Hi mbingo, reduction of current JV share from 51% once construction loan is paid off to 23.5% plus reduction of 100% ownership of Salinbas to 23.5%. No question it works for Salinbas being developed sooner, but some doubt as to whether AAU needs to cede so much of the current JV given the current profitability and the potential ability to bring Tavsan on stream by the end of 2021 without an additional partner, which would increase annual output to 50K+ oz from Red Rabbit with that 51% share.
$30m cash up front and an immediate return to shareholders is a plus, but decreasing profits in the next few years vs better mid-term profit from Red Rabbit and a steadily increasing sp, assuming an increasing gold price, is a negative.
Opinions are divided as to how this will play out, but ultimately it should be a bigger prospect. Everyone has different timelines and views so you have to weigh up the differing scenarios and make your own mind up.
Morning all, yet another positive RNS! So much more potential to come from Red Rabbit that I really do wonder whether giving so much of it away as part of the proposed deal is the right thing to do.......
Evening all, I’m with VanVan & Scorscribler on this one.
Say $5m at GBP/USD at 1.30 gives £3.846m divided by 1,060m shares is 0.00363 per share. At a sp of 0.028 is 12.96% gross yield.
The yield may well be less, if the sp rises, but that’s a win win.
Also worth remembering that the first £2k of dividend income is exempt from income tax, I believe (please don’t shout if I’ve got this wrong), so if you’ve not earned any dividends so far this year (assuming the dividend is paid out before 5 April) and you’re fully subscribed in your ISA and don’t want to put extra money into your pension, a dividend at the above rate on 500,000 shares in a trading account would still be tax free.
Btw, just following up on my dialogue with dropinmonkey regarding the tax, etc.
Having re-read the tax charge note in the 2018 accounts and the deferred tax note, I confess I didn’t read it properly - the tax charge for 2018 was the minimum of 1% of turnover so there are tax losses b/fwd to offset taxable profits for 2019 - see the deferred tax note. Apologies for the error.
Also, the $2.5m settlement to Taurus, assuming it was made pre-year end, should be allowable as a tax deduction i.e. a net cost of $1.75m. The gross cost would also explain how some of the cash was used.
Still working on the net debt numbers, but at least we now know what the cash position is, which would have been the hardest number to calculate.
Evening, not sure that any of the suggestions on ARX Resources Limited so far are correct.
Ariana (AAU) have a subsidiary called Portswood Resources Limited registered in the BVI.
A quick search on the name brings up a website https://en.datocapital.com which will give you info on Portswood. A search on ARX Resources draws a blank.
Maybe it has only been recently created as a vehicle for the potential acquisition. Maybe the name chosen is relevant or just designed to put anyone off the scent of the real potential buyer. Who knows....
I get the impression that a lot of regulars here don't fully understand the Financial Accounts and some of the information they contain. For example, the $15m royalty liability relating to Dugbe is fully explained in note 22 to the accounts as is the provision of $13.7m, which relates to the rehabilitation of the mine at the end of it's life, as explained in note 18.
Leasing liabilities of $13.3m are a little more complicated, but in essence the operating lease commitment is now treated differently since 1st Jan 2019, under IFRS16, so the notional asset is capitalised and the lease payments due treated as a liability. Payments are then offset against the liability rather than being expensed to P&L and the new asset is then depreciated, which partly explains the big jump in depreciation charges in H1.
The tax charge for 2018 incorporates a credit at 30% of the loss for the year, which means there is no tax shield of b/fwd losses as far as the P&L charge for 2019, although there will be in cash terms.
Yes, the Plc company does take advantage of the exemption to file it's own profit & loss statement, but the full year accounts provide both a balance sheet and cash flow statement with supporting notes at the end of the accounts and discloses that in 2018, the company made a loss of $5.4m out of the reported group loss of $12.8m.
I personally think that the detail is a lot better than that provided by a number of other AIM mining companies.
Lastly, it would also be beneficial to take a look at reconciliation of cost of sales to cash costs and AISC on page 20 within the Financial Review section of the 2018 accounts, which will give a much better understanding of what is and what is not included in AISC. Too many calculations on here seem to assume that AISC is a measure of total costs with resulting wild assumptions about potential profit levels and cash.
Any other points raised that I haven't addressed, please feel free to ask.
Good evening GoldenBull, you state that costs are around $800 and we are currently doubling our money on every ounce produced, I assume you mean AISC is likely to be around $800 per ounce in the 4th quarter? Nothing wrong with that assumption, but you need to bear in mind that AISC is only a cash cost of production that includes capital expenditure to maintain production capability.
However, it does not include depreciation & amortisation, non-mining administration costs and finance costs/income, all of which means that total costs are considerably greater than $800 per ounce. Consequently, the subsidiary company is a long way off doubling its money on every ounce produced and, furthermore, only 80% of its net profit is attributable to shareholders of Hummingbird Plc.
