Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
I took the opportunity late this afternoon to climb over the towels and through the blood and buy with the 10% cash I have held back for an outside/exceptional opportunity to buy more on the cheap. I judged that this was such an opportunity.
Time will tell whether it is foolish or wise but I am reassured that it is "cheap" as we closed today 10p down year to date and 12p down on share price close on day of Endeavour approach 3/12/20.
As the Frank Holmes and Bob Moriarty podcast said on 5/11/20 noted the best management teams have 6 key attributes,
and the first 5 are: a vision; transparency; a strong track record; a profit mindset; expertise. I would argue that Martin Horgan fits the bill on what we know so far and has investor goodwill.
But as yet he has not yet met the 6th attribute of the best precious metal mine Directors: buy shares in the company you run. Martin Horgan has not yet invested his own money to buy Centamin shares.
Now is a good opportunity Martin.
Tiger thank you. I am an optimist for CEY if Horgan's team proactively makes the most of the company's advantages in a rising gold price environment. Today the sentiment fort CEY is bombed out. Investors, whether institutional or retail want both hope and progress.
Bad news often comes in threes. Investors still have to deal with the volatility which is likely soon to hit us from US 2nd wave of Covid impact on US economy and market and US election. As Jim Rickards has said " markets have not priced in a no clear winner result".
But any stock market sell-off induced by US events will likely see gold and gold miners then rally into the end of the year.
But before that we might need to brace for impact.
If you have held CEY shares for 10 years you will certainly have earned those gold flip flops the hard way. One country and one mine and 1.2bn of issued shares just amplifies each and every one of the CEY share price smack downs.
The waste slippage is a good analogy for CEY management complacency since Pardey became CEO in January 2015. Lots of senior management appointments, some for only a few months, lots of share options granted. But where have these specialists and their free share incentives got us ? The Court case, Sukari expansion, 600,000 oz production, W.African expansion. Between 2016 and today we've marked time when CEY should be striding ahead and building far and wide by now with a world class asset and $350m cash and no debt.
Martin Horgan sounds like the CEO we need to jump start the CEY engine. Otherwise why not just distribute the $350m cash and put the company up for sale? I assume Horgan took the job as CEO in April because he sees the great potential here.
The time for more studies, deliberation is ending. The market and the share price drubbing is telling us that.
For each report from now on Horgan needs to deliver an action plan for as many of these issues as possible in 2021.
Cash. $345m when are we going to use it ? Use it or lose it to an asset stripper takeover. Endeavour was the first warning shot.
Sukari. update on expansion & resource and reserves. Where has the optimism gone for "600,000 oz p.a soon..."
Solar. Institutional investors love green tech and it helps show the company is modern and tech responsive to cost cutting.
New Egypt licence. Let's hope so. But it might be good to bring in a JV partner like Barrick or Newmont ? If CEY did perhaps we could advance 2nd mine in Egypt and W.Af at same time.
W.Africa. What value from 6 year investment ? 3m oz gold implied resource apparently? Sell it on in a rising gold price market or produce a mine plan in 2021.
Dividend. At least guarantee 4c Divi (cost $46m) to match the total 2019 divis of 10c. Ideally, be brave and spend $69m of cash for a 6c divi to total 12c for year, up 2c from 2019 10c as reward to long suffering institutional and retail investors. The share price has yet to deliver meaningful capital growth. Consider that CEY closed out 2010 at 176.4p and last year at 127p.
CEO Horgan. Align yourself with institutional and retail shareholders and buy a meaningful holding. All the admired gold mine leaders have substantial personal investments in their own company (e.g. Sprott, Lassonde, McEwan, Neumeyer ).
Hi Mr Tibbles,
My opinion remains the same : Trump could and should have ordered it in January 2017. But that would have changed all the US financial control levers from the Fed and Wall St banks to the US Treasury and the White House.
The newly elected President with all of his baggage was with hindsight very unlikely to be a force for real change. He is Deutsche bank's largest private debtor and he has a long standing dispute with the IRS over a $100m rebate, never mind the sleazy strippers etc. Trump was easy to control. His chance of draining the swamp and making radical changes were probably zero from the start.
