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Nevergonnaretire: thanks.
Yes, it's a very oddly low budget. I'm increasingly of the view that a big part of the issue is with the processing plant side of the operation.
1. To refer to a point I think I made to xcoder just earlier, I think the original budget projection probably included the processing costs for one or more other concentrates (e.g. molybdenum) that haven't yet come on stream.
2. The processing plant itself is operating at much lower efficiency than originally projected. This is partly about purity of concentrate being lower than targeted but it's also about the ore volume to concentrate volume ratio. I posted on the numbers for that issue some months back but I'll try to return to it with the new figures this weekend.
My hunch is that a big part of the operating cost is the processing plant, and that as the plant does more work, with additional concentrates and higher purities, the processing budget will rise significantly. The issue will then be whether they can optimize the financials of the new concentrates quickly, and in the first instance subsidize any losses internally via profitability specifically on the copper concentrate.
Xcoder: that's not a BPPM operating cost. It's corporate overhead, which is a separate budget.
One obvious issue, IMO, is budgeting the molybdenum production and other concentrates they've aired in the past.
Message was cut off. Here's the rest:
2. Will continuing operations and increases in production involve the budget floating back up towards previous expectations? In other words, is "breakeven" a moving frontier as costs that have perhaps been held off need to be worked back in?
The direction of travel is positive. But there are questions.
Okey-doke. It's one of those times where there's a lot to analyse so I'm going to do this in stages, as I get to it over the weekend. First things first: breakeven.
Q2 report confirms that BPPM achieved operational breakeven in June. What does this look like?
(Note: although the company gives both wet and dry concentrate figures for reference, wet is used for shipping whereas dry is used for sale valuations, so I refer here to dry.)
Breakeven is a financial position, not a production position. So benchmarking breakeven ought to be done on the 167 dry tonnes *sold* in June, not the 255 dry tonnes *produced* in June.
We also know that, as sales lag production, the dry conc. actually sold in June drew on earlier inventory, which was a mix of purities. At end of Q1, they had 241 inventory. They sold nil in April and 149 in May, leaving 92 dry tonnes from that inventory at 23% purity available to sell in June.
That means June sales (167 dry tonnes) probably included:
-- 92 from Q1 at 23% purity
-- 75 from April at 17.6%.
June sales therefore probably consisted of:
-- 92 x 23% = 21.16 pure tonnes equivalent
-- 75 x 17.6% = 13.2 pure tonnes equivalent
= equivalent of 34.36 dry tonnes at 100% pure for sale valuation purposes (average purity being 20.6% on the 167 tonnes).
London Metal Exchange shows yesterday's spot cash valuation at $8450 per pure tonne.
https://www.lme.com/en/metals/non-ferrous/lme-copper#Trading+day+summary
Taking that value as an approximate indication:
34.36 pure dry tonnes x $8450 = $290,342 gross value of copper concentrate sold in June.
From this, you have to deduct Mercuria's cut plus tolling and refinery fees; but you also have to add gold and silver credits. We do not have values for these. (The working hypothesis has been that they more or less balance out.)
About 3-4 years back, when they got the licence and were starting to reopen the mine, the company projected a monthly operating cost at BPPM of around $800k-$1m (say ~$900k) and a breakeven monthly sales volume of around 450 tonnes. Prices were lower then but they were also anticipating a much higher purity (~30%), so these shifts largely cancel each other out.
** So we are currently looking at a very substantially reduced budget at BPPM being covered by a very substantially lower sales volume. **
The figures we now have, with monthly breakeven at 167 dry tonnes and gross sale value of ~$290k is a new reality, different from earlier projections.
Breakeven is obviously a major step forward. But achieving it at around one-third of the original budget on about one-third of the formerly expected necessary sales volume is an ambiguous situation. It raises two immediate questions in my mind:
1. What operational impacts has the much lower budget had?
2. Will continuing operations and increases in production involve the budget rising back up towards previous expectations? In other words, is "breakeven" a moving frontier as cos
Nevergonnaretire: "Sandy.. can you take your usual look at what little figures there are on the rns and extrapolate your take on this...".
Thanks for your 06:06 on 3 August. Yes, I was meaning to get to it and will aim to either today or tomorrow.
Gemstar: Vast's reorientation in Zimbabwe from prioritizing a new licence to prioritizing the 'historic parcel' windfall speaks for itself IMO. The EU's self-sufficiency needs are obviously growing + Tajikistan is much less cosy with Russia than Zim. I think Vast would be quite willing to walk away from Zim if it's the right political thing to do: the company would just like to take its parcel with it.
Gemstar: some posters will miss your irony.
Nevergonnaretire: thank you.
They'd be accumulating for a profit, not a takeover IMO. Capstone are highly successful specialists in volatility trading. They're not, to my knowledge, outright buyers of companies as that isn't their business model.
But to be clear, apart from the 60m bump from 180m to 240m via Barclays as nominees, I don't think they've been accumulating in the secondary market.
Instead, this looks like a much more organized process. First, the swap deal - which, as I argued some weeks ago, was directly timed to follow an earlier placing so might well have been set up via brokers to give those placees an exit and bring in Capstone. Now, if I'm right, direct participation for a large part of the more recent placing.
