Otho, thank you for your well thought out and balanced post. My immediate reaction is the proposed arrangement is an excellent start to monetising the $72m of intangible assets on the balance sheet at little if any risk to Hummingbird. Keeping the majority stake in the venture as well is better still. Of course this is just the start of a long journey with no certainties of eventually a large operating gold mine at Dugbe. Your final point about the current lack of public plans for the capital allocation of the current operating free cash flow is well made.
To my mind when 20% of the company is being put on the line, together with a substantial drilling requirement to prove up the mineral resource, with no guarantee of success and as yet no indication of how much it will all cost, then the project is high risk The resource is in the lowest JORC classification of inferred. I would imagine that before trying to sell it on, far more geological confidence in the resource will be required and it will need to be moved up through the indicated category up to the measured category. At that point the highest risk part of the exploration is over, and the economic viability of a mine can then be properly established. Listen to CB speaking to Tom Winnifrith in a recent interview for ************* and you will understand why the majors let the small exploration company shareholders take the high exploration risk whilst they monitor from the side and step in with an offer when the resource has largely been proved up.
As far as I can see Xtract has very little cash. It has relatively small amounts coming in each quarter from the alluvial, but not a lot more until the hard rose gold project is fully up and running. After commissioning that may well not be until 2nd Q next year. Meanwhile over the next 9 to 12 months funding is required for all of the copper projects. It doesn’t take a genius as to where it has got to come from! This is why I am not invested currently despite the significant potential here, and may explain some of the current price action. It may also be for some that the new high risk but high potential of the Australian copper project is a risk too far until the near term revenue projects are much nearer to up and running.
The issue between CB and TW re Galileo placing was not the placing itself. It was the fact that the placing was not available to existing shareholders and other PIs as well. TW has campaigned for some time about loyal existing PI shareholders not only being shafted by heavily discounted placings to bucket shops, whose inside connections probably pre sale, but also PIs being excluded from them. Primary Bid now provides a cheap method of enabling PIs to take place in a discounted placing. TW had written to CB and a large number of other Chief Executives about this, and if CB does not adhere to this approach in future, he will no longer feature any of his companies on *************.
As I have previously stated there are a number of regulatory issues affecting both Galileo and Jubilee that hopefully will all come together over the next 3 to 4 months. From Jubilees perspective they have recently requested a transfer of the small scale mining licence from BMR to one of their own subsidiaries. This licence also needs to be renewed and extended this September otherwise they cannot mine the Kabwe tailings. If they can’t do that then they will have a decision on whether to finish the build of the zinc processing circuit, although they are probably too far advanced with that particular part of the project to pull back now. They may also need some environmental permit before the zinc tailings can be mined because of the high lead content. Jubilee of course want high grade zinc from Star Zinc to mix with their own tailings to process them more economically. From Jubilees perspective the earliest they will need the Star Zinc tailings is probably at the beginning of 2021.
As far as Galileo is concerned they need a small scale mining licence for Star Zinc. They have dealt with the legal requirements to ensure all rights to Star Zinc are in effect transferred out of BMRs control but this issue has still to be ratified by the Zambian authorities. They appear now to be on top of the environment permitting side so fingers crossed the small scale mining licence for Star Zinc will be granted within the next four months.
CB always underplays the time it takes to get all the permits in place for his projects.
Well with Galileo and now here, Colin has been a busy boy. The sheer potential size of the inferred copper is eye watering but it comes with a fair cost. The purchase seems a big risk, but maybe in 3 or 4 years very high reward. In effect a placing of around 15% of the company at 1.25p is proposed to purchase the asset. It will then need a lot of drilling to prove up, but fortunately the exploration commitment in the first 12 months as a condition of purchase is not too high. I hope CBS mega copper bull instincts are not leading to over commitment here. The near term cash projects certainly need to deliver to help fund this and Eureka.
