Cobus Loots, CEO of Pan African Resources, on delivering sector-leading returns for shareholders. Watch the video here.
What will impact on the share price favourably? Let's assume the current favourable gold price environment remains as it has not been properly priced in for this share yet. The extensive drilling and the impressive results reported should lead to a significant life of mine extension announcement in Q4. It could be as much as 2 years. The recent broker note forecasted a 10p per share price rise for each year of extension to the LOM. If the current favourable gold price environment is maintained, then a Q3 confirmation of meeting the target of about 30Kozs would restore operational confidence and would be beneficial in showing up up the massive cash generation at Yanofalina. Any positive progress with the new mine and the Dugbe project shoudl also help , but the market seems to be ignoring both of these significant projects for the time being.
Leon was pressed quite hard about Tjate by Tom Winnifrith in the interview on mineprophets on 18 July. To my mind, and not just for Jubilee Metals, it is worth paying £2.99 to listen to this interview, and to access the on line Questions submitted to Leon and his answers over a one and half hour period. In short Jubilee will not be developing an underground mine at Tjate on their own or in partnership. The resource will have to be bought by a major company and the higher the expected long term PGM basket price the more likely that this will occur. When? Who knows? But there are two large companies with existing mines on the flanks of Tjate and working towards the Tjate resource. The most likely scenario is that the buyer will be one of those existing companies or perhaps a chinese company which takes over one of the existing mines as well as buying the Tjate resource.
Good summary Moneyhawk.
The massive increase expected from operational cash generation is highlighted in the WHIreland note. The cash cows in the 2021 accounting year will be the PGM projects at Windsor and Inyoni. In the model developed by WHI, the total free cash expected to come from these projects in the 2021 accounting year is $42m, up from a predicted $17m in the 2020 accounting year.
Hopefully there will also be some additional free cash from the large chrome projects, and the Zambian copper projects as they get ramped up.
The net cash figure used in company presentations was a simple tool comparing the cash and gold held assets with the borrowings from the bank on a single date.. On its own it is not really that meaningful. What is more important on any particular date is the comparison of the current assets with the current liabilities i.e the ability of the company to meet its known liabilities over the next 12 months with the known assets it expects to be able to use to pay for them. If the current liabilities are much greater then either the company must manage the shortfall from the generation of free cash in the 12 month period or it must borrow or both. At the 2019 year end the current liabilities exceeded the current assets by over $55m. Yes the bank debt is coming down on schedule but what is happening with the overall net current liabilities amount? I hope that figure is also reducing by more than the bank debt being paid off. Until we get the interim figures we will not know the answer. Until we see the cash flow statement in the interims we will not know exactly how all the cash is being used. In the past I have found Hummingbirds notes on the report and accounts well explained and all the answers to some bizarre apparent allegations on this board will be answered probably in about 3 weeks time. That is if those that are trying to imply money has walked out of the back door can be bothered to read the interims properly at that stage.
Personally delighted if SP goes down. As a longer term investor I can pick up some even cheaper shares. I know that investing in a company operating in West Africa will attract a discount for the higher perceived political risk, the discount on this share seems way over done to me. That’s why I am buying more reinforced by an RNS providing significant confidence for the remaining part of 2020.
With the COVID operational difficulties these are excellent results. Other than a small blip in one quarters production the future looks fantastic. The Dugbe project given a true market value and the new mine both moving forward rapidly and not even taken into account in the share price. Very confident statement about full year target production being hit. We are set up for a potentially incredible 6 months on all fronts boosted by a booming gold price. What is not to like?
Based on the Q&A with Leon at the Mineprophets investor show on 19 July, there are potentially four short term issues which might warrant an RNS. 1. Approval for the small scale mining licence for the Kabwe tailings was expected to be transferred from BMR to Jubilee and renewed at the end of July; 2. A solution for the Processing of the DCM PGM enriched tailings was expected to be concluded around now; 3. A new deal for a major chrome ore provider to Windsor is anticipated shortly; and 4 the next big copper deal is also anticipated shortly. Let’s hope we are not waiting too long. Meanwhile the cash should be pouring in for the PGMs at current PGM basket prices. Interesting to see cash went up by £1.7m from end May to end June.
A 15% surge in SP in two days may well tempt the traders to cash out. Whereas yesterdays increase was probably based on what Leon had to say at the mine prophets on line investor show, I expect today has a lot to do with reinforcement from the surge in precious metals prices. Will the PM prices hold for any length of time. If they do it will be incredibly positive for Jubilee's cash cow South African assets. Will the SP now be reinforced in the short term by an announcement on the 2nd brownfield copper project and/or large chrome ore supply to Windsor and /or the plans to monetise the enriched PGM tailings at DCM? The company has a lot going for it at the moment. Let's hope it lasts.
As I understand things the permits were transferred from Hummingbird to Cora in exchange for most of the current 12.5% shareholding in Cora. They were considered at the time to be non core assets and would not have been developed. By passing over to Cora the permits are being worked up into a mineral resource and Hummingbird has retained an interest in their value appreciation through their Cora shareholding. It is quite possible if a mine is eventually developed on one or more of the Yanfolina permits, the ore would be processed at Hummingbirds Yanfolina mine.
