Member Info for ragnarlothbrok

I agree Visitor regarding valuation. However I wouldn't be surprised if it fell further. If you look at the recent trading activity there are almost no buys and the spread is widening. Liquidity is desperately low and we look to be in a bear market, and anything could happen in the short term with valuations becoming unhinged from fundamentals.

I'm surprised that Samancor hasn't thought about having a tilt and tidying up the whole structure at these levels but maybe they just aren't interested in PGMs.

gkb you know and I know that SLP is a PGM producer but unfortunately for us its called 'Sylvania Platinum'. 63% of its 4E output is Pt and that's enough to stop most people even looking into it. The basket is extremely strong now but it's being underpinned by Rh and Pd, which are both prone to extreme peaks and troughs.

I think that the average investor expects the movement in these metals to be unsustainable. But what your average investor probably doesn't realise is extremely low all AISC means that they can continue to generate FCF through even the most unlikely downturn scenario (which I have stress tested to the point where pretty much every Pt producer will go bust and the SA economy in ruins).

And on top of that there will soon be liquid assets of $50m, fully covering the market cap!!

There is a mid day auction, one of three for the day. The auction is intended as a liquidity event. The number of times the auction is extended for PAF, sometimes 2x, indicates to me that there is an imbalance in supply and demand probably due to low liquidity. Almost no volume today with no lead from the JSE. The bots are quiet when the JSE is closed.

https://www.lseg.com/sites/default/files/content/documents/LSEG_CM_SETS%20Intra-Day%20Auction_Final_LR.pdf

I believe you're right Irene. Looks like the bots drove this down first thing and now the people are stepping in to grab a bargain. Great opportunity for a top up below 190, this was recently in in the 230s.

Hi gkb47, I see a few reasons why SLP would be relatively undervalued

a) It's a platinum company, the least attractive metal sector right now.
b) It operates in South Africa; a country frequently experiencing strikes, power failures, corruption and political instability. There is a SA discount to more stable jurisdictions like Australia, Canada or the US;
c) It receives almost no analyst or media coverage (the last report was Feb I think).
d) They don't own a resource. While SLP produces metals, it's an industrial company, not a miner. Future revenue depends on receiving continuous supply of arisings from the Samancor chrome mines. While the Samancor mines have 50+ yers of supply, since being taking private, and despite producing a third of the world's ferrochrome, Samancor keeps a very low profile and we don't know how well the company is doing.
e) SLPs future is thus tied to the chrome industry which is relatively unknown and, like nickel, is driven by stainless steel demand, which is prone to the odd downturn
f) SLP is going through a relatively high stage of capital intensity. Cash flow will not peak until 2021, so some may be willing to wait until Echo is derisked.

I think some of the above mean that many simply aren't interested in the risk profile or are willing to wait, regardless of how high the FCF is.

Sounds like you aren't clear on your strategy Odonnell. Or perhaps you have forgotten why you invested.

Market is down heavily again today. Gold is down a few dollars but the rand is down 1.5%. On the whole the macro outlook is positive.

There is no guarantee.

I'm holding for the return to FAT dividends, probably 18 months from now. With $60m of FCF at an AISC of $800-$900 by 2020 we could see a $30m dividend, which is 10%+ yield, leaving some leftover for investment in Sheba growth and debt repayments.

I don't have high expectations for the next 6 months, even though operationally Elikhulu has been commissioned there is normally a working capital overhang as costs precede revenue and the precious metals refining cycle means we won't get paid for many months. So H119 may not be impressive on cash flow. Debt will be high. Perhaps more than we think. I'm hoping EBITDA is solid, we have been lucky with a higher PoG and weaker rand.

I see the random drops as opportunities. I bought a few more just below 8.50 today. Can't see the trade anywhere though. I don't know why the bots are keen on a penny stock but without them there would be almost no liquidity.

I see we got the 9p UT again for 1 share today... and another extended auction

I guess DGOC has the option to waive the conditions of the lock up period if its in their interest. Not a bad result to sell a large chunk of shares at market price. It's common to see more of a discount, especially in this market.

Cash hungry sellers are the type which DGOC preys upon, so these kinds of shenanigans don't surprise me

The pile will slowly become a cash mountain and drag up the SP with it. We will see close to $20m in December. Maybe we will have to wait until 2021 (until Echo is done) when it gets really huge. By then the pile will be uncomfortably large even for a conservative management team. In the meantime our funds are in the bank getting 7% interest.

Welcome Tradeface. If you can stomach the volatility (and a bit of Eskom load shedding) I believe our patience will be rewarded.

In this market companies with high multiples (i.e. high expectations) are getting punished for any sign of weakness. If FFX doesn't not deliver, even if it is a fractionally off, I think it will fall. Maybe hard.