Having said that, the results for 2019 should be a considerable improvement over 2018 and I anticipate that 2020 will take the company to another level.
Hi Joe, just to break the ice on that one, I wasn’t worried one way or another. Recent events and news have convinced me that the BoD have the right ambitions for this Company over the long term and, in my opinion, recognise that whilst there may be a step back in the short term, the long term plan is to take Ariana towards the stated goals.
It just remains for investors to decide how to play this, based on their own timelines. Having reviewed my own personal circumstances, pension arrangements, etc, I am now happier with a 3-5 year progression here than I was a couple of weeks ago, but I have had reason to consider other opportunities so I have taken the decision to diversify my share portfolio and will now continue to do so to try and maximise the potential, both here and elsewhere.
Hi Willowman, very bullish and it would be an amazing achievement. I just hope I’m around long enough to spend it, as it seems a long way off right now. Even with 3 mines up and running, the reduced profit share is going to require a lot more than the current POG and current projected outputs to get to that sort of MCap so greater capacity, further expansion of the existing resource and additional projects will be required, in my view. Not impossible, but a tall order.
Lol! I suspect the car cost more than £3, but it may have paid for a cheap hammer & sampling tube back then. There are a few errors in the article - it is not Northern, but Southern Cyprus, Ariana is not sat on £30m in cash as yet and it's the first time I have heard of doubling output from Kiziltepe to 50k oz in advance of bringing Tavsan into production - but it is a compelling story nonetheless. Great credit has to go to Kerim for what has been achieved to date. Clearly, he is a man on a mission.
Hi RD2U, my own thoughts are that with nearly £4m in cash returned from Galata earlier this year to be used for exploration/development/acquisition (Salinbas, Kizilcukur, Cyprus) plus holding company expenses, together with cash generated from JV profits over the course of the year, after repayment of loans, funding shouldn't really be a problem right now and if the deal goes through, there certainly should be no requirement to raise cash in the short term.
Evening all, have to say it’s been a while since we’ve seen some relatively steady buying in anticipation. Hopefully, this will be the pattern for the next month or so until further news of the proposed deal, LOM & reserves update and that special dividend.
In the meantime, I’d like to wish all fellow investors here a great Xmas and a prosperous New Year!
Hello Rd 2 U, thank you for your kind words. I shall do my best to try and add to the existing contributions here once I have done some more research. In the meantime, I wish you and everyone here a great Xmas and a prosperous New Year!
Hi VanVan, looking good here. I have taken a position and will be working on some forecast numbers between Xmas and New Year. I have high expectations over the next 12 months, assuming gold prices remain steady and production remains in line with targets and I particularly like the fact that the Court Order allowing the cancellation of the share premium account and conversion to retained profits in 2018 opens the way for dividends to be paid from surplus cash going forwards - something I was not previously aware was possible (doh!), but I am fairly hopeful of some reasonable returns here.
Evening VanVan, John, Joe and everyone else here. I have read this weekends‘ posts with great interest and agree with so many of the points made and fully understand the different views.
The bottom line is the proposed deal is very divisive when I’m sure many of us would have wanted something with a clear benefit that we could all agree on.
Just to add something else into the mix, which has crossed my mind, is that the deal could be considered as a hedge against a fall in the gold price. That is to say, if the price were to fall, then future profits would be lower and the deal would be viewed in hindsight as very much in the interests of shareholders.
However, if the gold price rises, then the deal reduces the exposure to the value of the increasing gold price.
In that sense, it comes down to where you believe the gold price is heading and maybe we will have a clearer view on this over the next couple of months before deciding whether to vote to approve the deal.
Hi Benjie, on the face of it, the cash is a positive and the special dividend will be welcomed (apart from the tax), but as you say, what then?
It is after all just cash and is not going to generate any immediate benefits. If it’s going to be used for exploration and development in Cyprus or elsewhere, I agree with Willowman that it might be as well to not do the deal and use the retained profits and cash to develop Salinbas to a point where the potential value of a deal is much greater.
The numbers don’t really tell me anything in as much as the cash & foregone profit pretty much balance out rather than there being a clear incremental benefit.
Where I find myself now is stuck on the fence, having formulated a strategy to hold and at some point partially cash out with a free ride on the remainder and now I am uncertain whether the new proposal fits with my previous timescales, I am having to decide on something that I basically did not want to have to make a decision on without a clear view of the incremental benefit and I am having to formulate a new strategy based on what I think may happen in the short term, medium term and long term. Ok, so there will be events such as the recent Syrian skirmish and movements in the gold price that were always going to throw in the odd curve ball and it would be foolish of me to think that everything would go according to plan, but I still feel a bit miffed and underwhelmed by what is on the table, a bit like John, but hopeful that in time, we will all be better off as a result....