As a result of his interview with Leon, and the fact that Leon confirmed that just on projects and the copper target now known about, earnings could double from the base amount today within 3 years (i.e to £60m p.a.) TW has bought shares in Jubilee. He has previously been very concerned about the way South Africa was going politically, but the diversification into Zambia and the massive potential growth in tailings dam copper projects in that country has persuaded him to part with some of his money. Will others do so on Monday?
Moneyhawk in the interims a £2.3m gain was booked on the purchase of the Sable refinery. This may well be due to the fact no value was placed on the copper tailings by Glencore. Let’s see if the audited accounts also show this gain which of course goes straight to the pre tax profit bottom line.
Leon mentioned they had been offered feed from Glencore. It seems that might not be necessary as the next brownfield copper project with a 5 month implementation period which seems to be in advanced negotiation , will be all that is required in the short to medium term before the recently announced project elephant starts to come on stream.The copper project to get to 25K tonnes in 4 years seems a real possibility, rather than wishful thinking.
They have nominated as per the BMR contract to take 100% ownership of all assets relating to the Kabwe tailings. This will mean Jubilee will take over ownership of the BMR subsidiary which holds both the small scale and large scale mining licences. Leon confirmed the small scale licence covering the Kabwe tailings needs to be renewed but he was expecting its renewal will be confirmed at the end of July ministerial meeting. He indicated Jubilee was helping Galileo with Zambian authority approval of taking on the large scale mining licence. This would clean out the balance sheet of the BMR subsidiary they are taking over, and of course enable Galileo to explore the Kash itu zinc project as a potential longer term source of high grade zinc ore to the Sable refinery.
Once transfer of all Kabwe tailings assets is complete Jubilee will retain a nominal holding in BMR. Not sure why Leon just said a "nominal" holding as currently they hold just under 30% of BMRs shares. Jubilee then intends to negotiate a complete exit away from BMR. How it will be achieved was not mentioned and only a commitment to provide further details once there is a clearer sight of time lines was made.
The $11m budget indicated to build the zinc circuit covers
(a) a recovery and precipitation circuit to produce a zinc salt, and
(b) a new tailings storage facility to ensure all effluent is captured and sealed.
It seems a lot of work has already been done at the Kabwe tailings site in developing a new water capturing facility. The liquid from the tailings contains heavy metals. Such work is in line with their effluent neutral policy.
Hoping borders will be open by September so they can get back to work on the zinc circuit.
The SA projects are of course the cash cow to help fund the massive expansion in Zambia. I had concerns over their longevity and the potential loss of PGMs at DCM.
(a) Windsor PGM project with Northam
Northam processing may not be available in 2 to 3 years as they develop their mine. Leon indicated an intention to expand the capacity at Inyoni during this period. He reckoned it would be a 10 month project and provide much better margins as the current Northam share on earnings would all be retained by Jubilee.
Intriguingly he said "watch this space" about a potential deal with a large chrome ore producer to feed the Windsor plant over the longer term and properly utilise its capacity.
(b) The DCM enriched PGM tailings
Fine chrome plant already disassembled and starting to be transported to Inyoni.
He emphasised that SAMANCOR was now owner of old Hernic and would assist them in showcasing the fine chrome facility. Did not elaborate on this.( He mentioned as an aside the processing techniques they had developed for fine chrome were being utilised at Kabwe to extract copper from the tailings. It seems Glencore have been amazed at the speed of getting the copper circuit going but even more so the ability to extract the copper from tailings at such good margins.)
He indicated that discussions were well advanced to commence processing the DCM tailings. Whether this will be the method or not, he did not discount the possibility of transporting the enriched tailings to either Inyoni or Windsor. Leon openly expressed his frustration with the bureaucratic delay and institutionalised inertia at a regulatory level regarding the DCM project.
The chat line with Leon was excellent. A wide range of questions and he was very open in his answers. I would recommend you buy a ticket as you can still access everything said on the chat line. I will post bits and pieces over the weekend.
What a transformation is going on. Long term large future earnings now becoming visible through the copper strategy. Growth is the order of the day and every bit of the significant free cash flow from the South African projects will be needed over the next two years at least to partially fund the large capital expenditure. The balance sheet hopefully will support debt funding secured on the additional plant facilities that will be needed to cover the balance, but it would be of no surprise to see large new IIs investing at hopefully a small discount to market price. I cannot possibly see any dividends or share buybacks for two years at least but hopefully good share price growth as the copper strategy unfolds and starts to be delivered.
The reported earnings do not appear to include anything for the copper and cobalt sales. I anticipate they will be used to offset some of the costs of getting the Sable refinery up and running and these items will be capitalised when the year end results are published. I assume it will only be when the report and accounts are published that we will be able to see what the earnings from the copper were in H1 2020.
It looks to me as in effect an agreed reverse takeover is occurring as the ASX shareholders will have in total 49% of the total Pasofino shares on completion of the Pasofino purchase of all ASX shares. By acting in concert the current ASX shareholders would in effect be able to control the Pasofino company so expect to see the ASX management installed to run it. The funds for acquiring the earn in to the Dugbe project will probably be raised through a placing of Pasofino shares. It should be noted Hummingbird will still own the Dugbe project and Pasofino will only be able to earn up to a 49% share of the beneficial interest in it by completing some tough minimum requirements which could cost $30 to 40m over the next couple of years. To me theHummingbirds Dugbe deal with ASX is beginning to look better and better with realistic chances of proceeding on the back of the presumed reverse take over of Pasofino.