Proposed Directors of Tirupati Graphite explain why they have requisitioned an GM. Watch the video here.
NPV still £0.75-£1 ! 1) It will fall when new equity is raised. 2) Its based on projecting 50 years (50 years !!) ahead. Who on earth would pay in advance (which is what an NPV 'target' is) for something as airy fairy as that ? In mining, cos never achieve more than 1/3rd their theoreticla NPV's - even for only t en years ahead. 3) Its those brokers again puffing a ridiculous NPV so as to flog their 'house' shares - last time they did the institutions only paid 1/3rd their puff. So there's every need to panic !
I see brokers are flagging up SXX's NPVs again - revised (I assume - haven't seen their reports) down due risk of equity dilution from now on - as if the shares are still cheap. Note Well. These NPV calcs are boosted by taking in revenues up to 50 years ahead - 50 years ! Who in their right mind would pay up front (for that is what paying up to a NPV based 'target' implies) for revenues expected in 50 years time ! If you revise the NPV calcs to take in (say) only the next 20 years (forecasted !!) revenues, those NPVs would halve. Not only that but mining investors never, ever, take any notice of NPV 'targets' They are never, ever, anywhere near achieved because the logic of paying a NPV based price for a share now is grotesquely flawed. That's why mining shares in the past have done well to reach 1/3rd their NPV 'targets' (depending on the assumed discount rate) Brokers use them as a means of puffing their shares - as did Shore et al two years ago when puffing Sxx before its first capital raise. The institutions blew a raspberry and paid only around 22p vs the more than 50p 'target' the brokers forecast they would pay. It will be the same this time around. The reality is only the naive will pay more than a token price for a share still 10 years away from meaningful profits with all the risks that can arise over that time. Given that few investors (institutions and brokers included) really understand what an NPV is and what it isn't I expect I'll be vilified !
Goes to show the idiocy of investing in a co where profits won't flow for ten years, with enormous uncertainty re costs meanwhile and re the sales value of its products. Look at the frightening range of 'NPV's being displayed ! And also the idiocy (as from Shore and Co) of calculating a value (NPV) taking account of income 50 years (50 years for G's sake) in the future ! (in the event called out by the institutions 2 years ago who wouldn'y buy Shore's then 'target' over 50 p!)
This is the sort of company to invest in only at the very lowest price and when production is almost in the bag. A 50 year NPV is meaningless.
continued
(Note: the final life of project will be fixed by the final Power Purchase Agreement ("PPA")) of approximately US$7.5 to US$8.5 billion;
- Indicative post tax Equity IRR between 21% and 22%, an increase of 11% on the indicative IPFS post-tax Equity IRR, based on the following conservative debt assumptions:
®Debt tenor: 12 years;
®All in interest rate (post construction): 10%; and
®DSRA facility: 6 months
- Post tax Project IRR ranging between 14.7% and 16%;
- Indicative post-tax payback:
®Equity Payback period: 4 to 5 years
®Debt Payback Period: 11 to 12 years
On the 800m shares iin issue after financing its other 15%, that gives Kibo a mere 0.6p per share share of net cash flow over first 11 years.
As for your - "And a few further figures:
300mln of NPV, @20%, implies profit of 60mln pa. ---"
That has already been accounted for in what I say above. The spreadsheet assumes $320m pa revenue, at a 32.5% gross margin before tax/loan repayments. It produces the figures I've given above.
As for
" Which ties in nicely with the 8 bln figure KIBO published as total revenues from 300 MW MCPP, 60 mln profit implies 300 mln of revenue (20% profit margin), hence 7.5 bln revenues over 25 years.
So if KIBO retains 50% of the project, that should mean 30 mln pa cash in KIBO's coffers. Just from the 300 MW MCPP. Obviously, Kibo has a few other energy projects, say up to 2000 MWs, you can do the maths."
Yes, I've done the maths, but I'm afraid as I've shown, your thinking - (and therefore your calculation) - is somewhat wonky.
Why else do you suppose a mere $11m value has been put on 100% of the Mabesekwa project company (equivalent to and at same stage as MCPP) by Kibo's deal, while only $23m has been placed on 100% of the Sese power project. (twice as big) by First Quantum Minerals. They show that those involved don't expect anything like the value to themselves (as sponsor) that people on here are placing on MCPP. Sorry !
Your posts yesterday
"Based on your figures, you need 150mln (25% of 600 mln build costs) to turn it into 300mln worth project valued at NPV, whih itself is calculated at 20%, as you said. ?