If you have a short term horizon then you're bound to be disappointed looking for a new high. But if you sit tight, when things do recover and liquidity improves I think this will be one of those companies which will move fast and quickly retest their 2018 highs.

Overall only 20% off the top isn't too bad in this market. Fingers crossed we've found a bottom but who knows...

The striking workers are delaying the inevitable, they can only prolong the problem until the old shafts close one by one. Unfortunately for them the capitalist economic system won't allow it. I can understand where they are coming from, they need to live but SA is not the USSR. Companies will choose shareholders first or eventually go bust. I point the finger at the government, not workers or companies. They have squandered the mineral wealth, sitting on their hands idly while the mineral industry declines without investing in a plan B.

Fortunately PAF bit the bullet and I would say handled the Evander closure very well. It could have been much worse. And now we are in the enviable position of not having any unprofitable operations an probably some of the lowest cost production in the country. PAF would be a target middle of next year with such low cost, low risk production. But their domestic competitors don't have any cash and their paper isn't worth anything.

Volume definitely picking up here. You seem surprised that this is going up. Its just getting started. Gold seems to be trending up...

Sentiment towards the gold sector has definitely improved over the last month. I believe the recent bump is due to the rand gold price rising 5% over the last week. Hopefully we have set a new support level at 9. I'm pretty close to break even at this level.

Given PAFs debt burden it is highly leveraged to the gold price. By my calculations a 5% rise in the gold price gives nearly a 10% increase in FCF.

The South African Rand: Zuid-Afrikaanse Rand (ZAR)

Market conditions are converging nicely here for PAF. ZAR crashing today, gold hanging in there as it seems that financial Armageddon befalls us.

And here we have PAF just hitting its peak of low cost production ounces.

SA precious metal miners one of the few bright spots in the market today.

The power situation in SA is a worry, more so than usual, SA is in its 6th or 7th day of power cuts, hopefully this is not constraining Elikhulu operations.

Hang in there Borgy. It looks like we are heading into a bear market and it might go lower but f you have a 3 year horizon this will come good.

The drop this morning seemed to be one of those typical orchestrated maneuvers down on solid results so I bought a few more. A great opportunity if you don't think its a cyclical business like me.

This is one of the few FTSE100 stocks that pays a growing dividend approaching a 5% yield, 2x covered by FCF. The last time the price was at these levels was early 2015!!

Officially more expensive than gold.

Doesn't look like much will stop it, up 9 out of 10 of the last sessions despite the market wobbling.

I estimate this year SLP will sell 19koz of Pd.

Hey Visitor, similar to you, around 24%. I saw this article this morning that says its around 20%.

https://www.businesslive.co.za/bd/companies/mining/2018-11-28-tharisa-plots-strategy-for-growth-and-independence/

Guess we won't get any further news until end of Jan for Q2 results or Feb H1 results, so no dividend policy until then.

I'm assumed 50% of FCF and special dividends when Echo is complete. Right now they have enough in the bank to complete the rest of Echo (£16m) but I think they will want a cash buffer of $15m on top of that for potential pipeline finance.

Looks like the little platinum rally is over. Latest WPIC forecast says jewellery demand is plummeting, supply rising and there will be a big surplus next year (which says a lot given its funded by the platinum miners).

The Pd/Pt spread is $365. Seems like there is a going to be significant short term supply squeeze for Pd with the futures curve showing strong backwardation. PGM market is well out of balance but from what I've read the spread will need to stay this wide for at least the next 6-12 months before automakers will consider switching. GM just announced a number of plant closures and are probably not in the mood to sign off some significant capex.

At today's price the revenue contribution is Pt/Pd/Rh 45%/26%/29%. The basket is near multi year highs but I can imagine Stuart is feeling pretty gloomy about the sinking Pt price.

https://www.metalsdaily.com/link/287303/wpic-platinum-quarterly-q3-2018.htm

https://www.denvergold.org/precious-metal-prices-charts/palladium-futures-curve/

The P/E for 2018 is 23. For 2019 is 12 and 9 for 2020. By my calcs it needs 30% growth in transaction value per year for the next two years to get there.

The questions in my mind are:

- How will the current market situation play out, will the volatility impact transaction volume growth?
- How correlated is transaction volume with a weak pound?
- What are the big shareholders thinking? There has been a pretty steady stream of large trades for the last couple of weeks but the price is holding up ok.
- How deep is the product pipeline and how long will this be prioritised over shareholder returns.

The track record is there, it has the scalable platform and it's a huge market. Management seemed pretty confident from the last update in September, despite the headwinds. Even 15% growth and a tiny market share puts it on a pretty reasonable value multiple.