Not about Centamin,12 Aug 2018 17:49
But a warning of what can go very wrong with a mining company when the management board are inflexible,single minded and not not open with the shareholders.
I have a copy of the full report by analyst Kees Dekker but ii is too long to post here .
Argonaut is an example of a company with management that pursues growth at all cost, or at least extending their tenure by keeping the production going, no matter what. The company started off with a classy mine, the El Castillo operation in Mexico, which commenced production in 2010. It had all the markings of a money spinner, which could reward its shareholders with good dividends. This mine is now on its last legs and all its cash flow has been used for starting other operations and partially paying for acquisition of sub economic projects.
Argonaut has since the 2016 report commenced operations at San Agustin and completed a feasibility study for its “flagship” project, Magino in Ontario, Canada. It therefore merits a revisit to see whether the criticisms in the original report were valid, or not.
This study shows that the production growth of the company, supposedly from 150,000 oz per annum to 200,000 oz per annum, will come to an end in 2021 unless the Magino project is starting up. The previous sentence has “supposedly” because the H1 2018 performance at El Castillo and La Colorada fell well short of plan and the actual annual performance may be closer to 150,000 oz than 200,000 oz.
Shareholders can only hope that Magino is not given the go-ahead. The attached report argues that the validity of the reserve statement is suspect and input parameters used are far too optimistic when benchmarked. After appropriate operating cost and capital expenditure adjustments Magino has actually a negative value.
This study comes to an intrinsic value of Argonaut that is less than half the valuation the market places on the company at 10 August 2018, but that assumes Magino is NOT given the go-ahead. When Magino is given the go-ahead Argonaut has no value at all.
On past performance it is unlikely that this will not hold management back pushing for a go-ahead of the Magino project.
Thought this may be of interest to some members.
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