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We are pretty much pinned here. Could it be that CR bondohders are shorting here to lock in their profits? They can always get the shares to cover their short losses? They would do this to protect their ROI from interest rate gains. It‘s a typical strategy which a CB holder does to reduce risk.
Lawrence, it would make sense to know the production cost of gold, but keep in mind that sunk cost don’t count. You really can only take into account what future costs there are with it. This said, it could well mean that the POX hub has been the dumbest investment ever, viewed over the entire project’s life span (dating back 10 years), but still an excellent investment going forward.
In my books I got them at 0.0c with a massive debt load on top.
@Kenj, To me, this looks like they have put some paint on a pig. Overall, it looks like our immediate liability in case IRC goes BK, would be reduced, but the total liability remains the same as we still guarantee the remaining 120Mio at the end of the 8 year period.
Regarding cash constraints, I believe those bridge loans will give us some room to breathe, as we are certainly the first to receive that 60Mio payback before IRC sees a dime of the new facility so that must be a positive.
@Wigwammer, I agree with you. I do not see any chance of IRC ever repaying the loans. I agree that POG can be fine though if and only if the gold price remains at these levels or increases. I don't think POX will be a solution to all of our worries. If this was so lucrative, then I would have thought that a whole lot of companies would have worked on this already. There are lots of mining companies with very deep pockets and if this was a no-brainer investment as everybody has come to believe, it would not have taken 10 years for some of the big guys to build this They keep talking about this being top notch technology which only few companies worldwide have. I work in the internet space and the mere fact that this has taken 10 years to complete, to me suggests that at completion, this was already old school technology and not "cutting edge" or whatever they called it.
I hope that IRC will magically become cash flow positive. Let's hope that no bank, not even a Russian bank, would be dumb enough at this point to give IRC more money unless they really had a very very feasible plan to get there. It's pretty bad, but my hope relies on a bank not being stupid, but we must remember that they probably know a heck lot more about IRCs business than we ever will.
Finally, if IRC can't turn around, I guess POG will remain the dog it has been, only alive to keep another company on life support. In this case, I would argue that the share price will never recover until those IRC loans are fully paid off :(
Wondering about that new update. I am a little puzzled as to how these new guarantees work.
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This is a first stage in Petropavlovsk's plan to reduce its guarantee exposure to the IRC Group. Under the proposed terms, the Company will provide the US$120 million Corporate Guarantee and three US$40 million sequential two year fixed term guarantees and from the sixth anniversary of first utilisation a further US$120 million guarantee. The total initial guarantee will therefore be for US$160 million which should reduce to US$40 million subject to certain operational conditions at the K&S project being met. . For the final year of the New Facility, the guarantee will increase to US$120 million to cover the final principal and interest repayments.
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I am not sure if I am reading this correctly. Maybe someone can elaborate.
To me it looks like we are still guaranteeing the whole amount, just that at any given time in the life cycle of these loans, we guarantee less. At first, we would guarantee 120 + 40 and we need to come up with another bridge loan of 27. This in sum still puts us at 187. We then get back 60 once the financing is secured, and we are still at 160 which we still guarantee. Now, if they cannot pay, what happens. do we owe the 160 + at the end of the term another 120??? That would still keep our risk at the same levels ?!?
I guess, I am lost, please enlighten me.
lol. Gold will go up I agree, but this will be unrelated to the price of bitcoin. Bitcoin is not bust, this is rather like the 2000 crash and BTC will recover as more applications will embrace it. I do not expect BTC to be the new digital gold and it won't be in competition with gold. Gold has proven to be the store of value and hedge against inflation for thousands of years, but FIAT will lose it's value and crpypto will rise, and I do not mean just the value of crypto, but actually the usability of it. Once that happens, we will see years of growth for BTC. I don't know if we have to go to 1000 or lower on BTC, but the sooner the value depends on usability of BTC rather than some pipe dreams, it will flourish. I think of Bitcoin as Amazon in 2000. Every bubble bursts eventually, and that's a good thing. The strongest cryptos will rise from the ashes only to become much more valuable.
We'll revisit this post in 5 years, when Bitcoin will probably be worth the same as today (in real terms of how many BigMacs you can buy for them), but in FIAT terms it will probably be much more valuable as FIAT currencies lose their value :)
I think Brexit is a terrible solution in the first place. A second Referendum would be great. This whole mess would be like a huge warning shot for the EU and would probably motivate everybody to make it better. I love the idea of a unified Europe, unfortunately they have totally messed it up which then resulted in the Brexit referendum as well as the right wing movement across the rest of Europe.
I don't buy the beaurocracy argument. Things run very smoothly with a single currency, just ask companies that work cross border.
All we need is a real European government that is truly above the national governments (especially the German one), we need a single tax authority, which is paid taxes to and then distributes to the regions accordingly where the revenue is generated (not on the national level), we need Euro Bond and we need a European Army.
As long as someone like Tusk is less powerful than someone like Merkel or Macron, there is no real Europe. As long as national heads remain more powerful, they will continue to make decisions for their nations first regardless of other nations' interest.
I see a unified Europe as a place where all local cultures can flourish and prosper side by side and would be much better represented on a global level.
