Member Info for jjhbev

Hi again Gavster & thanks for replying

The $42.5m is in their statutory accounts & the costs as shown in statutory accounts differ from AISC because of the way the costs are presented to conform with IFRS requirements. Normally they won’t differ dramatically but can do e.g. If a company puts through some exceptional write off or gain in their statutory accounts.

For PAF in H1 the revenue of $194m in the statutory accounts is the 98k oz @ $1960 per oz

The statutory costs are Costs of Production of $121m plus Other/Royalty of $10m. These total appx $1330 per oz v their stated AISC of $1328 (usually IMO they don’t align quite so closely!). There are net finance costs (which now should be reducing rapidly) of $5m resulting in a pretax profit of $59.5m. Tax is approx. $17m – in line with the SA corporate tax rate – and hence statutory net profit is $42.5m

As for the current half year, one thing that surprises me a little is that they continue to guide AISC in excess of $1300. I say this because (a) in a presentation earlier this year they indicated progress in their underground operations should improve AISC and (b) they have stated that they have cut high-cost production. Therefore, I am hopeful that AISC may actually come in at or below $1300. We’ll see soon enough.

On a separate Off Topic, over at BGLF I agree with your post of 5th June. I think Damofarl's reply is a bit off track in making reference to a mix of NAV numbers and Market SP numbers. I’ll follow up over there – But not until after the weekend as we make the most of the weather!!

ATB

Good morning Gavster,

A question on your numbers for the year. For Q3 & Q4 are your numbers pre tax? (my reading of your post is that they are, whereas the $42.5m for the first half is after tax).

Assuming your figures are pre-tax then the after tax figure for H2 may be in the range of say $55m as compared with the $42.5m for H1. To me, this seems realistic as the results for H2 do "benefit" from the uplift in the gold price (particularly Q4) but production for H2 will be some 8 thousand oz less than H1.

A net profit for the year around $95-$100m could IMO give rise to a div in the range of 2p (pre the impact of the wretched SA witholding tax).

Apologies if I have misinterpreted anything.

ATB

Good Morning Gavster

Thank you for your analysis. Your figures make a lot of sense and, if anything, I hope that they tend toward the conservative (which is the way I tend to go when looking at things.)

The only thing that I would hope is that the costs assumption for next year is overly conservative. Given that the uplift in production comes from the Mintails operation with an AISC of less than $1000 I would hope that – even allowing for local inflation – the blended AISC would be no more than $1300 and hopefully less.

I also hope that next year will see the introduction of semi-annual dividends (which don’t make sense on a small dividend but do at the level that we should be seeing) and/or the introduction of a share buyback plan (given the painful impact on us poor foreigners of the dividend withholding tax).

ATB

Also, No Q&A. Not really surprising as it is consistent with the utterly shameful cowardice we are seeing. A prime example of this is (in addition to this ducking of Q&A) attempting to spin expansion of Singida as a problem because of the cost involved.

IMO this is horse manure. The business is already net cash positive & is generating very substantial cash flow. Given a realistic timeline for the expansion of Singida, Shanta will be able to fund a lot of the cost from its own resources and debt can be repaid in very short order from the increased cashflow. In addition, expansion of Singida will reduce AISC making the marginal profit & cash flow generation even greater.

As I say - Utterly shameful cowardice!

Ooooops - Sorry about the double post. I thought I had been rejected & had to change a few words!!!

So……. FYI I drafted this post before reading the last couple of posts.

A few highlights/lowlights from the half year figures:-

Cash Flow generated in excess of $10m – over only 6 months!

Cash Balance increased from $30m to $40m (nb $40m = approx. 18p per share)

These numbers are after:

Recurring Admin Costs increasing from $3m to $4.25m (nb 75% of these costs are “corporate”).

Acquisition Costs of $1.9m - No detail is given for this figure (and personally I am entirely unaware of any acquisition activity we have undertaken in the past 6 mths!). I guess it must be to do with the Scirocco deal but if so (a) Why are they shown in this period’s figures? (b) why were they not recoverable when we were pre-empted??

