Member Info for shakhtar

RNS reads "The public dissemination of such untrue information in the media violates his rights and legitimate interests as a citizen of Ukraine, and causes direct reputational and economic damage to the businesses where Mr Zhevago is a shareholder. This undermines the international authority and economy of the country of Ukraine and jeopardizes the future implementation of major investment projects in Ukraine."

What a stupid RNS! What have they achieved? Instead of distancing the company from its CEO and the major shareholder (who may be guilty), they are seemingly taking his side and have linked the company's economic prospects and investment policy directly to the pursuit by the authorities of the CEO. Whether he was involved in any wrongdoing or not is for the prosecutors and him to prove or disprove. The company's economic prospects and investment decisions should have nothing to do with that. By issuing this RNS the company have come out in support of their CEO, without any basis for such support, and against the prosecutors who may or may not be right in their accusations. That is an extremely dangerous and reckless tactic. Where were the non-executive directors who should have considered this announcement before it was released? What were they thinking?! This is basically the company saying "we have no corporate governance - our CEO is always right". I am a shareholder and I am furious that such a misguided RNS was allowed to be issued!

Lawyers getting busy ))

He cannot buy a single share as he would automatically have to made an offer for the entire company... Unless of course he is buying from one of his offshore companies with the money he stole, and doesn't give a damn about the takeover code, which given his dealings I wouldn't put past him.

I don’t know what happened to a post I just tried to make, but it seems to have gone missing. That’s annoying as I have to write all over again, but the point I’m trying to make is worth the pain.

I wanted to ask MrGrimnasty on what basis he is making a prediction of 70-80p per share?

At the current SP of 34.2p, the market cap is $189m. Net debt is now $72m. Hence EV is $261m.
Assuming 2019EBITDA of $15m (optimistic IMO), this translates to EV/EBITDA of 17.4x !

Let’s suppose Artem is right in his predictions and we get to $80m EBITDA once Tulkubash is fully operational. Let’s further assume they get full benefit of this EBITDA as early as 2021.

To get there they would need to raise $80m of debt for Tulkubash capex and further $40m to repay debts maturing over this period. (Not to mention they need to build the mine!) Kapan in the meantime might contribute net cash flow (after paying its own debt) of, say, $20m. Net Debt will therefore increase by $120m. This means that today’s SP equates to 2021EV of $381m. This translates to EV/2021EBITDA of 4.8x.

That looks already very rich to me, but I have ignored dilution so far. I don’t understand why shareholders are so happy about today’s massive dilution news. Over the same period, all those shares and options announced today would vest, so on diluted basis CGH is now trading at EV/2019EBITDA of 19.7 (!) and EV/2021EBITDA of 5.2.

This is assuming no further share issue and no more options, which is unlikely, given the history so far.

Now, let’s take MrGrimnasty’s wild prediction of 70p. That would mean the shares would be trading on EV/2019EBITDA of 30.5x (non-diluted) or 35.4x (diluted) and EV/2021EBITDA of 7.2x (non-diluted) or 8.1x (diluted).

This is madness! I mean anything is possible given Martin is controlling the price. I've never seen anything like this with any share on any exchange. This is crazy.

The company has just printed money (new shares) to a tune of $9million with further dilution of $25m over the next few years, but everyone here is ecstatic. What are people smoking here?! Unbelievable.

I said I am not shorting as I cannot compete with Martin’s millions, but if this goes anywhere near 40p I will be very tempted to open a short position.

This is a test. Am I being blocked? My posts don't come through...

I really don't care whichever way it goes, Daisan

Casual, I keep enjoying your pearls of financial wisdom:

“All this anxiety about the short term loan will evaporate once they secure the $80m capex financing.”

Really? I though $80m they need to build the mine, not to repay short term loans. Or you think the nice project financing folk would be kind enough to let them spend project funds on repaying existing debts? By March this debt alone will be $18m (incl interest) and they would have burnt that money on G&A. They’d need another $15-20m for another year. Kapan barely generates enough to pay its own debt on time...

