focusIR May 2024 Investor Webinar: Blue Whale, Kavango, Taseko Mines & CQS Natural Resources. Catch up with the webinar here.
(bah hit the submit button by accident, and stupid LSE doesn't support tabs so no indentations)
Some things to note:
- These numbers are purely based on the feasibility studies for each resource
- Sabina includes open pit + underground, Condor does not include underground
- Condor's FS was designed to provide Condor with the lowest cost route to production, not to demonstrate the upside to a potential acquirer
Obv the Sabina resource is very large compared to Condor, but the FS doesn't really tell the whole picture. The success of the sale depends on Jim and Mark's ability to sell it based on the upside case established in the Sept 2021 PEA:
- Includes La India open pit + underground, and feeder pits
- Production rate of 150koz/year for 12 years
- 3.18 g/t for 1.47m oz gold
- AISC of $958/oz
- IRR @ $1700 gold of 54%, NPV (5% discount) of $418m (at $1800 to compare to the previous posts figures would obv be even better)
These figures are more comparable to Sabina's since they are based on costs before inflation started taking off. Condor's FS takes this inflation into account but Sabina's does not, their costs are certainly much higher now.
We've got a great project here, get us $200m minimum please Jim and Mark!!
For those that are interested, here's my comparison between Sabina and Condor:
- Project jurisdiction:
- Sabina: Canada; Condor: Nicaragua
- Feasibility study completed:
- Sabina: Q1 2021; Condor: Q3 2022
- IRR @ $1800 gold:
- Sabina: 31.3%; Condor: 33.4%
- Post-tax NPV with 5% discount rate @ $1800 gold:
- Sabina: $1.1b; Condor: $146.07m
- AISC:
- Sabina: $775/oz; Condor: $1039/oz
- Production rate:
- Sabina: 223koz/year for 15 years; Condor: $1039/oz
- Mineral reserve:
- Sabina: 18.7Mt @ 6.0 g/t for 3.6m oz gold; Condor: 7.3Mt @ 2.56g/t for 602,000 oz gold
Some things to note:
I listened to a podcast yesterday with money manager and gold investment specialist Adrian Day (manages one of Peter Schiff's gold funds) and the whole thing is a great listen, but towards the end of the interview I heard some things that are very relevant to our situation that investors here might appreciate:
https://www.youtube.com/watch?v=BQFfj07UxDQ
Watch from 1hr 6mins, some highlights:
- Copper mines are typically large and take lots of capital and time to bring online compared to gold
- Permitting times are getting longer all over the world including in the US
- Streaming has become a much more common way of financing a mine build compared to issuing equity
- If you're building a mine you have to dilute, either at the mine level or at the company level (if you don't have the capital already)
- THE THING THAT THE AVEAGE RETAIL INVESTOR DOESN'T UNDERSTAND IS THAT A LOT OF THESE COMPANIES IF THEY ONLY HAVE ONE OR TWO MINES THEN THEY HAVE TO BET THE WHOLE COMPANY ON THE ONE MINE!
- Taking on a lot of debt is onerous for a junior gold company with only one mine/project
- There are many risks in building a mine and very few new mines come in on time and on budget
- This situation has got even worse in the last few years as inflation has increased
- The largest cost of running a mine is energy, the second largest is local (labour) costs
- Average grades of gold mines have collapsed over the past 20 years
I realise that trust in Condor's board and management is low right now, but we know that we have a proven, permitted and economic project that is ready to construct. That is worth a lot of money in it's own right, certainly more than our current market cap of £30m!!
We are all concerned what is happening behind the scenes as we are in the dark, but we have to remember that our board have a lot of skin in this game and are incentivised to sell the mine at the highest possible price. If Jim Mellon has decided he wants out now then his only choice is to sell the assets to the highest bidder (unless someone is willing to buy him out), we can rest assured that he is working hard to get a mutually beneficial deal done, the man is not an idiot. He knows he's got a valuable asset and it is unlikely he will let it go for fire sale prices.
Hold fast.
