...yawn...yawn

Bring on professional activated engaged directors. ... and management with real KPI's that enthuse and motivate to grow the company...yawn

the gnome

The in-the-ground assets will not mine themselves....

No doubt West Africa is a good place to hunt for gold and has been for 1,000 years, and I suspect a lot more. Yes, there has been a few coup d'etats (probably a lot better democratic process than the convoluted conflicted molly coddled process we presently have) there has been no nationalisation of assets and by and large the taxation regime is investor friendly, if not on the lenient side! CEY has done well in West Africa (resource acquisition and resource growth), with the exception of Burkina Faso, for which they have not told shareholders much at all about what they have, what they are going to do with the assets, where and how (beyond belief seeing they have spent more than $70m by my guestimate, but we have all said that before). CEY has indeed a very bloated and largely relaxed and comfortable Board. The Kpi's for the mngt look very soft, and, not surprisingly a lot like their performance. CEY needs a 50% cut in the number of directors, and 100% lift in director perfomance. They need to communicate very clearly with the management through a talented performing, independent, CEO as opposed to one fo the boys, reinforced by setting real KPI's allied to share price growth (short term) and resource/reserve growth (long term) etc.

I doubt I will see this from CEY itself (they have had more than 3 years!), which is why I am very much for a takeover, but it has to be at the right price and by the right company. Endeavour possibly have the mngt assets, and the achievements they have made in the last 3 years are very impressive. Getting an assett base of >10 year mine life and ASIC costs of less than $800 is a great place to be and aim for. Have 2 out of 4 West Africans as Gen Mngrs at the same time is impressive, and at the next level 42% moving to 80% next year, solid achievments. Many more new discoveries to be made in West Africa, but you need mine development AND management to transform this in to cash flow, and this is not where CEY will be able to perfrom.

They are failing trying to run a single mine base which contains a world class asset!

But watch for the games with the share price, forces will try to keep the share price down I suspect...one way or another .... thats business.

best
the gnome

Let’s say you have saved $1 million to buy a home in a year, or you’re a retiree who cannot tolerate losing any of the capital you live off. Where can you stash your cash safely and retain its purchasing power in real terms over short terms?
Sorry, there’s nowhere....?!

Investing was once relatively straightforward for highly-conservative investors. As recently as 2012, the cash rate was greater than the 4% annual minimum drawdown required from a superannuation pension account. Further back to the 1990s, periods of double-digit cash and term deposit rates avoided the need to go into anything riskier than term deposits, although inflation was higher.
Fast forward to now, as we enter the 2020s, there is nowhere to hide that gives capital security, a return greater than inflation and avoids a continual drawdown on a pension.
Many retirees cannot tolerate losses
Recent research by AllianzRetire+ reveals 79% of Australian retirees say they are responsible for their own finances and they need to feel in control of their money. However, only 44% feel secure in their current financial position, and:
“The response from current retirees is to assume a frugal and conservative retirement investment approach to fund their retirement (75%).”
The consequence is that two-thirds of retirees are spending only on necessities, worried about unexpected costs and illness. This lack of confidence leads to a high allocation to deeply-defensive investments, but what exactly is defensive in the current market?
A 2018 National Seniors survey called ‘Once Bitten Twice Shy’ shows a high 23% of older Australians cannot tolerate any annual loss on their portfolio, and only 25% can tolerate a loss greater than 10%. A decade on, the impact of the GFC looms large for many retirees, as the survey quotes a retired man aged 54:
“The main issue with the GFC for me was the reduction in my capital investments of approximately $30,000. Up until that point I would be considered a medium risk investor, however following my loss, I changed to a low risk investor and transferred much of my capital into cash. The income from the cash stream is considerably less than a shares portfolio however I was not prepared to suffer another loss of that magnitude. My attitude has not changed to this day.”
Another National Seniors survey from March 2019, ‘Feeling financially comfortable? What retirees say’, shows the intractable dilemma this creates. Over 30% of the ‘not able to tolerate any loss’ group keep their savings out of equities...
and on it goes, and every day they see the pollies on tv they think of Elton John's recent comment...that he "wouldnt buy a car from any of the pollies in the UK", no matter what side of the fence they sat...or even if they sat on the fence....

go gold...

Sorry about the repeat, but I am getting a lot of error messages when trying to post on the web site, telling me to refresh or come back again. A new tactic by Endeavour ...LOL

We have the usual bunkum going on down in the southern colony, new revelations of deals to pay off the singular odd ball politician, no recomendations from Australia's most significant tax review ina few decades, and now we find we are still walloing in tax system which renders our standard of living unsustainable.

"Dr Henry (architect of the tax review) said he was “absolutely stunned” so little of his 2009 tax blueprint commissioned by the Rudd government had been implemented and said the current tax system was “simply unsustainable” to fund government services in the longer term."

Massive loss of faith globally in the democratically elected government's, and of course the "democratic processes" and on through the system. When the recent claim (backed by good evidence mind you) is the market is jumping on every tweet from the leader of the world order, we have a problem (or two).

Sorry it appear this note below did not get my previous post
"London | Britain's Serious Fraud Office (SFO) has launched an investigation into Glencore over suspicions of bribery, it said, adding to the legal woes of one of the world's biggest commodity traders.
Since July last year, Glencore has been subject to a US Department of Justice enquiry in connection with corruption in the Democratic Republic of Congo, Venezuela and Nigeria...etc?" THE MINING INDUSTRY SEEMS TO BE DOING A GREAT JOB AT TRASHING ITS SOCIAL LISCENSE TO OPERATE....SIGH

best
the gnome