Equity raise is inevitable. Hence SP pumping by Mr A

Casual47, who is Shakalak you keep referring to? ))

On a more serious note, Çiftay... We are reading same things but obviously seeing different things. "Contract mining", "bulk material handling", "operating capability", "ability to opeprate small equipment" , "minimise strip ratios", "appreciation for the importance of ore control in gold mining operations, which distinguishes them from many other contract earthmovers"

Where is CONSTRUCTION here?

If mining was just about, well, mining, then they'd be perfect for the job! They know how to build a man camp, how to buy trucks and shovels and how to OPERATE these in a mine on a steep terrain. Great! Well, let's just then go and start mining, shall we?

What about PROCESSING? Are they going to build the processing plant too, or are we planning to sell leach solution?

Quick glance to their website. "road construction", "locker washer buildings", "transformer building", "packaging building". Where is INDUSTRIAL FACTORIES? Processing plants? Electrowinning workshops? Concentrators?

Maybe I didn't spent enough time researching them. I admit, I didn't. Just 5 minutes looking through their rubbish website. But from what I saw I was not impressed. I saw nothing to suggest they can build a processing complex. Mining? Yes, they can handle that part.

Good to see Mercedes Benz is their preferred supplier. At least they can get Martin a nice Maybach at a discount )))

One question I would like people's help with, though, is this - where is liquidity?
I've done a lot of research on this company, but one thing I haven't done is to trace where the free float has gone, and I can't be bothered going through 12 years worth of RNSs )) And Bloomberg has nothing on this either.
I mean, 37% is now in the hands of the current management. 11% is with Martin's friends and previous management. NFC has 5.4%, Polymetal 3.5%, UBS Wealth Management 3.1%. That's 60%. Where is the remaining 40%? Why is this not trading? I just don't get this. 167 MILLION shares gone missing somewhere in dead long-written-off accounts? Would someone explain to me where they're gone and why nobody's trading any?

To have an opinion on SXX worthy of attention one needs to know what type of person Gina Rinehart is, and that I don't know. The government will never bail them out (even if there was no Brexit, this would never happen). The only outcome is for a strategic partnership or, what is more likely, a take-private. And she is best placed to do this. Will she be greedy and drive them to the wall before picking it up for nothing or will she be nice and pay a half-decent fraction of the NAV? That depends on how charitable she feels. And, being a cynic, somehow I doubt that, but then you never know. I'm going to watch for now, let it slide over the coming few months, and then maybe it's worth a punt, but be prepared to lose the whole lot.

I disagree Daisan. The history behind this loan doesn't mean endorsement by the lender at all. I work in finance, in mining finance. I speak to risk and credit committees and other lenders on a daily basis. The way this loan has been rolled and rolled, to me, means only one thing - it is not an arms length loan. Again, just my opinion, but I really suspect something dodgy is going on behind this loan. No lender in their right mind would give Chaarat an unsecured corporate loan at this stage. I even doubt they'd able to raise project finance (despite their assurances). So why is this rolled and increased? I mean I would understand if the lender was a small fish that has been cornered and beaten into submission, so to speak, but the amounts are not small. This can't be explained by either commercial logic, or stupidity. The only other alternative is that it is a connected party staying in on personal assurances from Martin. But that would have to be one hell of a friend! (They would have to trust Martin implicitly, not to mention being willing to co-conspire in shareholder fraud.) So instead, I suspect it is Martin's money fronted by someone. And high interest rate would help him keep that average down when eventually this loan and accrued interest are repaid with shares. Again, just my suspicions - nothing more - call me conspiracy theorist, I don't mind.

Fun Fact #2 for you:
Since 2006 Chaarat has issued shares for net proceeds (after issuing costs) of over $155m, convertible notes (net of interest and net of redemptions) of $27m and loans (net of repayments and net of interest charges) of $55m - that's just shy of $240 million of financing. YOU COULD HAVE BUILT TWO MINES WITH THAT BY NOW!
Since Martin took charge, almost $100m of new money has been raised (and I ignore roll-overs). Half is for Kapan, of course (and my opinion on this is clear - that was a waste of effort). The remaining half - that's $50m - what do they have to show for this? Some resource increase and a JV with a company that's never actually built a mining production complex? (they do some contract mining work and build some mine camps - that's about it). This is a disaster waiting to happen. In no way this business is worth $200m now!