Gavlaa, yes could be. I was musing the other day that the sudden shift in strategy must have been triggered by something that was a fairly powerful incentive (for JM at least). I'm sure we hope that it was a real indication that the assets could be sold quickly for an acceptable price.
In relation to your other point, I think that a sale of the assets *may* flip into a takeover of the company's shares. But we'll see I guess.
Sent MC a message today asking if there was any non-market sensitive news he could share, he responded within a couple of hours. I won't post his reply without his permission but sufficive to say we'll have to wait until they're ready to update the market in due course.
Seingred the entire gold sector has been lifted by the rising gold price, Equinox has it's fair share of problems (not to mention $1600+/oz AISC due to rising inflation), they had a terrible year last year and some analysts are saying at current prices it's overbought. Could go higher based on sentiment and the desire to capture leveraged gains based on a rising gold price, but no guarantees. My point is even the great Equinox suffered as much as we did last year and is only now rising thanks to the gold price. This sector is fraught with risk, we should all remember that before leaping to insult the BOD here (not saying you did Seingred), but criticism is deserved and justified for sure.
I say the entire gold sector has been lifted by the rising gold price, but obv not Condor as we are currently stuck in this sale process with no idea how it will turn out. My only hope is that the rising gold price will increase the chances of a decent sale here and we can all get out and move on. A decent update soon would be most welcome.
As a side point, the asset sale of La India doesn't make much sense to me, as surely any acquirer would want the additional feeder pits for a scenario described in the 2021 PEA (150,000oz/year for 9 years) rather than the cut down FS scenario. And if they take the feeder pits they might as well take the rest for the exploration upside no (I doubt the remaining land package would add that much additional cost to the deal)?
Inflation is starting to hurt producers and really the gold price should be much higher. The 6 monthly gold price hit $1900 in 2020, adjusted for (official) inflation that would be $2130 today. Given everything happening in the world gold should be $2500+ but it seems the US still has it's thumb on the commodity scales, at least for now. But for how much longer, that is the real question...
DDD having not been through this process before I really don't know what to expect, so unfortunately not in a position to offer any experience-based insights. I guess if nothing else it will be a learning experience!
Your posts relating to intra-company debt are interesting, though have to admit also confusing! The £45m debt you mention, is this basically an accounting "trick" so that it won't actually affect shareholder value? For example, if the asset is sold for £145m , will the shareholders realise £145m in value or £100m?
Punter I'm not arguing that MC has "done a great job", clearly whatever else he has failed to unlock market value for whatever reason (whether his competence, wider market sentiment, etc). What I'm arguing is constantly ****ging of the leadership whilst remaining invested has to be the dumbest thing I've ever seen. So to answer your question "Why would anyone sell now at near rock bottom?", well if you think the BOD are a bunch of crooks then what makes you think you'll ever see a penny more? Sell out whilst you can no?!
Punter out of interest, would you have been happy with 50% dilution to secure mine finance? Would you have accepted the construction risks and possibility of time and cost overruns? And at the end of it, what if the market STILL did not value the Condor appropriately - what if we were still sitting at 30p whilst in production given the amount of dilution required to secure funding?
Obviously I am disappointed with where we are, but I'm hoping that MC/JM had a good reason to believe they could sell the asset for $100-$200m dollars as MC stated. Not the ending I'd hoped for but it is what it is. I'd take that over watch more years pass by and seeing the (current) value of my investment here halved just to start construction.
Get it sold, issue a divi and let's all move on.
You're right of course EL, done. Apologies for giving these fools some undeserved attention.
But seriously, I'm flabbergasted that there are people here that are so angry MC (and JM) didn't make them rich that all they can do is spend their time insulting them on this board! And the best part is, they are still invested!! Surely if you felt that way about the management team you would sell your holding and never look back? Unbelievable.
Good posts EL, agree wholeheartedly.
Re gold, very interesting volume in COMEX Jan spot contract recently. Someone is buying the spot contract and taking immediate delivery of 100,000s of ozs, something that basically never happens (futures are for hedging/speculating, not for purchasing physical!). Not surprised to see the paper price bounce, could this finally be the time the gold price takes off?