Member Info for ragnarlothbrok

Thanks for sharing

Yes the current method is a little confusing. They talk about achieved basket price which is at a premium to the market, but then they take a huge discount for refining costs. I ignore their achieved price and calculate the refining costs based on production x market price - actual revenue = implied discount.

My estimate for refining charges, net of market premium price achieved, was $21.5m, or $300/oz for 2018.

The convention for the mining industry is always to net third party treatment and refining charges from revenue. I think there is an element of commercial sensitivity around this as well. We don't officially know who the refiner is, though speculation is generally that its Amplats. In the accounts this year there are 2 customers v 1 last year, which implies SDO and Lesedi output went to different smelters in 2018.

Bman1 House broker Cenkos released a broker report today. I don't have access but there is a forecast which you can see here:

https://www.marketscreener.com/FAIRFX-GROUP-PLC-17109493/financials/

Like you I'm surprised that for a company of this size and growth its only covered by the house broker. Its a great opportunity for well researched PIs to get ahead of the game.

Good to see July and August continuing the YoY growth and supporting the full year outlook. In the current market any sign of weakness is being punished so its reassuring to know that the company is on track, even in spite of the headwinds which the company has provided full disclosure.

I believe so, yes. There isn't much consistency across the industry but Lonmin reports 6E production, its ops (not far from SLP Western limb ops) produces more ruthenium than rhodium, (around 10% of global supply for both). Global demand for Ru is more than Rh, but because the price is 1/10thj its not really important (although not long ago it was 1/20th). Based on SLP 2018 by product production/revenue/market prices I estimate the by product mix at Ru 90-95% and Ir 5%-10%. It looks like for every 100oz of 4E PGM 33oz of by products are produced.

Prices are in a sweet spot right now. Pt is an ugly chart but all other Q118 prices up v Q117:

Pt: (14%)
Pd: +5%
Rh: +120%
Ru: +294%
Ir: +47%
USD Basket: +9%
ZAR Basket: +16%

The ZAR basket is just below 16,000 ZAR. That is a pretty significant step change from the 14,000 it was around for a long time. If SLP can maintain the operating momentum from Q418 and get close to 20koz this will be a storming quarter...

Have to agree with Mulder here. Its a paltry amount and why would the shares be bought via short term derivatives?

I noticed this paragraph in the 2017 annual report, would this have something to do with it?

"Initial requirement of at least a ZAR2 million shareholding from personal funds, to be held for a minimum of two years. Requirements to be increased each financial year. Subsequent to 30 June 2017 financial year-end Remco required an additional ZAR250,000 in shares to be purchased by 31 December 2017"

The RNS yesterday says his current shareholding is 668,000 shares which is a lot less than ZAR2m.

Not sure Mulder, I thought AISC was around $1200 when last disclosed so not really sure how such as a large profit was generated. I've moved on from last year

The recovery of Pd has also been remarkable, 25% in a month. On Jan 1 2015 the spread between Pd and Pt was -$400 and now its +$220, which is easily a record.

The decline in diesel has created quite an interesting market dynamic. Auto production is currently set up to produce diesel converters from Pt and petrol from Pd, but this can be altered (at great cost). If the spread between Pd and Pt widens too much manufacturers could increase the amount of Pt used in petrol engines.

Rhodium is the most effective at reducing NO emissions, but I believe that it can be substituted with Pd pr Pt but requires a much higher density. Rh and Pt were trading at parity for quite a while a few years ago but the spread has gradually been widening to $1,700.

In the back of everyone's mind is that Rh once hit $10,000oz after SA supply shock and may have further to go.

They notified results would be 27th Sep and now 9 days later they are declaring this will be 4 weeks later.

AIR seems to be becoming a business that while performing satisfactorily at an operational level but which continues to suffer setbacks in responsibility, governance an communication compounded by high staff turnover. Fair enough the delay is not related to trading but over the last 6 months it has been one disappointment after another.

I'm out, good luck all

Elikhulu will be incurring development capex right up until completion of commissioning i.e this month. However any revenue less costs related to production between first pour and commissioning will be deducted from the capital costs.

Revenue is 4E PGM+ by products + By product revenue so its definitely reported as revenue rather than cost credits. I'm assuming the by product smelter charge is offset against 4E revenue rather than being allocated to the by product portion, which might make by product revenue seem higher and 4E lower.

I expect by product revenue to be $500k higher than Q418 in the next qtrly update. I'll add Ru to my list of prices watchlist.

Eish my sentiments exactly. A lot of the negativity stems from broken promises and investors buying shares at 20p+ and being burned by a 70% share price decline. Its understandable, but emotion can cloud one's judgement if you let it

I have built a position here (and topped up on the recent dips) and think the shares will return to above 10p in the next 6 months because of the following reasons:

-It will be producing 170000+ of low cost ounces at the very bottom of the cash cost curve ($700-750oz). Resource companies with similar characteristics, long life, lowest quartile cash costs and strong cash generation leading to high levels of sustainable dividends (e.g. HGM, SLP, CAML, DGOC) have all performed very well in the past
-PAF will return to dividends and will be able to comfortably afford paying a £15m, 10% dividend within 2 years. 10% sustainable yields are not very common and I don’t think will stay at 10% for long
-Debt is an issue but with debt expected to peak at £100m but is declining and represents less than 2x 2019 EBITDA which is within my comfort zone for now;
-Sheba seems to be a high quality growth option which can be funded internally and deliver growth in cash flow;
-PAF suffers from a depressed valuation for issues in the past which have been rectified.

All my own opinions of course and implementation risk is the primary company uncertainty for me but with Elikhulu commissioned and Barberton ‘fixed’ the outlook has been substantially derisked.

The good news is that Elikhulu has been commissioned ahead of schedule and that all the operations are currently cash flow positive.

The bad news is everything else

Sounds promising. It feels a bit out of leftfield.

https://www.progressive-research.com/research/solarwinds-collaboration/

Is there something awry with my logic here?

23koz of by products iridium and ruthenium were produced in 2018. However since September 2017 Ru prices have rocketed by 400%. Year on year price movements are currently Ru +64% and Ir +38%. Thats a +50% increase in the by product basket (I estimate 90-95% of by product ounces was lower value Ru (Lonmin ~85% as a comparative))

By product revenue was $5.5m in 2018. A +50% increase in prices indicates an increase in revenue of $3m which will go straight to PBT. Production should also be higher in line with higher PGM production.

It hasn't been mentioned yet in any company communications so its either the best kept secret or I'm dreaming.

Hey Shareminator long time... Too many variables to predict the basket, I just stick with current spot. The negative Pt outlook seems to be offset by the positive outlook for Pd/Rh. Basket currently at 1070 and multi year ZAR high, some big gains yesterday. Palladium now at a $200/oz premium to Pt, how things have changed.

Based on 2019 net income SCS trades on 9x and DFS on 12x. This gap narrows substantially the following year reflecting DFS revenue growth while SCS has low single digit growth.

To clarify, by working capital deficit I mean negative trade working capital: debtors + inventory - payables. Its not very common.

I agree with the value proposition you outline. Its not an exciting company but it pays a sector/market leading dividend on a low net asset base which i see as relatively low risk. It only only trades at a small discount to DFS (on a P/E basis) despite being a much smaller company.

Hopefully results in a couple of weeks reveal low single digit growth in profits. which will be a resilient result in the current retail climate.