Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
Even during the election I think Castillo was arguing for something different to nationalisation. He had an argument about 70:30 and 30:70, but I don't really understand whether he knew what he meant by this. Maybe his theorist did (VLADIMIR ROY CERRĂ“N ROJAS)
Looking at the oil production from the country CNPC produce about 12,000 barrels a day. Now they also want a return on their investment. They are, of course, a company from a notionally communist country (China).
Its all about maths. Investment is about putting in resources (people, cash, expertise etc) and getting a return.
What is interesting also is Veronika Mendoza who appears to be more extreme on these issues than Castillo worrying publicly about him doing a U turn on this issue as a previous president did. Peru has done this before and U turned and as soon as they face the reality of maths they tend to do a U turn. The difference with the right on these issues is the right don't try to do things this way anyway.
Fujimore is I think the only candidate Castillo can beat. However, we don't have any certainty that he will do so. With Mendoza's crew they have just under 1/3 of congress. There are some people in other political groups that may not support impeachment, but he does not have the guarantee of a blocking vote against impeachment (which is 1/3 - 87 seats)
It is quite a complex issue and in a sense you can read into Castillo wanting to change the constitution that he thinks the constitution will prevent him from doing what he wants. I have read the current constitution and it differs from what Wikipedia says.
In the end the fact that Castillo wants to change it says a lot to me.
In the end, however, communists face a difficulty if they want investment. If they want people to provide funds for the country and their expertise then whether the people are Peruvian investors or Canadian the investors will want a return. Investors will accept risks, but the more the risk the more the return they want.
Hence by creating shifting sands they increase the risk and therefore investors want more return. Similarly looking at the balance between revenue for the country and the investors does not really help as the investors don't care about the balance of revenue. The investors care about what return they get on their investment. Hence if shifting the balance lowers the return investors won't invest. The problem with the 70:30 figure is working out what the return is. When an international company invests it will pay people locally for services. Petrotal in my view has been quite good at doing work with the local community. I think that is important in all circumstances, but particularly in these.
If Castillo wishes to really concentrate on his 70:30 figure then where does the CEO come into this. He is a Peruvian who is the son of a previous Chair of the State Oil Company. The corporation is registered in Canada and I think therefore would rely on the Canada-Peru FTA to resolve any property rights disputes (Property rights are a human right under Article 1 Protocol 1 of the European Convention of Human Rights - that does not apply in this instance, but it is relevant from the perspective of analysing disputes).
This is perhaps quite a useful article
https://www.argusmedia.com/en/news/2204922-perus-presidential-rivals-shake-investors
Of note in this is Castillo wanting to change the constitution which means he sees it as a problem to what he would like to do.
This is a good example of sovereign risk. If you are interested in this issue it is worth studying the history of Peru and the politics of Peru.
It is right to say that the Congress would have to support legislative changes. Current estimates give Peru Libre possibly around 30 seats out of 130. That would be insufficient to prevent impeachment of the president. Fujimori is unpopular and so it is not a popularity contest, but an unpopularity contest. Castillo has some association or links with organisations linked to Shining Path. That adds to the political complexity.
Trading volumes in Petrotal are really low today. This is a risk issue which existed last week and continues to exist for any company. Personally I am not selling, but I am also being cautious about extending my holdings.
I cannot, however, offer any certainties. If you have a heavy investment on margin in a very concentrated portfolio it is a factor to consider. The questions are
a) Who wins in June
b) If Castillo were to win could/would he nationalise Petrotal.
c) If he did what would he pay
What I would say is that Petrotal is not what I would think as being the top target for such action.
It will be worth translating the local media to find out what he actually says in the elections. What Peru did many years ago did not work out that well and people do remember it.
If you go back to the 2017 and 2019 General Elections in the UK there was sovereign risk. That has faded to some extent with Jeremy Corbyn not being leader of the Labour Party. In Peru, however, when we know what the political balance in the Congress is that will last for five years (most likely).
The response of the market to this has been to assess the situation. The response of the Peruvian market yesterday to the outcome which was known there yesterday was to fall back a bit, but come up since then.
I don't know what the best indicators are for the peruvian market, but here is a NASDAQ index
https://www.google.com/finance/quote/NQPE:INDEXNASDAQ?window=1Y
If anyone has any better suggestions I would be interested to see them.