Just as aside, if the $10m of cash flow had been distributed as a dividend it would have equated to a dividend for the half year of approx. 4.5p – But, of course, this cash will pass instead to Maurel & Prom if the buyout actually concludes.

We are still being told that the M&P deal is a good one for us – which I suppose is only par for the course for this company’s Board who continue to run an outrageous level of “Corporate” costs (presumably the senior Operation Expert we hired in preparation for the Scirocco deal is still on the books even though we do not operate Mnazi and have no new operations planned!). Also, in this half year there were $667k of “Share Based Payment Charges” – go figure!!

The way I see it is:

M&P’s 32.5pps offer equates to a total figure of approx. $72m

Wentworth at Mid-Year had $40m of cash which by now must be around $45+m and by year end will be around $50+m (even allowing for the ongoing Corporate Costs but hopefully no more Acquisition Costs!!!)

Therefore the M&P deal gives an amount over the cash we will have of say $22m – or to put that into context:

10p per share

or

An amount equal to the cash flow likely to be generated over just this year!!

My definition of a good deal does not align with that of this lot!!!!!!!

Didn’t Fidelity International vote against the deal? Perhaps the way to put some pressure on Wentworth is to write to them??

As a final point – IMO under absolutely no circumstances should the M&P deal be extended beyond the year end drop-dead date. I know that that is a statement of the .......... obvious but with this Board??????

So……. FYI I drafted this post before reading the last couple of posts.

A few highlights/lowlights from the half year figures:-

Cash Flow generated in excess of $10m – over only 6 months!

Cash Balance increased from $30m to $40m (nb $40m = approx. 18p per share)

These numbers are after:

Recurring Admin Costs increasing from $3m to $4.25m (nb 75% of these costs are “corporate”).

Acquisition Costs of $1.9m - No detail is given for this figure (and personally I am entirely unaware of any acquisition activity we have undertaken in the past 6 mths!). I guess it must be to do with the Scirocco deal but if so (a) Why are they shown in this period’s figures? (b) why were they not recoverable when we were pre-empted??

Just as aside, if the $10m of cash flow had been distributed as a dividend it would have equated to a dividend for the half year of approx. 4.5p – But, of course, this cash will pass instead to Maurel & Prom if the buyout actually concludes.

We are still being told that the M&P deal is a good one for us – which I suppose is only par for the course for this company’s Board who continue to run an obscene level of “Corporate” costs (presumably the senior Operations Expert we hired in preparation for the Scirocco deal is still on the books even though we do not operate Mnazi and have no new operations planned!). Also, in this half year there were $667k of “Share Based Payment Charges” – go figure!!

The way I see it is:

M&P’s 32.5pps offer equates to a total figure of approx. $72m

Wentworth at Mid-Year had $40m of cash which by now must be around $45+m and by year end will be around $50+m (even allowing for the ongoing Corporate Costs but hopefully no more Acquisition Costs!!!)

Therefore the M&P deal gives an amount over the cash we will have of say $22m – or to put that into context:

10p per share

or

An amount equal to the cash flow likely to be generated over just this year!!

My definition of a good deal does not align with that of this shower!!!!!!!

Didn’t Fidelity International vote against the deal? Perhaps the way to put some pressure on Wentworth is to write to them??

As a final point – IMO under absolutely no circumstances should the M&P deal be extended beyond the year end drop-dead date. I know that that is a statement of the breeding obvious but with this Board??????

Edward

I agree that there are many other single product businesses - and, no matter how well those businesses may be run, if the price of their product craters then they suffer. Equally, if their product soars they benefit - as has been the case across the energy sector including Thungela. My comment stands, Thungela's profitability depends on the price of their single product.

JA - If the average RB price on an ongoing basis were to be $95 then (all other things such as production levels, costs, discount level being in line with H1) then IMO Thungela would not be profitable. As their results show, an average RB coal price of $130 resulted in a profit of Rand 3billion or $28 per ton. Therefore if the RB coal price were to be (let me emphasise) on an ongoing basis some $35 per ton lower I cannot see how they could be profitable. They would however, as referred to in their report, undoubtedly adjust their business/production levels as necessary.

