Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
Initial results. Low grade but large metres so a lot of gold. Positive.
Anyone who invests in a growing REIT such as SUPR and doesn’t expect a rolling programme of equity raise / placing a does not understand in what they are invested. The business distributes, at least 90% of its income to qualify as a REIT, in SUPR’s case it’s more as part of the portfolio (Sainsbury Reversionary portfolio) is not yet cash yielding. So the only way to grow is to raise new equity, which can only ever be done as a discount to the current share price. I felt the discount offered on the October raise was too high but this round feels more reasonable (and at a lower raise quantum). Ultimately we need more liquidity in the share to attract bigger institutions, so it’s a good thing assuming they can invest it well and the track record to date is very good in my view.
Drilling underway at Dugbe F and more shortly commending at Tuzon. Two new targets identified from soil sampling. All on track.
Don’t forget that equity gets levered RPI given the 40% LTV. So 4% inflation becomes 6.67% post gearing from an equity holders perspective. On the slightly lower yield you also need to consider timing of the next 5-year rent review.
Hi TBTT. I agree though from memory the shares for Kouroussa have not been admitted yet so the market cap on a see through basis is 10% higher for once the exploration license is granted. Still, massively undervalued!
I’m a net buyer of SUPR for the next 10 years so I’m happy to snap up a 5.6%+ dividend yield if the market continues to value at these levels. Pleased to see the scrip dividend being voted through at the AGM yesterday - even cheaper to reinvest dividends!
It’s pretty immaterial so might not be worthy of an announcement for HUM. Though the deal appears to have been struck after market hours on Friday given time of announcement for BH. The detail on the stake was in the annual report note 12 from memory.
BH have announced they have reached agreement with HUM over the outstanding US$2.1m of outstanding convertible loan that was due in June. HUM have agreed to convert the loan into c.5.6m shares in BH at a price of $0.5 a share (currently trading at $0.52) - that compares to previous contractual conversion price of $8.50 for principal and $4.50 for accrued interest. Allows BH to use their cash for their exploration programme. BH shares up 6% today.
Another announcement from VEIN / Pasofino re Dugbe. They have now selected their drill contractor, the DFS and ESIA consultants. The road contractor has been mobilised and camp equipment ordered. Full steam ahead on Dugbe!
@Mostyn: On the basis that the exploration programme along is US$10m alone, never mind the DFS, Gov of Liberia costs, central / running costs etc, then CAD$10m was not going to be enough. However, there was cash already in the VEIN vehicle (they had raised CAD$6.3m in May) and you would not expect them to fully fund the full budget immediately. They will want show good progress and strong drill results to excite the share price and reduce dilution by raising the subsequent tranches at higher pricing. Moreover, the announcements have clear said that VEIN advanced the $2.0m deposit plus costs to ARX, so whoever said HUM lent the money is wrong.
Good interview with Dan Betts on **********. Highlighting:
- on track with production, no effect from coup, although COVID has been a logistical challenge
- Dugbe will deliver huge value - just look at the read through from Pasofino which holds the 49% and is funding everything to earn that stake
- Net cash in Q4 (so we should be close by end of Q3)
- Kouroussa (no update on licensing) is progressing and should allow the business to be doing. 250k oz a year self funded with maybe a little bit of debt.
All seems to be on track. Clearly gold down to $1,867 which weighed on the price today, but I stick to my 70p view of fair value and 12 month target of £1 a share.
https://www.londonstockexchange.com/news-article/HUM/dugbe-gold-project-financing/14695054
Well done HUM!
HUM should be announcing this to the market. I do not see why they would wait for the Q3 results to deliver such an important update.
The VEIN announcement is very positive. Not only does it confirm completion of the ARX acquisition and funding of the initial work, drilling and deposit, but it also sets out some really helpful detail:
- the 49% is diluted by the 10% non-dilutable GoL stake (giving a 44.1% economic interest)
- the 44.1% absorbs it’s share of the 2% net smelter royalty to Anglo Pacific
- $2.0m deposit (already received by HUM)
- Funding of the option agreement under the MDA with GoL of $700k
- Funding of $1.4m further payment in tranches of options over exploration rights
- Payment for rehabilitation of the access road
- Establishment of new 70 man camp, with capital equipment support
- $10m drilling programme (which will commence shortly as the contractor is currently mobilising with drills working from November)
- Pay for full DFS with joint oversight from HUM - expected to be delivered by Q3 2021, with selection of SEIA and FS consultants almost complete.
That’s tremendous progress and demonstrates the value of the deal for HUM, both in terms of value of all the items ARX / VEIN will cover (allowing HUM to focus cash on Kouroussa) and in terms of news flow on a site that HUM still controls.
Taking the market cap of VEIN implies a £47.5m stake in Dugbe for HUM. That’s 12p a share, that’s not in the share price.
Investor call at 8.30am on Thursday
https://www.londonstockexchange.com/news-article/SUPR/acquisition-of-a-tesco-supermarket-and-updated-kid/14684041
Great to see the final capital deployment of the money raised earlier in the year, taking the LTV back to c.40%. The 5.7% NIY must reflect a slightly aging building but in a good location and with 10 years still on the lease. Financed at 3m LIBOR plus 1.75% creates a lot of cash on cash and ensures geared RPI for shareholders. Great place for a lower-risk segment of the portfolio. I have topped up further this morning.
This is big news for HUM. Demonstrates progress in addressing the immediate political issues and ensuring that borders can reopen with little of the disruption still priced into the share. Positive for the share price and movement towards my view of 70p+ fair value.
Hi mostyn: my pleasure. I agree that there are improvements that could be made to announcements. I have voiced my issues with the original Dugbe announcement, for instance, which is a great deal but which came across flat. However I know many much larger companies that are just as poor - despite have much bigger PR budgets. The new IR guy Ed Montgomery seems to be a big step up and has direct markets experience, so I’m hoping that we’ll see improvements. Ultimately, the deals will speak for themselves and on that front I’m very happy. 70p short term price target!
Hi Mostyn: so I think you’ve dealt with the dore / gold price disconnect. The other points I think are as follows:
- The origin gold is a JV with HUM and Betts, but with the refined gold being bought by the JV to process into the coins. It’s a very small operation.
- ASIC: I think you’re issue here is a general mining industry issue rather than purely a HUM one. They did give a very helpful breakdown of ASIC in the annual report which allowed you to tie Yanfolila’s ASIC to the financial statements. Clearly as the business has a central cost and other assets, it won’t capture all of the costs, so you do need to consider the uncovered cost. That’s true of all miners. I expect that some of the cost will reduce as it was associated with Dugbe and that’s now being shouldered by ARX / VEIN.
- The creditor position could have been spelled out a bit better but it was in the financial statements. Clearly what we didn’t know was how it would normalise over time. That has clearly absorbed cashflow - which should not have been a surprise, but the timing of it could have been better signposted. I’ve tried to encourage them to be a bit more helpful on working capital guidance in future, though I suspect, give we’re in challenging times (COVID-19, Coup) being precise on certain items of w/c is currently more difficult.
- on ASIC increase, they didn’t say it was purely COVID, it was one of a number of factors, but including a rescheduling of the mine plan, which has meant lower grades in the last couple of quarters, but with an anticipation that higher grades are processed later in the year / next year. This seems smart given gold price. I agree they haven’t provided a split out of the effect, which might have been helpful, but at least we know what’s causing it and what the guidance on ASIC will be as a result.
Hopefully helpful. The reporting is not perfect, some of which can arguably down to commercial sensitivity, but it is sufficient. HUM is an AIM miner - not a FTSE100...