This company now seems to have excellent prospects. I have been seriously considering investing in it over the weekend, but the placing over at Galileo this morning has made me hold off for a while. CB is a mega copper bull and believes he has about a two to three year window to acquire good copper exploration asset, and to prove them up to a level at which he can then sell on to a larger mining company. This strategy is now being played out over his other companies of Bezant and Galileo, as well as here with the Eureka project, which could be a company maker if CB is right about how good a prospect it appears to be particularly after the recent drilling results. But the proving up will need quite a bit more money and it will need to be found well before the hoped for revenue from the hard rock gold project ( starting early next year) starts to flow in. Extra money might also be needed to get the copper dump project underway as well.
CB is a mega bull on copper. He believes the copper price will be over $7000 in a year's time. With the forecasted copper demand expected to increase substantially, possibly double by the end of the 20's decade, and very few good deposits becoming available, he expects good deposits to be wanted by the major mining companies within the next two to three years. He hopes the Botswana deal will be one of those deposits which now needs to be proved up or outlined as soon as possible. As soon as the deal went through about a week ago a placing was on the cards. Personally I am delighted a sizeable amount of money has been raised for a relatively small discount to market price. If CB is right about the copper price and the Botswana deal turns out to be as good as he hopes, then in 3 years time it truly could be a company maker.
In the meantime we now need some monetising events. Hopefully Star Zinc will get going very early next year, and will the phosphate, rare earth asset be monetised in the near future? Lets hope so.
CB is following a similar strategy in Xtract and Bezant, both now with significant copper exploration assets to fund, and surely placings will shortly be seen in these companies as well.
With a £54m market cap, a lot of future profit is certainly priced in. The time period to profitability seems to keep slipping. Optibiotix might be profitable in 2020, and yes the potential is good for 2021. But boy investors seem to be currently paying a lot for that future potential today?Personally I decided today that I will wait until later this year to reassess whether 2021 might at last be the start of real profitability, and decided not to push the buy button.
TT Not sure why PGM earnings to be worse in H2 than in H1. The PGM basket price has not reduced below the price throughout H1, and in fact would have produced significant bonus earnings in January and February. In volume terms I am also expecting H1s 21K ozs production to be matched at least, with Windsor PGM production fully on stream since the start of H2, the additional PGMozs from this source alone should more than offset the lost production during the COVID shutdown when compared to H1.
Moneyhawk, very surprised if we have given up on the PGM rich tailings at DCM. Surely that would have had to be stated in this RNS? It is in DCMs interest as much as Jubilee’s to find a way of monetising the PGMs in the tailings as they are to be getting 40% of the profit.
Don’t forget Jubilee is also a significant chrome concentrate producer, even without DCM fine chrome. And the chrome price is up over 10% in the last month. It would be nice to see a decent positive contribution from the chrome earnings, which I am sure we will due to Inyoni chrome coming on line towards the end of last year. They have also been implementing a number of efficiencies at Windsor chrome plant, so fingers crossed maybe that will start to properly contribute as well.
The fine chrome plant has not been profitable at DCM at any time. It was never covering its depreciation costs. The fact they were sharing any positive chrome earnings, would have made the chance of it ever being profitable without future arising s from the mine very unlikely. With no future feed coming from the mine, the short operation life left at DCM made this decision a no brainer. Good to see some contribution from DCM towards the disassembling costs, but as usual no detail? I hope DCM have paid their debt for their contribution towards negative earnings when the chrome price collapsed.At least at the other operations they will not be sharing any positive earnings and the business model should work.
Fine chrome processing a bit like Concorde so far- a great technical achievement but financially awful. This move makes a lot of sense but why no certainty yet about the final destination of the plant. Hopefully by the beginning of 2021 this plant will start producing enough positive earnings to at least cover its depreciation cost. I await with interest about what is going to happen to the PGM rich tailings at DCM so they can be monetised. The PGM plant will not be built now.
TT, If you get a reply from CB please post if possible. I and others, I am sure would be interested in the high level assumptions being made by Galileo in their own figures from June2019. Thanks for posting the info you have already found.