Conversely, if the RB coal price were to be say $180 per ton (some $50 per ton higher than H1) their profits would more than double.

The risk/reward as things stand don't stack up for me - others regard it as a bargain opportunity. To each their own.

Just a bit of simplified numerical backup for JA’s post of 9.36am

In H1 the RB Index price was approx. $130 (with Thungela receiving 82% of the figure – lower than previous percentages).

On that price and with approx. 6milion tons of production/sales the Net Profit was Rand 3billion. To express that as a profit per ton in dollars :-

Rand 3billion = $167million = Approx $28 per ton

We are now in the 8th week of this 26 week reporting period and the RB index price thus far has averaged less than $110 – i.e. $20 per ton lower than the H1 index price. Taking into account the 82% pricing this indicates a net profit of not much more than $10 per ton.

As for my own take on things……

Simply put, Thungela IMO is a well-run business operating in a basket case of a country – as exemplified particularly by the shambles that is Transnet. It has very prudently built up cash reserves on its balance sheet when coal prices were high (whilst at the same time making generous dividend and Community distributions) and is in a very strong financial position going forward.

However, it has a single commodity and – as regards future profitability and distributions – it is basically a leveraged play on the coal price – i.e. Its profits will go up in percentage terms by much more than the percentage increase in the coal price… or go down by much more than the percentage decline in the coal price as has been seen through H1.

If the RB coal price rises above say $150 per ton (or possibly much higher) then the dividends will rise accordingly above the H1 level. At this stage, for the current half year the dividend outlook is potentially below the H1 level.

Personally, for me the risk/reward ratio doesn’t work at (or near) the current SP….. but those who are more aligned to a bullish coal price scenario kicking into action very shortly will disagree (as they are fully entitled to).

Morning all

And what a nice start to the day!

Just a brief aside on the discussions re PLL (whose shares were down 1.5% on ASX yesterday - go figure?!)
They released a new corporate presentation yesterday and on Page 10 show their "Projects". In respect of Atlantic there is a note in the bottom right of the page (Note 4). It reads as follows:-
"Piedmont can earn a 50% interest in Atlantic Lithium's Ghanaian lithium portfolio and owns 9.4% of Atlantic Lithium"

Hope the day continues well.
ATB

Good morning Bankrupty and everyone

There seems to be a lot of concern/confusion in respect of the Offtake Agreement with Piedmont. However, summary details of the Agreement are actually contained in the ASX Prospectus issued by Atlantic on 21st September.

You can see the full Prospectus via the Atlantic website and will see that it includes (at Section 10.6 on page 86) details of the Offtake Agreement.

Of particular note :-

ALL will supply a minimum of 50% of Spodumene Concentrate form each of the Ghanaian facilities for the life of the company’s production operations in Ghana

The price paid by Piedmont for each shipment of the Spodumene Concentrate will be determined using the prevailing price of lithium products, ensuring the Company captures value-added margins

So – Ghana only and at Market Rates.

Also included is something that has confused me since I read it:-

Commencement
The parties will discuss in good faith and confirm in writing the projected start of production for commercial shipments of the Spodumene Concentrate which must be no sooner than 1 July 2025 and no later than 30 June 2026 (Scheduled SOP Date)

There is then an interesting clause Under which there is a Piedmont termination right in respect of the contract linked to Piedmont’s committing to a Scheduled SOP date no later than 30 June 2026. Any such termination right must be elected by 1 July 2024.

Given the target timelines Atlantic have indicted for the start of production (within end 2024?) it seems as though there may be a gap between the start of physical production and the start of the Offtake. Would the start of the Offtake be brought forward? Or do Piedmont only want to take physical delivery if they have one of their refining operations up and running in the USA?

I have not heard/seen these points being discussed anywhere but may well have missed things.

