Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
Another way of looking at it is that if they knew something “that would result in a drop in share price far worse than we've seen up to now” it would be unlawful not to have disclosed it to the market already. Therefore, to the non-conspiratorially minded, the absence of an RNS is actually confirmation that they don’t know such a thing.
In any case, there are many possibilities beyond the two you present. There is no obligation to issue a “no known reason” RNS and many companies do not. In my experience they are more common when prices spike up for no reason. And if I had to estimate the proportion of companies on my watchlist who have produced such an RNS in response to a notable share price fall, it would certainly be less than 10%
Yep - thus toned down, I have no issue with that comment, GG
Jim and GG, I think we’ve established that there is no basis for using the word “fraud” whatsoever. It is not a valid assumption based on nothing more than a falling share price. It is not necessary for a director or directors to go on record to say that they haven’t committed a fraud. That statement is implicit at all times. The idea that whenever a share price goes down without known reason the board of the company concerned needs to declare to the market that it hasn’t committed a fraud is absolutely risible
Alessandro, do you mean in 2022?
My god there’s a lot of rubbish on here. A few points:
1. The company ended H1 2023 with strong production and healthy cashflow.
2. Since then (a) the gas price has gone up (DEC is well hedged but, even so, up is good), (b) directors have continued to buy, (c) the board has caused the company to buy its own shares, and (d) nobody is able to point to any known operational issue.
3. An increase in the company’s credit facilities is a good thing. It shows that the lenders are happy with the company’s financial soundness, and it increases the company’s liquidity and flexibility. Comments like “why do they need to borrow more if they’ve got such good cash flow” are just piffle. Having a larger facility does not commit them to borrow more, it just gives them an ability to do so. It’s an unequivocal good thing.
4. A dividend doesn’t become unsustainable just because it’s high in percentage per share terms. Its sustainability depends on the absolute amount. DEC’s dividend is precisely as sustainable now as it was when the share price was 95p some 5 weeks ago.
72.3 but only an initial tranche. Plenty held back to scale in further should the price continue to slip. Not quite at tranche 2 level yet. In any case, I bought at 72.3 because I think that’s a good price medium term, not because I thought it would go up in the first day of holding
I don’t see why the dividend should be cut:
- The next dividend has already been declared
- Our gas revenue is being very nicely topped up by the hedging program
- There is an active share buyback program, which seems inconsistent with a need to save cash
I’m in :-)
GG - I think that’s a fair point about the auditor not having to be in on it. I overreached a bit there, apologies. But if you assume a non-fraudulent and competent auditor, it does make sustained fraud much less likely
Well, I’m grateful to GG for taking the time to explain his concern to a newcomer. Having now read lots of today’s posts, and the 2022 and 1H23 reports, my view is as follows:
The GG theory seems to run like this: (a) DEC has lower reserves and lower production than it claims, (b) this results in DEC having to buy gas on the market to deliver on forward selling contracts, (c) in 2022 this was a big problem because of the high gas price, and (d) the buying of gas on the market resulted in the $133m hedge modification entry in the 2022 accounts. There is admittedly no evidence of (a)-(c): the case for them is inferential, on the basis of (d).
This theory is only valid if two conditions are satisfied. First, point (d) has to be right. And second, (a)-(c) have to be a valid inference from (d).
It seems to me that point (d) is not right. The $133m hedge modification entry is explained in the 2022 accounts, as Trotsky has pointed out. It has nothing to do with buying gas on the market to deliver on forward sales. Indeed, GG’s claim *can’t* be right because it assumes DEC hedges by forward selling physical, whereas it’s clear from the accounts that it doesn’t: instead it uses paper derivatives. These derivatives settle in cash, not gas.
If (d) is wrong, (a)-(c) are out of the question. Worth noting, though, that even if (d) was right, there would be far more natural and inherently plausible inferences than (a)-(c). Fraud should always be low down the list of possible explanations, particularly where lots of people including PwC would have to be in on it for it to work.
So that’s GG done as far as I’m concerned. I’m also happy with the company’s operational and financial performance as per the 1H23 report. The only issue I have found which I’m not crazy about is the resignation of the CFO (particularly combined with an unexplained share price crash). But, people move on in their career for all sorts of reasons. It’s probably balanced out by the widespread director buying this year.
I’m minded to buy some DEC shares.
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Thanks for taking the time to explain, I appreciate it. Is there a reason for thinking that the loss suffered in respect of hedging was caused by a production shortfall which is being fraudulently covered up?
Ok but he either has a good point or he doesn’t. I’m happy to work out which, but in order to do so need to understand what the point actually is
Hi GG. I’m a non-holder here but interested to understand what your concerns are. Can I ask, have you ever written them down comprehensively in one place, like in a blog post or anything? I have tried scratching together an understanding of your point from your various posts on this board, but there are a lot of them…
Thanks Poppyseed. Building on my twitter thread, I think a couple of other things that are under appreciated at the moment (but this may change quickly) are:
(1) The operational simplicity and economy of the HMS project. Scoop it up with a digger, run it through the nearby plant, whack it in some bags, done. Well, pretty much anyway. Cheap and low risk.
(2) Scale up potential. This follows from my first point. Once we have a stable operation with one plant, why not buy another one, and another, and another? The resource is big enough, and constantly replenished. We don’t have a complex mine plan holding us back. The capex for each plant will be repaid quickly.
Well I agree with the last four posts (Reggie to HH). Never said it wasn’t good news. Indeed my first post said it was. I just thought it was a sneakily worded RNS which appeared to have misled people, so tried to bring a bit of focus onto the actual wording. That’s it from me, enjoy your day guys, should be a decent one
The objection to the exploration and miscellaneous applications has been withdrawn. Come on guys
No, what has happened is that IOCA has a number of applications pending consideration by KNAC - the big one for mining and a bunch of others for exploration, building the road etc. The news today is approval of some of the minor ones. It doesn’t say anything about how the big one is going, except in the soft sense that it suggests the relationship with KNAC is constructive. I have to say I think the RNS is written in a borderline misleading way, as indeed is evidenced by the flood of people on here who same to have read it as the KNAC approval to mine
So you’re all just going to pretend this is “the” KNAC approval, are you, even though it isn’t?
“continues negotiations on a separate mining agreement providing for common law holders' consent to the grant of mining tenure and operations, which is due to be considered by the end of 2023”
Read the RNS guys - it’s good news but as far as I can tell it’s not the heritage agreement you’ve been waiting for