So Kibo can sell half of the project, say at 50% discount to NPV (which is quite attractive) and get 75mln. Which is exactly its equity contribution."
And what will a purchaser be 'buying' ? As well as paying $75m to Kibo, he'll be buying an obligation to spend another $75m as his half of the $150m equity needed to build.
He ends up with half the project but has paid $300m - as much as the whole project would have cost the seller - 'Bit of a chump don't you think ?
The basic point is that as I've explained on here time after time. You can't 'sell' an unbuilt project, because as well as paying you, the buyer has also to spend his share of the full capex to build. result - a far lower return than you would have got - and bankruptcy !
(Don't know what you mean by the "calculated at 20%" ,- 20% is assumption for share of MCPP Kibo will retain. ie share of NPV is $60m, not $300m)
"Hence retain 50% of the project and get some really juicy cashflows over the next 25 years. Alternatively, sell further chunks, but at much lower discount rates as a few years down the line the project will be hugely derisked.
Wow, sounds quite good.
And them multiply it by 4. Even better"
So your excited conclusion is bonkers
As for your 'few further figures'
20% of the $300m NPV that Kibo will get (on my assumptions of $15m contribution by way of feasibility work etc, plus $15m new funding via a share issue = $30m credited towards the $150m equity = 20%) doesn't earn a profit of $60m pa.
$60m pa is the average annual net cash flow after loan repayments for the whole 100% of the project. ie 20% gives Kibo an average annual share of $12m.
On the present 650m shares plus another (say very optimistically) 150m to raise the other $15m gives 800m shares in issue - on which $12m gives average eps/cash flow of 1.5p.
Unfortunately, that $60m was an off the top of my head figure on the Jan 2017 IBFS figures below - assuming level over full 25 yrs. The trouble is that return is bunched towards the last 14 years because loan repayments in first 11 years takes a big chunk of that $60m.
Running a detailed year-by-year 25 yr spreadsheet taking account of everything including tax, loan repayments capex timing, and other clues given in past RNS's (and the IBFS figures below) and which gives the stated irr, and assuming capex is now $600m, shows a considerably lower post tax post loan repayment project cash flow for the first 11 years. For the whole project it is $25m pa. - rising to $84m pa from year 15 and for Kibo it is only $5m pa.
IBFS figures Jan 2017
- Total capital requirement for the integrated project reduced 21.1 % from the original integrated prefeasibility study ("IPFS") figure;
- Indicative MCPP total revenue over an assumed 25-year
NPV''s have already been announced for MCPP as also for the other listed CTP's. They're of the order of $300m for a 350MW plant, and all have the same irr's -(around 15%) because that;'s the accepted 'norm' for the return governments and PPA's have to offer to get investors interested. Its only when a Govt 'guarantees' a minimum return via a legally binding PPA that these projects become debt fundable (to the tune around 75%) which then gears up the return (a 'norm' of around 21%) which the 25% equity investors demand for investing in developing countries. These figures are all available in the literature, and are what underlies estimates of the eventual value to a 'sponsor' like Kibo who hasn't got the funds to develop its own project. Its nothing near the fantasy projections on here.
Mie-Mike That's not what I said. It doesn't have any value before its built. Once $2bn has been spent, it will obviously have a higher value - dictated by its NPV. But at the usual 15% IRR for these projects it won't be much higher. No-one would pay much more than the build cost, otherwise their own return on investment would be below 15% -which is pretty low for the risks on a 25 year project.
$2bn quoted for Lamu is 'cost' to build. Its not its 'value' as an investment.
Sad little man. Sepco are a supplier. Can you not read ? Even LC admitted they won't be an equity 'partner' in MCPP. They may have bought a very small stake in Kibo. That doesn't make them a 'partner'. It merely secures their position as a 'preferred supplier', should MCPP (or others) go ahead. Only a drivelling brain would count on they're being a 'partner'. Believe they are a 'partner' only if they agree to invest in MCPP itself on FC. There is no indication at present that they will.
At those sorts of PV's and irr's, the capex needed for one of these will be north of £10m. If Kibo wants its cash flow its going to have to put up is 60%. For emergency generation it won't get loans at these low irr's. More and more dilution. Cash flows in to Kibo - yes. But not to its shareholders. Note that none of these two CEO's - both the same SA university - have yet achieved ANYTHING ! The latest is a financial operator, not an energy specialist. Yet more empire building by LC, will benefit him. But not his long-suffering shareholders.