And here is a walk back into a now distant past:
https://www.investegate.co.uk/chaarat-gold-holdings-ltd--cgh-/gnw/fundraising-of--51-6-million/20110207070000H5805/
Yes, I know, this was a different company back then, different management. But it all reads so much similar to what I am reading now, it makes me lough - I just had to post this...

Oli, I have never held, although I wanted, but after a lot of research and months of monitoring I decided against it. That decision was based on the quality of the Kyrgyz asset and the risks associated with it ever becoming a mine. I have remained interested since my first deep dive, and the more I observed the behaviour of the company, and by that I mean the lead team (Martin and Artem), the more I got convinced that posing my warning to shareholders is a good idea. The share has been ridiculously ramped up. The value is just not there. I am not saying that it does not have a value, and perhaps even for the Kyrgyz asset the risks will be overcome one day and it will be a producing mine, but it's just not worth the price it is at. Whatever anyone says.

Daisan, of course I understand this, I am not naive. This report is not why I am accusing Chaarat of market manipulation. Every company has a right to promote itself. It's just Chaarat goes way beyond promoting. And it is so obvious, I don't understand why others don't see it.

And just to be clear, this is all my personal opinion, based on my own research, and I am neither long nor short, nor I receive any compensation from anyone for posting my opinions. So, totally unbiased. Everyone should do their own research and rely on their own opinion. I just want my opinion out there. If I am wrong - great, all holders make lots of money holding. If I am right - perhaps I saved a few from people from investing and loosing lots of money (or even exiting now, having made money). Look at what happened to SXX. I didn't post anything on their board in the last couple days - I'm not the type to rub it in - but I did look closely at SXX in June and posted my negative views on the board. I actually said I'd be buying below 6p, and was promptly accuse of wishful thinking, but now I won't be buying at all... well, maybe a punt below 2p ;)

I don't post on advfn for a reason, but for those reading CGH thread there today, and noting Hannam & Partners' analyst report - at 65 pages no less! - a very relevant question of their independence was raised. My sources tell me Hannam & Partners have been retained to advise the company on financing. So, no, out of 4 analysts out there, there are NO independent ones covering this company. I did read some of H&P's report and having done so have no respect for them for participating in this blatant market manipulation.

Fun fact for CGH fans: Martin A (according to my fairly accurate estimate) spent approx. £18.3 million buying his current position in CGH. This translates to just over 13p per share on average.
$18m investment is a very respectable number, as far as skin in the game goes, no doubt. But the way he does it smacks of market abuse. PRA should look closely into his purchasing history.
He has become smarter, though, lately, since about a year ago. I mean why pay 33p per share in the market when you can keep that average down by charging the company all sorts of fees for what you'd have done anyway, free of charge, and then get those fees paid in shares. He got 543,888 shares in "loan commitment fees" , 34,435 shares as a "drawdown fee" for a $500k drawdown (which btw was repaid within a week by issuing shares - hmm...), 250,000 shares in "loan guarantee fees". He'll get further 200,000 shares as a fee for the the latest 2.5m drawdown (I wonder how quickly that one gets repaid, and I'm guessing by issuing shares) and circa 825,000 of shares for guaranteeing $17m loan (probably from his buddy, or, worse, from himself or his proxy - because who on earth would increase a loan by $7m to a borrower who just defaulted on the previous $10m?!! Bet you that loan will be repaid by Martin eventually)
This is all a nice new smart way of keeping that average down whilst driving the price up, maintaining his stake whilst new investors pay at 30p - 33p - 36p - 40p ... Charles Ponzi springs to mind here...
13p average is not bad (given my fair value calculations earlier), not bad at all

I would do whatever I want, Tractorhead, and will express my opinion, or not, as I please, and as long as I please; so please don’t tell me what to do - you are not in Kyrgyzstan!
I would love to short this share, if a) there was some liquidity in it, and b) the spread on IG was not that ridiculous.
Perhaps someone could recommend a platform with narrow spreads on aim penny stocks so I could short this? Otherwise it’s too expensive given leverage and long holding period. No liquidity means this will likely drift in the current range for sometime before one day people would wake up to a 50-70% drop in an instant.

