Member Info for ragnarlothbrok

pickedpeck I think you're right. PAF being acquired by another SA miner is a possibility but the field of candidates is shrinking. I thought Sibanye would the most likely source given the desire to double its business and it might fit well with the interest in DRDGold, but Froneman has said he is no longer interested in SA assets so that only leaves a small number of players (Harmony, GoldFields, ?). Full acquisition EV including assumed debt would be at least £400m with a 30% premium which is big chunk.

Otherwise a merger between DRDGold or even SLP might make more sense to create a larger precious metal recovery business. Whatever happens I think further consolidation in SA is inevitable.

I agree Eish. They are planning on moving their listing away from the JSE in the final insult. That combined with:

- SA imminently being downgraded to junk status by all 3 ratings agencies
- an inherently corrupt political system driven as much by egos as anything else
- the perpetual risk of asset expropriation and changes to the mining charter
- the constant risk of union action, combined with very high unemployment, leading to a high risk of civil unrest
- power outages for the next 18 months at least, but more likely 5 years

Can anyone give a recent example of a foreign company buying assets in SA? I can't think of any. I can think of plenty of examples of investment in Russia, the situation in SA makes Russia looks like a haven for investment. The Russians and Chinese are investing in Zimbabwe ahead of SA.

The ease with which this company raises pretty large amounts of cash in a short period time says a lot about the prospects of the business.

(It might also have something to do with the abilities of Shore Capital who seem to be doing pretty brisk at the moment, having sold off a huge chunk of SCS shares earlier this week)

They feel they have their business model established, now they need to funnel vast amounts of cash in building a loyal customer base. They have probably already committed to spending a lot of that cash on hand so better to get in early before they start running out.

I like the stats so far around active customer and repeat order growth and am not displeased with this placing.

Cost performance will be key and could be a surprise. While they have managed to meet production targets, inflationary pressures in SA have been immense, the rand is weak, impacting on imports, wages are as usual taking large jumps and energy prices are all over the place. Cobus has guided AISC in below $1,000/oz so anything below that will be pretty good

The original plan for this project was to smelt the ore using the Conroast process, which was a Jubilee/Sylvania JV. I'm not sure what happened to this tech or if its still useful. I guess with the basket where it is now its no longer considered an uneconomic deposit and could be processed into concentrate and then smelted via the traditional means.

I'd be very happy with the $40m risk free cash in the pocket, financing this project would be pretty challenging in this environment

https://www.proactiveinvestors.com.au/companies/news/146050/jubilee-platinum-and-sylvania-resources-formalise-conroast-pgm-smelting-partnership-create-2-new-jvs--4724.html

Hey Visitor, this clearly confirms our suspicions. Looks like PIs getting in via the HL and II platforms soaking up some of the fund reductions.

What ever happened to the buyback? I wonder what fair value is to the directors if they are only buying when below fair value?!

That's an incredible reversal in SP and sentiment triggered by STs article

Thanks Bazzaman.. "awesome amount of cash" sums it up

I have cash of $54m forecast in 4 months time. And dont forget about the liquid net working capital of $50m on top of that

Alwaysone you need to scroll over to the right in the table and you can see that the funds on the list disposed of 8m shares in January. This has been happening for a few months now - these long term holders are unwinding their positions indiscriminately of any consideration of 'value'

Hey TBTT, the SP looks pretty good to me, smack bang in the middle of the rising channel. Sure its frustrating to see these short term dips the fact is that the funds are still selling, driving by their fear of diminishing liquidity, the performance of SLP increasing their weightings to uncomfortable levels and their compliance departments trying to avoid the same catastrophe that took down Woodford.

The desperation of these funds creates an opportunity for the patient. But perhaps there aren't enough deep value, well researched PIs around to absorb this which means that we get drops like today on some pretty low volumes.

Well thats my theory anyway!

https://www.morningstar.com/stocks/xfra/31l/ownership

Hey Visitor, thanks for the detailed write up of Volspruit. I did some detailed analysis on this project some time ago and can add a few more details and thoughts.

- At current price the total in situ metal value is $5.5bn, assuming 75% recovery of ROM ore. My revenue is split as follows: Pt 15%, Pd 44%, Rh 17%, Ni 21%, cu 3%. Obviously this would be lower reflecting long term price assumptions rather than spot

- The book value of Volspruit is around $40m, they wont sell for anything less than that

- I believe any cost and capex information to be extremely out of date. I think I new feasibility study would be required but without further drilling and relying on the old resource statement

- I strongly doubt that SLP itself would be willing to develop this project but I think would probably demerge the asset if they get all the approvals and cant sell it to Impala. Sibanye has pretty much said they aren't interested in SA assets so not sure who any other SA buyers would be. No foreign company would dare get involved in SA right now. Demerging would require all permits to be received and a sufficient cash buffer to give the demerged entity comfort and time to pursue its survival separately. I cant see SLP raising bank or equity financing for this project, Stuart Murray has a pathological hatred of bankers and Terry loves his big cash pile.