Will reply fully at some stage. I don't spend all day hunched over a keyboard, let alone on this site. There are plenty of other interesting miners out there to keep an eye on. Something you should do, as would give you and fsj a better perspective. Your latest list of 'positives' contains absolutely no numbers. - typical for an inexperienced hopeful As for whether HUM is a 'growth' stock. You still haven't addressed the fact of lower recoveries and cash flow as the higher profitability Komana East is worked out - pretty soon. The co hasn't mentioned anywhere an updgrade of its feasibility study numbers .It still says average gold of 107,000 pa over LOM. Yet current prodn is 120-135,000 pa. What does that tell you ? Statements on here re superb cash generation all ignore Tax rate 21%. HUM share 80%. Royalties 5%. - as well as costs to extend Yanf. As for Dube it will never be nearly as profitable as Yanf. So it can't possibly deliver 'growth' when it takes over - if it ever does. Do some maths and do the same for other miners. You'll get a shock.
Jibbo Do some research lad before coming out with ridiculous posts like that. Have you 'researched' the 2015 feasibility study results ? What plan is definite as yet for production beyond 2025-6 ? What rate of production will there be ? No-one knows not even HUM itself. Do some proper research lad.
Growth Story ? What growth ? Yanfolila cash flow is due to fall - drastically after 2020, then to slowly recover to present levels until end of mine. What s to replace it please? It's numbers you need to concentrate on fsj. Not pretty pictures of gold being poured !
"Common sense however dictates that Kibo will at some point have to show that it has access to funding, but common sense also dictates that this will not be possible without a PPA in place.". Obvious from the tone of this answer that neither is yet agreed. It didn't need an SML for an 'in principle' agreement on a tariff. With pressure from Tanz for a low tariff, and from funders for a high enough profit. Kibo's hopes for a free share (a paid-for share won't help its share price) is squeezed in between. Not surprising investors are staying away.
I have other things to do. I already know the (non) answers anyway.
You don't really think LC is going to break the habit of six years in charge of Kibo and actually answer questions that would give an inkling of true share value - do you ?
But why not try these
1) Why is the AGM somewhere very few shareholders can get to ? (instead of eg, at St Brides London office ?)
2) When are you going to arrange matters so as to increase the share price, rather than destroy it with excessive share issues aimed at 'increasing the size of your empire ?
3) How many such share issues will be needed before even the first of your projects starts to deliver earnings to the shareholders ?
But I fear that
‘Is there anybody there?’ said the Traveller,
Knocking on the moonlit door;
And his horse in the silence champed the grasses
Of the forest’s ferny floor:
And a bird flew up out of the turret,
Above the Traveller’s head
And he smote upon the door again a second time;
‘Is there anybody there?’ he said.
But no one descended to the Traveller;
No head from the leaf-fringed sill
Leaned over and looked into his grey eyes,
Where he stood perplexed and still.
But only a host of phantom listeners
That dwelt in the lone house then
Stood listening in the quiet of the moonlight
To that voice from the world of men: "
- and so on -
Sonny Boy ? - He's probably mumbling to himself in a dark attic corner - realising a 70p share price was his crazy, druggy, dream. - let alone his £1 party.
The 10% NPV of the original tete 300MW project (separate from the mine) was shown in the 2012 DFS to be between $160-$200m on $550m capex, with an IRR above 20% (the 'hurdle rate' for these types of project - ie the min profitability to attract project investors) Since then the mine (original stand-alone capex around only $50m with lower irr) has been 'integrated' (in order to bring down the total cost, and the internal coal 'transfer price) ) just as every other African ctp project (inc Kibo) has been for the same reason. So that DFS is completely out of date, but we have nothing more recent. Hanno has said total capex is now over $1bn, so extrapolating with the same overall irr (Moz won't allow higher) NPV would be no more than $260m-$330m. You can take it from there. Much more important for investors than any 'tariff' news is an up-to-date DFS. But Hanno has given no sign he will release it.
I'm Afraid you still don't understand what an NPV is. The high revenue (and c 40% net profit margin) is what is required to pay back the 'stonkingly' big capex. - before any profit is made. In fact the NPV (ie profit - IRR around 15% before gearing) of these CTP projects is very small by most mining standards. If you look at NPV calculations you can have an enormous revenue and a very small NPV if the capex is also large.