Let’s talk about debt just a bit now. All $83.5 million of it. That is MASSIVE for a company with an $7.7m annualised ebitda. Net debt to EBITDA is what? 10? And they expect to raise project financing debt of further $80m? The G&A expenses for $10.5m for 6 months! That’s $20m per year on an ebitda of $7.7m? or even $15m? or even Artem’s make-belief $20m! They are burning cash faster than you can say “fast running horse”!

They are done! Bust. $17m extended to March – this will come very fast. Then convertibles in 2021. I’m sorry, they will run out of cash well before debt is even due to bondholders.

And Artem is in a dreamworld that he can deliver construction with no further equity. He, and Martin, too, are both either delusional or are lying. And everyone in this circus is due for a rude awakening.

RUN RUN RUN!

PS. “Legacy issues that have been identified since acquisitions” - read “Dear shareholders, we didn’t do the due diligence properly – that’s how bad we are despite our 2000 years of combined experience in the industry! We thought we were paying 0.53xNAV for Kapan but in fact we paid more than it’s worth on a good day, and we’ll be lucky if our auditors don’t make us recognise an impairment loss against it in the annual accounts when they get a chance to look at this mess we got all of you, our dear shareholders, in. We live and pray.”

AND YES, IT IS ONLY AN OPINION. DYOR

In summary, we have a sum-of-the-parts EV as follows:

Kapan $75m
Tulkubash $35m
Kyzyltash $35m
TOTAL = $145m

That’s before debt, as I pointed out several times.

Turning our heads to the latest available balance sheet:
Borrowings = 51347 + 4629 + 27492 = $83.5 million
Cash = 4905k = $5 million
Net Debt = $78.5 million.

Net working capital seems to be positive, so we will generously assume it is hopefully adequate.

EV $145m less Net Debt $78.5m gives us EQUITY VALUE of $66.5m. With 418.23 million shares in issue, that’s 16 cents per share or 13p at today’s exchange rate.

OK, not quite the 7-9p range I mentioned earlier, but I was feeling uncharacteristically generous today in my assumptions underlying the above analysis. The market, when it functions properly, is not that generous, so my 7-9p guesstimate is actually not that far off the level where this share would trade, if it was, indeed, trading. And no, 2-6 trades a day is not trading, it’s a joke! It's not even a lame donkey, this so called "fast running horse" - it's a dead tortoise.

Kyzyltash…

There is this expression in that part of the world - and for Chaarat (being the “fast running horse” and all) it fits rather perfectly – that, when roughly translated from Russian, goes something like this: “the horse hasn’t even rolled about yet”. They say this because, apparently, just before a horse is harnessed to go and plough some fields, it likes to roll about on the ground. Well, you get the meaning…

Anyway, with Kyzyltash, the horse has’ even done that yet. It’s just a resource estimate, it’s not even a project yet. And it is underground. And it is refractory ore. There is so much unknown about Kyzyltash and so many risks there that I don’t want to even spend a minute trying to give it a sensible valuation.

I did laugh out loud (literally) when I listened to Artem’s interview the other day, and how he used the in-situ resource (10m ounces) and multiplied it by the current gold price of $1500 to get 15bn value, then adjusted it 50% for resource to reserve conversion and deducted further 50% for cost of extraction to get to a wonderful valuation of 3 bn (or 4, or 5 billion - he couldn’t quite do the math). So, a “massive, massive underwaluation” ))) That was soo-o-o funny, priceless ))))) If this is how he really thinks and manages this company, then I don’t know, I’m speechless. I hope everyone here realises how wrong it is to make such calculations, how completely ridiculous he sounded. Unforgivable for a serious CEO. Utterly unprofessional.