In any event, the only aspect of the Offtake that gives me concern is the indication of production starting in mid-2025 rather than some time in 2024. Hopefully the company can/will clarify things…. And that production will start before 2025.

All the best

These numbers certainly do make the current MCap look rather silly…. And they do seem to be based on a surprisingly low assumed Spod price.

I say this because we all know about the mismatch between an assumed Spod price of $1.36kpt versus Pilbara’s latest $7kpt (for 5.5% Spod) but also the rising average term contract prices as indicated by Allkem, Pilbara etc. which have/are steadily moving north of $5kpt.

But also even in the theoretical and conservative assumptions that go into a PFS and DFS the number of $1.36kpt seems very very low IMO

Perhaps many of you will know of Sigma Lithium and their Spod project in Brazil which is nearing start up. Just this week they have released a new corporate presentation which IMO is very well worth a read
( I can’t seem to create a link but you find it on Sigmalithiumresources.com.)

A couple of standout features in the context of the ALL PFS are:-

For their first stage they use “An average LOM concentrate price of $2,479/t based on Benchmark Mineral Intelligence’s Q1-2022 forecast”

On Page 65 of the presentation, you can see the detailed numbers of the BMI forecast. You will see that numbers for the early years already look low IMO but they do show Spod prices through 2025 exceeding $3.5kpt and falling below $2kpt from 2027…… but never getting as low as $1.36kpt.

Of course, as with any new project, there are many risks in getting this project into production but IMO it is entirely reasonable to say that ALL could generate profits equal to or in excess of its current MCap from its 50% share of the project within the first 6 months of production.

Sadly it would seem that little, if anything, has actually changed with Transnet/TFR performance: - see recent articles from Mining Weekly….

Transnet to issue big locomotive tender in August as it clears legal hurdles (miningweekly.com)

ArcelorMittal to seek access to rail network amid a collapse in Transnet service (miningweekly.com)

Perhaps things are actually starting to be addressed but – like with the trains – the wheels are turning very slowly. Perhaps by this time next year there will be real improvement (and perhaps Thungela might be one of the entities bidding for the rail slots) but at the present time TFR failings look as though they are continuing much as before and therefore any increase in output/sales seems highly unlikely right now. What a ******** waste !!!

(Part 2)

So….

Assuming the market will price Thungela purely as a yield play and will price it based off 16% the SP should rise to £24 when an annual dividend of £4 is paid whereas a dividend of £2 equates to the current ball park sp of £12. Over a one-year period one therefore gets the numbers shown in your second paragraph.

To clarify whether I have correctly read your numbers this is how I have understood it. With the £4 dividend a shareholder having paid £12 gets the £4 dividend plus also has a share rising to a value of £24 (or dropping to £20 on the day it goes ex-div) whereas with the flat £2 dividend one gets £2 of dividends plus a share valued at £10 on the day it goes ex-div.

That all makes sense albeit that it assumes no impact whatsoever on the SP from the buyback which I think is unlikely . However, if one goes beyond the 1-year timeframe it is different.

This is how I see things using the same 16% yield concept

A dividend of £4 per share requires a total dividend of £540m assuming that there are 135m shares. Obviously a £2 dividend equals £270m and leaves £270 available for a buyback.
Theoretically, if the market has continued to price the shares based off the £2 dividend, the buyback could be for 22.5m shares but let’s say it’s 20m. Therefore, the total number of shares reduces to 115m.
A total dividend of £540m on 115m shares equates to £4.70 per share which, at a 16% yield, equates to an SP of £28.2

So, taking this into a 2 year timeframe the returns look as follows :

No buyback =
Dividends £8 plus end of period ex-div SP £20 = £28

With Buyback for First Year
Dividend Year 1 of £2 & Year 2 of £4.7 plus end of period ex-div SP of £23.5 (£28 - £4.7) = £30.2

n.b. The impact of the withholding tax on the dividends widens the differential in favour of a buyback.

So – All completely theoretical but it exemplifies why I bring up the topic of a share buyback. I respect that you are opposed for the reasons you have stated which many shareholders will agree with and wish you the very best with your investment here. I do think that a buyback is still unlikely and therefore hope that the SP progresses as you have laid out over the coming year. Fingers crossed on that front!