Instead he managed to make the US economy as indebted as his own finances. The US balance sheet now has trillions of dollars off balance sheet. The manipulation of markets and data which he complained loudly about before he was elected...has continued with a vengeance. It is the only reason he appointed Goldman Sachs creature Mnuchin as Treasury Sec.
Don't expect change from Biden. He is a creature of corporate America he'll follow orders. He won't audit the gold either.
It is undoubtedly true that the rise in the gold price is signalling investor distrust of devaluing currencies and overvalued paper assets. if a leading politician were to proclaim gold now they would be admitting the real mess the world economy is in. But gold will force it's way to attention either through the dollar's devaluation or US inflation taking off.
So the best performing asset of the 21st century continues it's stealth rally with only 0.5% of investment assets in any gold or silver investment. That will change as the debt and money printing pot boils over. Then there will be a gold rush.
Note how CFO Ross Jerrard's modest 15k purchase was actually made on 5/10 and probably could have been announced with the RNS yesterday for Jim Rutherford's purchase. Does that mean they have stage managed a series of buys and that we should expect a first purchase by Martin Horgan this week ?
The statement of Jerrard's total ordinary shares holding could be more transparent by listing them including now vested (prior share options) as a subset.
In the new Centamin website under the section : Shareholder information it lists the top 6 largest Institutional shareholders. But notably it does not state the total holdings retained by Sami and Josef El Raghy. Including the total holdings of management and senior executives is standard practice with many other publicly traded companies.
Gold mining is about taking calculated risk. The best way for management to attract new investors to Centamin is as the American phrase has "for the chefs to eat their own cooking".
So my message to Martin Horgan is lead by example and make your first major purchase, this is a great entry price.
Prof,
Thanks for your kind words. Hopefully Martin Horgan will follow the precedent of Harry Michael the CEO in 2011 who on appointment bought 1m shares at around 110p a share. That was a firm statement that he was aligned with shareholders and believed in Centamin.
I think it is important to know what kind of trader investor you are and stick to it. I don't have the panache like you and Sotolo to buy as the price recovered out of the March sell off. I am definitely an investment tortoise.
I believe that the US election the Fed and macro economic factors will soon see CEY share price trending higher. I remember reading months ago that Sotolo wants to get enough profits to build a house. That's great and his dream inspires me too.
We longterm holders are becoming like some Amish community...we struggle together but collectively it should be worth it in the end.
Thank you Jim for buying 100k shares.
When is Martin Horgan going to make his first share purchase ? Selling Toro made him a rich man. He has already been granted 590,000 share options of 590,000. Why not take that to a round 1m and buy 410,000 shares Martin ? But shouldn't the CEO be "Uber alles" other Directors ? Well Martin you've got some catching up to do...
CFO Ross Jerrard has now accumulated 1.26m share options. Ross why not top up 240,000 now to take it to 1.5m ?
Hello it's been a while. I finally completed my CEY long term holding this morning. I have been waiting to pull the trigger since May but never got the pullback bargain price I wanted. My rule for my investment portfolio is to wait for the price to come to me. My strategy is that one needs a"margin of safety" purchase price to minimise your capital risk with the inevitable setbacks of mining.
Why did I buy this morning ? Of the 11 examples of more than a 6% decline over the last two years 7 started recovering the day after. In March the recovery from the stock market crash began 6 days later. The exception was the 25/2/19 -28.4% drop which flattened sentiment and scared away buyers for 14 weeks.
The optics of the on site General Manager selling free share options a month before the RNS is galling. In my opinion if CEO Martin Horgan were now to announce that he has purchased 0.5-1m shares with his own money to align himself with investors. One of the common attributes of the most successful gold mine company entrepreneurs is that they have made substantial personal share purchases. Martin now is a good time to buy big.
US March Non Farm Payrolls (NFP) due 13.30 today. Last Thursday 26/3 US Initial first time jobless came in at a record 3.28m, and brought home to some people that the economic battle is just beginning and it is going to be long and hard.