I consider this to be much, much better than secondary market dabbling. They are paying their money to the company, not just to market makers. That's investor behaviour, not trader behaviour.
Pecten: I suspect confidentiality terms and legalese would prevent it. Due process would be admission on 25 July, shareholder self-report, company RNS.
Steward: "Sandy - ok, Capstone hold 240m through Barclays. What about the Capstone holding of 249m set out on the VAST website?"
Further to my previous reply yesterday, I've had another think about this and I think there's one very simple answer.
I now suspect that Capstone took the additional 249m in the recent placing but it just hasn't been TR-1 announced yet.
1. So, given that the 240m (now = 7.03%) held by Barclays is actually the pre-existing Capstone holding that was previously held by Barclays and then, for a while, held by Capstone directly, we can account for the entire sequence of holdings RNSs that we've so far seen from 16 June onward + we can account for the website figure for Barclays. Essentially, after Capstone took the holding directly, they then passed it back to Barclays as nominees and bumped that holding from 180m to 240m. So far so good.
BUT -
2. Your question about the separate website line of 249m (= 7.32%) attributed to Capstone directly still stands. Where the heck did this suddenly come from, with an effective date (stated on the website) of 25 July?
The only way I can see that the 7.03% held for Capstone by Barclays as nominees PLUS the 7.32% shown on the website as directly held by Capstone can be simultaneously accurate is if Capstone have separately gone out and bought 7.32% (249m shares) that haven't yet been RNSed.
Is this possible? Yes, it is IMO.
How? I think the most likely answer is that, instead of secondary market purchasing, they participated in the placing.
From the RNS about the placing:
"It is expected that Admission will become effective and dealing will commence in respect of 58,500,000 Shares on or around 13 July 2023 (the “First Admission”) and Admission will become effective and dealing will commence in respect of the issue of 427,500,000 being the balance of the Placing Shares on or around 25 July 2023 (the “Second Admission”). The Placing is conditional on Admission."
I would hypothesize that Capstone took 249m shares in the placing, with formalization of that being concluded on 25 July when the 'Second Admission' was finalized. In that case, the website update makes sense and we should see a TR-1 next week.
Steward: I agree that the website reporting of holdings is actually confusing things rather than clarifying them. But:
-- we know that there was only one existing institutional shareholder with 6.15%;
-- we know that was Capstone;
-- we know Capstone is using Barclays as a nominee at times and holding directly at times, quite possibly mixing;
-- we know that 6.15%, 8.04% and 7.03% are all holding fluctuations (rising by purchase; dropping by dilution) related to one party, Capstone, which might or might not probably is currently split across direct + nominee holdings;
-- we know that website reporting and RNS reporting don't exactly synch in terms of timings and rules.
Overall, I'm inclined to just say that Vast has one substantial and reputable II that hasn't been selling yet but has increased its holding and, in all honesty, just to say that we probably can't track the details in real time very consistently.
Steward: you keep saying the II could be a party other than Capstone but the RNS of 19 July explicitly stated that it was an increased holding by an existing institutional holder, whose prior holding was 6.15%.
Please in that case identify any institutional party other than Capstone that had a 6.15% holding. I'm aware of none.
Steward: your question at 09:25 conveniently answered.
240,000,033.
But as noted, the change is not selling. It's just dilution.
Yes, for all those previously saying that 8.04% wasn't Capstone, it was and they are now at 7.03% per the website direct holding.
RDeacs: "more than a reasonable chance of BP update showing profit".
Given that the company itself has said they only broke even at BPPM in June, and therefore April-May were at a loss as previous quarters, we already know that Q2 overall cannot possibly show a profit at the mine.
You say patience is a skill. Indeed it is. Profit at BPPM has been explicitly re-targeted for H2 2023. The Q3 report would be the one to watch for that, probably out in late October.
ASI: "Thoughts..."
Expectation management, IMO.
1. Q2 as a whole will have been loss-making at BPPM, so I'd hope that the company will offer more narrative insight into what breaking even in June specifically actually looked like, in addition to the quarter's tabulations. They've quoted figures for an individual month in the past when it suited them to blow the trumpet, so hopefully they'll do that as regards June.
2. I'd expect to see confirmation that operations in Q3 are proceeding without material disruption after the recent tragedy there, or alternatively some clarity about the impact of any pause required by investigators. I think a lack of any comment either way will rattle some watchers.
ASI: thanks. Just re-checked the first TR-1 of 16 June and yes, I see they've routed it through the US entity.
However, it's likely then that it's either Barclay's own UK registration or else the terms of contract between Barclays and Capstone that are the driver here.
ASI: re your 11:38, yes agree. Also the nature of the nominee to client relationship is very different with a client like Capstone as against private individuals who are not at least HNWIs.
Oofy: it's an interesting theory, re employee rights. But the fact that the shares are then potentially being moved across from nominee to direct holding makes that tricky, I think. Unless it's Paul Britton himself using Capstone as his own vehicle, though that seems rather wishful.
I suspect it's just Capstone preferring to do their secondary market dabbling through a nominee.