ATB

Good morning Pop

Normally, as I have said, I am not a fan of buybacks but in this case – because of how low the SP is (and, as a Brit investor, because of the Withholding tax) and the specifics of Thungela's operating constraints I believe it is something that should be done.

My in-principle opposition to buybacks is based on reasoning shared by many. i.e. –

a) I would prefer to receive a payout by way of dividend and then personally decide whether I want to reinvest or invest/spend elsewhere
b) One would hope that a well-run business can use some of the funds it generates to grow the business and that this will be more beneficial over time than the buying back of shares.
c) I am suspicious that buybacks can be motivated by directors’ desire to support a share price and (purely coincidentally) improve their bonuses.

In the case of Thungela we have – IMO – an exceptional case where the buyback is something to be pursued. This is because :-

a) At today’s coal prices Thungela is on a P/E ratio of 1
b) Thungela cannot grow its business by organic investment at present because of the shambles at Transnet. It already has underutilised mine capacity so further growth investment does not make sense.
c) Thungela could grow by acquisition – but to quote the CEO & FD they have not found a business priced as attractively as Thungela.

Given the above, the only/best way to grow the business on an earnings per share basis in the short term is to reduce the number of shares.

I will run through my numerical take on the benefit of a buyback in a separate post as otherwise it will be to long to complete here. I will use some of your figures so that we have a relatively “like-for-like” comparison. If I have misread or misunderstood anything in your post I apologise and please let me know.

I will say that if one is looking/hoping to be out of Thungela in a year or less then I do think that a buyback could be of less benefit than maxing the dividend payout – but the way the SP dropped on the day/hour that the buyback was not approved at the AGM indicates that it could well work in the short term. We both/all know that investing and SP movements are not just about numbers & ratios(sadly! ?? )

Part 2 to follow…

The numbers are indeed staggering. Based on the (very) recent update the net profit for the half year will have been approx. £3 per share. Given that those profits were based on an average coal price of $266 whereas it is now $70+ higher than that, the profit for H2 could be 50% higher IF (a very big if) that level of coal price were to be sustained.

That potential 50% uplift is based entirely on the coal price and does not include any uplift in the level of sales. IMO there is sadly no prospect of any significant improvement in Transnet performance coming through in the current half year. As per the comments made at the Exxaro meeting on Monday the situation at Transnet shows no sign of having improved and the government lack of action is clearly not going to help in the short term. See the article below on miningmx.com. The gist seems to be “there’s a lot of talking but the numbers are not improving”.

"Frustration with Govt dithering on rail network bubbles up at Exxaro investor meeting - Miningmx"

So… when it comes to distributions, I agree that we should be looking at around the £2 level for H1 – with the potential for a further significant increase for H2 but not much progress on increased sales.

Personally, I would like to see the idea of a share buyback put back on the table. I know that this was firmly rejected by PIC but I would suggest that there is actually a strong South African benefit with a share buyback.

The SP is absurdly low when measured by any metric – P/E, Yield, Cash held compared to MCap. There are of course ESG/Climate Change issues which impact the appetite for many investors and therefore suppress the SP but for South Africa/PIC the position is clearly one of Coal being part of things for a very long to come. Current coal prices and production levels will see the SP at a P/E ratio of just over 1 – and this would be below 1 if/when Transnet ever performs adequately. If Thungela – as a South African company – can buy shares many (most?) of which are currently held by “foreigners” this must be of long-term benefit to South Africa.

I am not usually a big fan of buybacks but in this case – and on the basis that the buyback amount would be limited to a fraction of the amount of any dividend (e.g. 10%-20%) – it seems to me something that benefits everyone.

A final point on the dividends & specifically the Withholding Tax. I have unfortunately not made any progress. Ryan at Thungela initially undertook to try and get Computershare to assist. Unfortunately, I have not heard anything from them and my last follow-up to Ryan has not been answered. Anyone else making any progress?