In general while the potential cash flows are mouthwatering I just cant see anything happening in the medium term given the state of the industry in SA and the licensing obstacles that are in the way. But a surprise in the same vein as Grasvally would be more than welcome.

I was very pleased with the results, they were marginally ahead of my forecasts on every measure. Production and the dip in unit costs was especially impressive. I was also pleased when the market reaction allowed me to buy back the shares I recently sold for 38.50.

Stick to the valuation story, not the short term fluctuations. Reread the RNS and make decisions based on your own research, not market movements. The managed funds seem to be selling but I have no doubt that the hedgies are buying on the back of PGM price movements.

Rhodium up again today as well and Q3 is going to give us a huge selling price revenue adjustment...

From FT on 24th, a bit delayed from me...

The mining company is considering eliminating almost 2,500 jobs at its Eastern Chrome and Western Chrome mines and about 600 jobs at its smelters because chrome ore prices are “under huge pressure” and it is paying more for less stable electricity supply in an “unsustainable” situation. The impact on chrome ore production may be approximately 29 per cent per annum, while an initial reduction of approximately 20 per cent in ferrochrome production is expected, said the company.

Hi TBTT, SLP could get by on tailings, there have been countless instances in the past of production being impacted at the entire Eastern or Western operations and SLP needing to rely on tailings (normally due to industrial action).

With the exception of Lesedi, all operations utilises current arisings and old dumps though it's pretty hard to keep track of which mines are operating. For example, in the 2018 H1 presentation SLP had planned to close the Lannex plant and move a secondary flotation to Tweefontein, but production forecasts now include Lannex and I believe they intend to build a new MF2 at Tweefontein when the power issues are resolved. The Echo program would also help mitigate any loss of current arisings by improving the recovery from the dumps.

As Visitor says, probably a bit premature to assume any material loss of production. A 30% reduction in Samancor staff numbers would make their business complete unviable and would impact the market balance. From memory they have around 35% of the market.

It really would have made sense for Samancor to acquire SLP, they are at a significant disadvantage to those chrome producers which have PGM by-product credits from their UG2 production. But thats another story and given the opaque nature of Samancor it's impossible to say why they haven't.

The same thing happened in 2016 and SLP's production wasn't really impacted, perhaps because prices swiftly rebounded and the cuts never happened. I suspect it could also be a tactic by Samancor to support prices, the chrome price doesn't seem to have reacted to the Eskom power issues the same way that PGMs have. I can't imagine they would reduce their production to the extent they experience huge permanent loss in market share to Glencore or the Chinese.

You are probably right mra1984. Even if we lost 10%, that has been more than compensated by the huge price increases.

If anyone is interested some light reading from 2010 on the background and operation of the SDOs and the various projects can be accessed from the link below on the SLP website. I've read it front to back a few times (check out Volspruit, its over 50% Pd with Pt, Rh, Ni and Cu credits).

https://www.sylvaniaplatinum.com/b/files/cpr-sylvania-resources.pdf

The potential downside is the SA PGM capacity issues. This could represent some risk for SLP given they rely on third parties for smelting/refining and due to the power issue with Eskom some of this capacity may have been restricted.

I also see that it looks like the Glencore/Merafe Rustenburg ferrochrome smelter is going to shut down. Samancor is also likely to be struggling with the low chrome price, rising SA costs and power issues at its own ferrochrome smelters. The less obvious effect of this is to reduce the supply of fresh chrome production into SLP's SDO.

Although with the SLP Echo program producing better recoveries they can profitably reprocess the lower grade tailings a few more times.

And goshdarnit SLP has so much cash and a valuation which is so low on many measures these risks just seem to be more than fully priced in.

Been on holidays and missed all the PGM price action! Rhodium is now at $9800! And palladium $2500! IG has stopped providing quotes for palladium, it's become so volatile. Seems to be some panic buying after SA November PGM production fell by 13.5% and the Eskom situation remains very unpredictable which could exacerbate the Pd/Rh deficits and perhaps even swing the Pt surplus.

https://tradingeconomics.com/south-africa/mining-production

Been an eventful week with very large volumes going through but limited price action. Basket is at a multi year high, in both ZAR and USD terms. Over $1900 now and Q2 prices finished 20% higher than Q2. Pt on a quiet tear while everyone has been on holidays.

Despite this multiple funds selling down, if the Morningstar data in the link below is to be believed, which shows month on month movements in holdings. Seems to be a pretty widespread sell off across more than just Majedie, around 9m in fund reductions in December 2019 but where are they all going? Continuing into 2020 as well, with over 10m or 3% traded in two days in 2020.

https://www.morningstar.com/stocks/xfra/31l/ownership