Today's NFP could report a staggering 10% to 20% US unemployment. That's from record low unemployment in February!
Over the next couple of months the data will likely get worse. The length of the virus activity and lockdown will determine whether we have a nasty recession for a few quarters or a 1930's style depression.
We've had a bounce off the selling fatigue bottom of 23/3 but a number of well respected hedge fund managers note that we have not yet seen the "capitulation" bottom for the stock market in the US yet. Perhaps the coming tidal wave of terrible data and Q1 earnings downgrades in April will lead to the the capitulation.
In April with a stream of terrible data incoming it seems plausible that there will be a re-test of the 23/3 DJ low of 18,214 and S&P 2192 and one final plunge and selling climax clear-out. European markets will take their cue from the US.
Hang on Centamin holders we may have one more storm to endure before discussing dividend growth and earnings upgrades going forward with new vigorous management.
bobliz35 you might find the attached podcast interview of Martin Horgan ex-CEO of Toro of interest.
His CV and the way he talks in this interview encourages me to believe that we have potentially now got the right man to develop the full potential of Centamin.
I will be even more convinced that he is the right man if over the next few months he buys say 500k to 1m shares with his own money (as all the other leading gold mining entrepreneurs do) to show institutional and retail clients that he has real skin in the game and we are all in it together.
https://omny.fm/shows/dig-deep-the-mining-podcast/dd-55
Hi to Zambianminer and MrT. For the record I don't want to see a takeover of CEY I want to see a Chief Executive installed who is ambitious to grow the company and who like the late lamented CEO of 2010 Harry Michael who on appointment immediately buys 1m shares. That is what all the leading US and Canadian mining entrepreneurs do and it helps them garner institutional support if they have real skin in the game. Pardey bought no CEY shares.
Secondly if we get a new Egyptian concession and say Barrick gets one near us I would welcome a Barrick-Newmont type JV they have agreed with their mines in Nevada. That way we could share costs and get to production quicker.
Centamin has lots to look forward to it just needs a dynamic CEO to seize the opportunity.
Coronavirus looks like the pin. All we can do is take shelter for now. Even gold miners (debt free, cash on hand , divi payers) producing a real hard asset with no counter party risk are getting sucked down with all of the malinvestment sectors eg oil fracking, mega banks derivatives swamp, unicorn IPO's, S&P 500 index co's issuing bonds to buy back company shares. All done with funny money that is borrowed. Don't start on government debt... US Fed debt is multiples higher than $23trn.
When the general market selling reaches a climax hard asset categories will be in strong demand. But not yet. Meanwhile keep an eye on Deutsche Bank trading at 5 Euros a share...an all time low for what was Europe's biggest bank in 2007. Might we see the German government nationalise it over a weekend. What happens to the 40+ Trillion Euros of Deutsche's derivative book exposure.
Coming out of this debt bomb environment gold and quality gold miners will likely do very well. Hang on folks.
Amused by a Reuters article with a "narrative" from EDV CEO justifying why their wooing of CEY failed.
Seb de M claimed a lack of understanding and a lack of information from CEY. Really ?
Note to Seb :
To be persuasive we must be believable
To be believable we must be credible
To be credible we must be truthful
No mention from Seb that the romance failed because of the incompatibility and imbalance of benefits enormously in their favour. No mention of their considerable negatives : $600m + debts, no annual net profit or dividends over last 5 years.
Centamin Board's unanimous opinion that the merger was not accretive to our stakeholders was spot on. Centamin can and will do much better than this. Move on.
https://uk.finance.yahoo.com/news/endeavour-not-tinder-acquisitions-dropping-120835479.html
Prof I would look to prior history. Right now the gold mine sector is getting some institutional attention after years of outright scorn from all but long term dividend investors.
As you rightly point out in an initial scramble for cash in correction a lot of portfolios will be sold regardless of gold mine shares "latent" potential as recovery assets. But then as you note gold and gold mine shares are usually the first to start to recover after a few weeks of the initial market correction..