Part 2:-

When it comes to distributions, the failure of the Board to obtain approval for a share buyback is IMO a major disappointment/failure. I hold that view mainly, but not exclusively, because of the 20% Withholding Tax problem (with only 1 broker that I know of prepared to provide any level of help in trying to recover part of it!!!). Therefore, sadly, I do understand why South African investors – particularly PIC as a representative of the South African Government – would not be supportive of a proposal which seems intended to “deprive” the SA Government of a tax paid only by foreigners.

However, given how low the Thungela SP is, I believe that it is in all shareholders interests to apply a minority share of distributable funds (e.g. 20%?) to a share buyback. Yesterday Deon stated that Thungela has not seen any third-party investment opportunity as compelling as Thungela itself. I do hope – but sadly doubt – that a modified buyback proposition could be discussed and agreed with PIC etc.

Meanwhile the SP continues to tank. It’s a funny old world ?

Just ramblings!!!

Good morning all.

Just a few ramblings (I do like that term Pop!) to add in to yesterday’s postings. This is in 2 parts because of the extent of my ramblings!

The first thing is to note that this update has been given with only 3 weeks of the half-year remaining. Therefore, I think we can take the guidance as a truly accurate indication of what the actual numbers will be. In particular we will be looking Earnings Per share of approx. £3….. for a six month period….and the SP is dropping to (now less than) £11….Hey Ho!

The Transnet debacle – and therefore the scale of sales – should not really have been too much of a surprise. Does this represent the low point in their performance?? We all hope so and yesterday’s presentation indicated grounds for gradual improvement (albeit “a 5day game rather than a 1day game” – wonder what the non-cricketing fraternity made of that!). However, I’m sure that we’ll all believe that only when we see it!

Even with that problem Thungela is still looking at an EPS of £3 for six months. I had actually thought that the average headline coal price would have been less than $266 given how “low” the coal price was in Jan/Feb and the 15% discount is what we were pretty much expecting. The scale of increased costs is painful but remember that production is forecast at only 6.1m tons v 7.3m tons in H2 2021 – so fixed costs are spread over 17% less units.

Of course, a key focus (THE key focus within these figures?) is the amount of cash. R15.3bn at the end of last month and yesterday Deon stated that cash flow for June should be broadly neutral – with cash generated being offset by the payment of Corporation Tax and Royalties. So, potentially something like R15bn at mid-year?

If so, and one then factors in holding R6bn of cash reserves and say R1.5bn held for Working Capital/CapEx/Remediation there is still R7.5bn available for distribution – or R6.75bn after distribution to the communities. If distributed, that equates to approx. £2.5 per share. Even if “only” R6bn (net R5.4bn) is distributed that equates to approx. £2. Nearly 20% going ex-div within 3 months based on numbers that are pretty much already known???!!

Part 2 to follow

Thank you Gubby

I also have received the R189 - which as you say is a "simple" schedule of dividend paid and tax deducted.

I have mailed Ryan at Thungela to ask for guidance/help as to how I/we now use this to reclaim the 10%. He has responded (very promptly I may add) that he has asked an appropriate department person to get back to me asap.
I will update as and when I hear from them..

In my case this is now of much greater significance than previously because (a) my holding is much greater than previously & (b) I would expect a very much increased dividend for the half year. Even though the coal price was relatively subdued in Q1 - and they do have some hedged pricing - the Q2 figures alone should IMO exceed last year (including taking into account a much higher tax charge).

Last year's dividend was set after creating the 6bn Rand cash "reserve". Obviously nothing on that scale will be required this time.

ATB

Great & exciting presentation but surprised that the Q&A was so brief. Only 1 of my questions answered. I did ask about the pricing comparability of their production v Australian Spodumene. In any event the info in the presentation does give some feel.
I also asked about indication of revenue growth. $100m plus for Stage 1 is great - it really is - but on current market Tin & Lithium prices I would expect a much higher number!

It certainly does sound like we will be receiving a lot of newsflow over the coming months