Anyway, back to our estimate, and I said I feel generous today, so let’s do this. Let’s just assume it has been built and it is operating and producing 250koz per year at AISC of $1000/oz. That would be EBITDA of $110-120m, at 5x multiple, EV of $550-600m. And to get their they would have spent some capex – let’s assume $100m for underground development and equipment, $150m for the plant, $50m for the tailings facility, $50m infrastructure and $50m other (contingency) – in total $400m. That would give us a back-of-the-fag-pack NAV of $150-200m. Given it’s still a horse that didn’t roll about, we fair value it at 0.1x-0.2x NAV – so a very generous EV of $30-40m, call it $35m.

To be continued…

Turning to Tulkubash…

Oxide at 94koz annual for 5.3 years. That’s not much at all. They give it NPV of $70m. Note it’s done at 5% discount rate. That’s for a project in Kyrgyzstan! For a company with so much debt it’s about to go bust (more about this later)! And for a project – not an operating mine, a project! They must be joking, really.

But let’s be generous – I’m in a generous mood today after all – let’s take their own NPV as a universal truth and run with it, with a small adjustment for this being a project, not an operating mine (and rarely do operating companies trade at 1x NPV). This is yet to be financed. It is yet to be built (and boy do I have my doubts on Cifrey’s abilities to build a mine, but that’s for another time). In other words, all the risks are still there. A discount to NPV would account for some of those risks to NPV, which is why projects at this stage of their development normally trade at 0.3-0.5x NPV. Let’s feel generous again and give them 0.5x NPV. That’s 0.5x their very optimistic NPV of $70m. This gives us fair value EV for Tulkubask oxide of $35m (again, before any debt).

To be continued....

Just to show that I listen to constructive criticism, here is my view, in more detail.

Let’s try doing a quick some-of-the-parts. We start with Kapan in this message.

EBITDA of $3.2m for 5 months, annualised that’s $7.7m. Ok, let’s hope (and pray) for some improvements. Gold price is on the rise, after all.

Quick calculation ($31m revenue less $3.2m ebitda, divide by 23.327koz AuEq sold for 5 months) gives us $1192/oz AuEq cash cost. Let’s say that they can manage to improve cash costs to an annual average of $1150/oz. Let’s assume Au price at $1450 (a very optimistic assumption, at least $100/oz higher than long term analysts’ consensus estimates and ignores any hedging they might have). This gives us normalised annual EBITDA at $300/oz times 65koz, or $19.5 million.

Now, this ignores that 65koz AuEq production estimate was calculated using Au price of… wait for it… $1250/oz – did anyone notice that? And prices for Cu and Zn were $6000/t and $2500/t respectively. Ignoring Cu and Zn (which by the way both currently trade at lower prices!) and just adjusting for Au price (to the one we use in our forecast above) results in annual AuEq production dropping to 56koz. (That’s why I hate reporting in AuEq). So, in reality EBITDA for the year will likely be closer to $16.8m. And that’s if everything goes well (prices stay high, costs go down).

In real world, things are never that perfect, so expect cost inflation, price volatility etc. etc. EIBTDA will be somewhere between the current annualised run rate of under $8m and our estimate above of $16-19m. I’d consider it “well done” if they achieve $15m annual ebitda from Kapan going forward.

Based on $15m EBITDA, we can work out EV – let’s use a generous EV/EBITDA multiple of 5x. And for an asset with current life of mine of 4 years that is VERY generous – in reality one should use 2x, maybe 3x. Our generous multiple gives us EV of Kapan of $75m (EV, that’s before debt!)

I know this is not particularly precise, but it is impossible to be more precise given complete lack of information and lack of transparency from the company. All this Gold Equivalent reporting business is complete nonsense – Kapan is producing copper and zinc conc. Stop translating it into gold for us! Why not into bitcoin equivalent? We are not stupid.

To be continued….