In 2008 CEY fell >50% in the 3 weeks after the market plunge in September to a bottom low of 22p. This time I plan to keep my "blood in the streets" funds to invest into that exaggerated weakness if it should happen again. If it doesn't happen I will be content with what I have acquired at a low average price and await your 2 GBP price with relish as a first course of a banquet.
Best wishes Marmot
Prof I agree with your sentiments save with one caveat. Centamin and all gold mine stocks are still at risk of a general stock market correction which is long overdue.
A very good Investor and analyst who writes for the Wall St Journal Nigam Arora wrote last week : "the US market has reached new highs but is losing its internal momentum. This is a very important development because this market is controlled by the momentum crowd. They are buying not because valuations are low or because the macro picture is getting much better or earnings are rising fast, but because the stock market is simply going up.
I am a long term holder and buy more when I see major price weakness. Caveat emptor.
The proposed merger was a non starter for CEY as it was not offering what new Deputy Non Exec Chairman Jim Rutherford calls "value accretive diversification" for shareholders. But I believe that the 6 weeks have been a useful period galvanising an esprit de corps with management. They now know after this experience that coasting until a larger gold price breakout leverages up the cash flow is not an option when one is sitting on $350m in cash and no debt. The good, the bad and the ugly will all be sniffing around CEY now. So Centamin management have to be proactive and either declare soon what their W.African mine plans and aim for a major price re-rating or find a value accretive company that leverages up the very substantial foundations Sami laid down. But first CEY needs a dynamic CEO who believes in the cause and invests some serious money buying shares. Back in 2011 when the late Harry Michael became CEO he put his money where his mouth is and invested 1.25m GBP. Pardey in contrast just collected millions of share options gratis for reward with no risk. The candidates should be asked what they intend to invest if they got the job. It requires a stakeholder CEO aligned with us and invested like us with hopes and fears like us.
To conclude with the EDV distraction. Just this comparison sums up the disjoint between what was good for EDV was destructive for CEY:
EDV in Q4 2019 reduced their net debt by $77m. But that still leaves debt of at least $523m. All things being equal it could take them another 18 months to 2 years to become cash flow positive.
CEY in Q4 added $60m net cash, new total $348.9m
Yet in today's press release EDV's De Montessus claimed EDV "is poised to generate cash flow".
EDV's problem is that if investors get cold feet about overvalued general stocks in 2020 the first gold companies shares to be bought for a safe haven will be the unimpaired debt free and divi paying producers. Centamin stands as the largest UK registered pure gold play on the LSE and when the time comes her superior balance sheet and liquidity will be rewarded. Ten years on from the last gold mine share price peak we are overdue another. EDV knew that hence their opportunistic approach.
EDV shares may have risen today but my bet is CEY will leave them for dust soon.
Dasut quite so. It also makes me wonder exactly why EDV would not initially agree to sign a standstill agreement with CEY. Did they calculate that major institutional shareholders would force the CEY Board in December to agree to a merger without EDV's balance sheet being examined ? Did they count on a sideways gold price stuck under $1500 and a flatlining CEY share price as the ideal time to pounce?
I know that EDV have not yet made a formal offer but It's worth noting that not all mergers or takeovers complete. Barrick's attempt to buy Newmont failed last year and three years ago EDV and Acacia talks broke down after three months discussion due to " doubts whether the deal would deliver value to their respective shareholders". So what value would EDV deliver for CEY shareholders ? Their balance sheet could certainly benefit from CEY but what's in it for us ?
A rising gold price makes CEY more profitable and it's free cash flow, dividends and no debt profile more attractive to investors. As billionaire gold mine stock investor Eric Sprott often states :
"when a gold price bull run takes hold you want to own mid size producers who pay dividends and have no debt. That is the sweet spot."
An independent CEY would keep it's sweet spot. An arranged marriage would EDV would end it just when it will be most valuable to have in a likely volatile investment environment in 2020. A strong balance sheet, no debt and the ability to pay a regular dividend will likely be rewarded with a significant share price rise as the gold price advances.