Peru uses D'hondt for allocating seats which takes a little time (I think they also have preferential voting) hence we don't have the final congress figures as yet.
It looks like Fujimori vs Castello. The unicameral Congress was also elected. Not that many far left in that. The uncertainty to me is the number of voters that (with compulsory voting) cast an abstention and whether they will do that with Castello vs fujimori (about as polarised as you could get)
>And for the last time, HUM are not generating any free cash at all at the moment - just read the RNSs and do the maths.
I have read the RNSs and done some maths. I am not myself clear how you calculate this? Could you please show your workings?
You need 3% to be required to declare. That is more like 24,000,000 shares than 500,000 shares (which is in the end only worth about 85K. A declarable holding is GBP 4.32 M (ish)
There is always a delay between a company getting to be in a strong position and developing market confidence. HUM have quite a high free float. It may be that as the company gets market confidence it gets some more institutional holdings. However, in the end running a business has to come down to having more cash coming in than going out.
I am a more recent investor. I also have quite a bit of experience of running various organisations of various sizes. Hence perhaps I am more sympathetic to management given that things are never that easy in practice.
As I see it some people are obsessing about the share price and ignoring the status of the company overall. However, that has meant I could buy more shares at a lower price so I don't personally mind.
Compared to many other companies the fundamentals here are really sound.
The government of Mali invested in the holding company for this mine (or at least got their shares) some years ago. This is just a delayed payment (probably because there is now material positive cash coming from the mine).
Thanks for doing this. I suggest some form of internal communication system (WhatsApp or Telegram) is worth setting up.
I thought DB came across well in the video interview. I think now they actually have some spare cash exploration is a good place to put some of it.
I am recent to this stock and don't have a history with it. I have done ok with PAF and SLP and see no particular reason why I should not do ok with this. However, I am spending quite a bit more time looking at it (particularly because of the grading issue which is, of course, key).
In the end, however, the gold price will drive this. The LBMA have a forecasting contest each year and I think it helps to see what they see as the possible range.
http://www.lbma.org.uk/assets/Forecast_2021_Interactive.pdf
It helps also to see the forecast for 2020.
http://www.lbma.org.uk/downloads/Forecast-2020.pdf
Although I think the way the company communicates things could be improved, I don't think things are all that bad. However, it suits me if some people think it is all that bad as that results in cheaper stock to buy.
I thought people might like a collection of links to broker targets. Hence
https://www.lse.co.uk/ShareBrokerTips.asp?shareprice=HUM
https://www.marketscreener.com/quote/stock/HUMMINGBIRD-RESOURCES-PLC-6978593/consensus/
https://www.marketbeat.com/stocks/LON/HUM/price-target/
https://markets.ft.com/data/equities/tearsheet/forecasts?s=HUM:LSE
To be fair to LSE they do perhaps the best job of this. (a job - collating broker targets -that no-one does particularly well)
https://www.hl.co.uk/shares/share-research/share-tips/stockbroker-tips/berenberg-cuts-target-price-on-hummingbird-resources
(Sharecast News) - Analysts at Berenberg slashed their target price on Hummingbird Resources from 62.0p to 39.0p on Thursday following the group's fourth-quarter production miss.
Hummingbird has released fourth-quarter production of 22,000 from its Yanfolila mine in Mali, taking production for the year to 101,000 and missing consensus estimates of 25,700 ounces and 105,000, respectively.
Gold sold during the quarter was 24.2m ounces at an average received price of $1,862 per ounce but weaker production drove up all-in sustaining costs for the quarter to USD1,496/oz, above our expectation of USD1,162/oz.
The German bank also noted that tonnes processed in the fourth quarter were in line at 359,000 but with a miss on grade at 2.03 grams per tonne, versus 2.5g, caused by grade reconciliation issues.
"We have a concern that this issue could have negative read-through for the broader resource," said the analysts.
As a result of the update, Berenberg retained a 'buy' recommendation on the stock despite Hummingbird facing both operational challenges associated with its Yanfolila site and logistical issues in Mali following the coup in August.
"The key upcoming catalysts should be delivering on guidance at Yanfolila and delivering on the permitting and financing package for the new Kouroussa project in Guinea that could double group production," added Berenberg.
I personally am quite a fan of ESG, but the interviewer should have asked about AISC as well. That really is a flaw in the interview process. I have not looked at (those whose name is blocked) before, but it does not encourage me to look again as it was really just corporate fluff.