In a unified Europe, there would be NO unilateral decisions possible (2 words - Germany & Immigration)
A wonderful utopia ;)
JMHO
Why would they not be allowed to buy anything. They have announced that the deal is being made. As long as it really has not been signed yet, which apparently cannot be done without shareholder approval, there certainly should be no hurdle to buy shares. Again, if this deal was signed off and that information had not been made available to the public, I would suggest that buying would be illegal.
We don’t need any Teleweb... what we need is some insider buying from them. That would reassure of of us. Cheers
I guess they read my post and gave us an immediate update. Well done Management :)
love that sarcasm :) 6.5 by Xmas 2019
I hope management gives us an update in January 2019 about how the first autoclave has performed.
not sure why shorters would have anything to do with POG share price. This is not shortable, at least not with any reason. This is at or near the bottom. I only see potential catalysts for strong share price increases. Everything else out there is already as bad as it can be. You would see shorters if we had negative profit margins, but at these levels of profitability along with POX hub going into production and guarantee reductions, I only see upside risk here.
If you want to bet on IRC dragging POG down, why not just short the loser directly, which makes a lot more sense than taking a low risk/return bet on a POG short.
Only guesses I have are
A) either, ICBC will get shares in POG if IRC goes under, which frankly is unlikely.
Or B) IRC will issue a convertible bond which waters down current shareholders of converted. This is more likely, and would be an exceptional relief for POG shareholders. Remember, with the financial risk involved with IRC, the less we own the better if our guarantee is removed or reduced.
I view it as a positive sign that shareholder approval is needed, this means that plans to refinance this thing are well under way. Let‘s hope it‘s the former though, otherwise we may get screwed again...
Hey guys, not a whole lot of new stuff in the update regarding IRC. However, we have a lot of transparency regarding to when we can expect news. We have very specific time frames given. This signals confidence of the management team. By giving a specific date means that they have some transparency which they were willing to share with us.
POX hub going into production tomorrow is fantastic news. Of course it will take time to see this at full capacity and there may be further delays, but key takeaway is that they are definitely starting a real test tomorrow and they will have a lot more transparency and more things to share about the progress once they really start producing gold with it.
The IRC news is partly old news, but there is a quite precise time frame now for the shareholder approval process which I consider very good news. This also tells me that management is confident that the refinancing will take place.
Regarding the share price, it seems like nobody big is willing to bet on all of this happening, which means that nobody knows more than what we know. I gut feeling tells me that with the first reduction in debt to 75% of the original value, our company value should increase by at least 1/4 of that outstanding loan + the 36Mio that we will get back. Not sure when that second brigde loan will be due. The restructuring of those loan should add 80Mio+ in market cap. Add another 50Mio or so for the next 25% they shave off in 2019 (if that happens). Furthermore, we can only guess how much more market cap will be added due to the fact that we become less risky as an investment. Add on top the free cash flow which the POX hub will generate. How much free cash flow it will really be is anyone's guess. I know nothing about the ultimate cash cost of those ounces produced.
All in all, I guess 2019 will bring a lot of clarity. Mark my words, if we do achieve the reduction of the IRC loan guarantee and POX Hub shows significant positive cash flow, we'll look at minimum 10p sometime in 2019.
G/L
btw... found the video of the bridge. I guess they did indeed connect it.
https://www.youtube.com/watch?v=0t2xjV60L6I
I wonder why they didn't put a picture of the connected bridge into that PDF. To me that bridge still looks like it's leading straight into the water :)
http://www.ircgroup.com.hk/attachment/2018101608020100003295019_en.pdf
Kenj, spot on. The gold price is extremely important to stay profitable and pay off our debt, but the big move comes from solving IRC related issues. Gold can only help us remaining solvent and being able to service our & IRC's debt until we get POX up an running at least.
To confirm your point. If gold was trading at 1750, we would not care about IRC and our own debt, since in that case, we would make loads of money 250Mio or so. In fact although it looks like the gold price has been irrelevant, the second we lose profitability (incl. all debt servicing cost), this share will tank.
Unfortunately, the facts are all but rosy. Lots of promises and hopes. Everything factual was negative (increased cash costs, lower production, loss instead of a profit etc etc). Yes, one day we will be at cruising altitude again :) Seems like I have heard that before and it never happened.
Corporate governance is a joke, how about Peter acting in the interest of two companies now and that’s not even to mention the nepotism going on. I am the bag holder that gives these guys another 6 months and then I am gone if nothing changes. Honestly, I see nothing but smoke and mirrors in this update. Cheers
Can’t believe that RNS... there is actually someone dumber than investors on here :) I thought I was stupid but seeing that bankers are actually getting POG out of its guarantee is just beyond me. I wonder what that deal maker got out of this. If we really get rid of that guarantee by 2020 it have been worth the wait. Great news... greetings from my vacation at Amalfi Coast! Having some beers now and enjoying the weather. Cheers
That all makes sense, but I would read this as follows... If IRC can issue enough shares, let's say 200Mio worth, then the capital would be there to get us off the hook. However, who do you think would participate in such a massive rights issue. We might participate for our share, which would still cost us roughly 70Mio. The question is, who would purchase the remainder of that 200Mio that would need to be raised. I don't see this happening.