RE: Centamin vs Thor21 Sep 2024 10:34
I really like the CEY THX comparison because it highlights a number of things.
Let's go back to the start of 2023. At that point CEY was valued ~12 times more than THX. Was that reasonable? Yes I would say so because the difference in risk had to be factored in back then. CEY had $102m cash and no debt, THX had begun paying down its senior debt facility but was still heavily indebted with a net debt position of $31m. With the gold price hovering around $1800/oz there was no guarantees of cash generation in the years ahead and hence the ability to pay down debt without turning to shareholders and institutions via a cash raise.
Additionally the uncertain outlook also meant that minimal funds could be released for exploration and drilling, Segun had to be cautious in order to avoid entangling themselves with debt that couldn't be met when it matured. So back at the start of 2023 with THX at 15.75p and CEY at 112p all but the most risk-loving might look to weight any funding towards CEY over THX but those taking the risk on THX were doing so for a situation like we've now seen, a move in gold price that derisks the investments enormously and turns the value disconnect on its head.
To think that those that placed their funds in CEY over THX at the start of 2023 have made a bigger return from CEY is simply irrational and illogical - the reason to choose CEY at that stage is to protect against any weakness in gold / failure in execution on THX's side, what with it being the untried and untested of the two companies. Yet instead we are in a parallel universe where THX is generating almost half the net profit that CEY is whilst the valuation difference has actually increased over the period. That's obviously not right.
Now we do need to see these near term catalysts come through for THX, in terms of low cost ounces found at Segilola plus further ounces discovered underground giving 200k+ extra ounces to mine (minimum, i expect far more) and convincingly attractive economics from Douta but both are heavily signposted to happen and if so that 15X difference in valuation *has* to shrink to something like 5 which values THX around the $500m mark and offers a solid 3X upside from here.
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