Member Info for shakhtar

7-9 pence maybe, but personally I wouldn't even buy them at that level, they are a basket case IMO

I wonder how long they can keep this boat afloat. Whoever is lending them money either has huge cojones or just has to keep hanging in there because what's the alternative? Default and cross-default on all facilities and getting next to nothing through settlement with all the lenders? But the music will stop one day and there just won't be enough chairs left.
I suppose Martin will have to step in and bail them out, and then probably convert into equity, increasing his stake substantially (75% maybe?). He'd probably want to keep it listed though (taking private at this price would be stupid anyway). In the meantime they are paying 12-13% on debt and Martin keeps getting paid, reducing a little bit the cost of his eventual bailout. Retail shareholders will never see any money from this share. I am amazed that some hard core LTHs (a total of 3 or 4 ) are still in this when they can sell now at what is really a great price! Their exchange on ADVFN keeps me entertained when on occasion I check it out ))
P.S. And to think that they were bidding $1bn for Kumtor! What audacity!

Well, that is an interesting purchase! This guy owned a fishing business together with Gleb Frank, who is a son of former transport minister Sergey Frank, and son-in-law of Gennady Timchenko, an oligarch with close ties to Putin and investments in energy, transport and infrastructure assets. Some people have linked Maxim Vorobyov's investment as being made in trust for Timchenko, who is under US sanctions and therefore has to hide his investment. Whether this is true or not, this is a significant vote of confidence by someone linked into the Russian government, and importantly, into the state-level investment in transport and infrastructure assets. This is a definitive sign indicating that investment by the government into the infrastructure for Baimskaya is forthcoming.

KAZ unexplained enthusiasm for developing Baimskaya (and paying so much for it) intrigued me for some time, so I decided to do some research into it. What I found is actually very interesting indeed! Apparently, Baimskaya is a huge mineralised trend with a lot of potential. Baimskaya contains not only the Peschanka deposit, for which KAZ have reported the JORC resource of 9.5 Mt of copper and 16.5 Moz of gold, but also numerous other deposits and occurrences of copper, gold and silver. Among these, notable deposits are Nakhodka, Vesenniy and Pryamoy.

The following extract (google-translated) from the conclusions of a scientific study into how prospective these deposits are is all you need to know to understand why KAZ are so excited about Baimskaya:

Source: https://www.dissercat.com/content/mineralogiya-i-zonalnost-molibden-medno-porfirovogo-rudnogo-polya-nakhodka-chukotka
"It was established that the epithermal mineralization in the central part of the Nakhodka ore field is showing high level of erosion, while on the flanks it had eroded only slightly. It was shown that the bodies of quartz-sericite metasomatites (phyllisites), which are associated with the main molybdenum-copper porphyry mineralization of promising areas, are only slightly eroded, since the phangite component prevails on the surface in light mica. These characteristics, taking into account the fact that muscovite is developed in the phyllisites of a larger and more eroded Peschanka deposit, allows predicting the presence of industrial volumes of ore at deep horizons. The vertical zoning of bodies of quartz-sericite metasomatites has been established: a decrease in the depth of the phangite component in light mica. The vertical and lateral mineral zoning of the epithermal mineralization of the Vesenniy ore field was also identified: at the upper levels, mineral associations with fused ores of the tennantite-tetrahedrite series, electrum, native gold and low quantities of chalcopyrite are developed; mineral associations with much higher quantities of chalcopyrite and lower tennantite-tetrahedrite are developed at below 200m; in the central part, zinc tennantite is developed, and on the flanks, silver-containing zinc tetrahedrite. The presence of telluride mineralization on the surface of the Vesenniy and the Pryamoy ore fields suggest their low level of erosion, which indicates significant prospect of mineralisation at deep horizons."

In other words, Nakhodka, and particularly Vesenniy and Pryamoy - all part of the Baimskaya licence area - are likely to have much more copper and gold (albeit at deeper horizons) than the Peschanka with its 9.5 million tonnes of copper and 16.5 million ounces of gold! Looks to me like Baimskaya in time will be larger than Oyu Tolgoy or Pebble and possibly larger than both combined! Remember where you heard it first (but DYOR)

Why is the company silent about this? This is huge!

Another piece of news from the forum:
https://magadanmedia.ru/news/850203/?from=69
Looks like the agreement was signed with Chukotka and Magadan regional governments on the construction of the power lines to the mine and connection to the Magadan power generation capacity. Mr Novachuk expressed gratitude to the two Governors for their support of getting this power line built. Looks like the government is doing their bit in delivering the infrastructure for the project as promised...
Might we see an announcement on this tomorrow morning?

Interesting article quoting Mr Novachuk speaking today at the Far East Economic Forum in Vladivostok, providing some insight into the Baimskaya project:
https://www.vedomosti.ru/business/articles/2019/09/04/810414-kaz-minerals (use google translate)
Autonomous dump trucks and concentrators remotely controlled from Moscow aside (read "low cost"), looks like capex is also coming slightly below at $5bn, feasibility study is progressing well with February mentioned as expected completion date, and he confirmed that potential partners will be invited to co-invest in the project, including Nornickel.
All sounds very sensible and promising. Should calm the institutional investors, if all true, and hopefully price will start recovering from here....
ATB

I know this is silly, so before I'm accused of being stupid, I do understand this will be comparing apples and oranges, but I was just looking at BUR financials and thought this is interesting... food for thought, or simply some light afternoon entertainment.........

So, if you had to choose, would you rather own KAZ shares (Market Cap of $2.2bn) or BUR shares (Market Cap of $2.0bn)?

Both reported similar H1 profit after tax - $225m for BUR and $227m for KAZ
Both declared similar dividend - 4.17c for BUR and 4.0c for KAZ
Both have similar net asset value - $1.57bn for BUR and $1.78bn for KAZ
I suppose this is where similarities end.
H1 EBITDA for BUR was $250m and KAZ had $620m
KAZ has $5.7bn of total assets agains BUR's $2.3bn
Granted, KAZ' Net Debt is $2.56bn (2x ebitda) against BUR at $0.4bn (0.8x ebitda)
But KAZ generated operating cash flow of $248m againt BUR's $7m!

Ok, enough of silly comparison, but the point is that, for similar market cap companies, I'd rather own shares in a highly profitable miner with real assets producing commodity in high demand and capable of generating consistent and predictable cash flows for the next 28 years at least! (from existing assets) with huge potential from owned projects then shares in an investment firm which puts its money into highly complex and unpredictable litigation cases with uncertain outcome that few people can understand (I can't even understand BUR financial statements, if I'm honest). KAZ is a solid business with predictable low cost long life production, simple truck and shovel mining and proven processing technology, growing demand for its product etc. etc. etc.... you get the point... )))

Autonomy, I said I.m beginning to suspect, but I hope it's not the case, which is why I'm holding. It would be a huge disappointment if they manipulated the markets like this. I don't want to believe KAZ is yet another ENRC - after all they tried hard for years to distinguish themselves from the likes of the trio that owned ENRC...
Lanbo, personaly I think it would be difficult to do. They would need support of the banks, which in the current markets and given their high leverage, is a massive ask. They would need to show the banks precisely what the plans are in respect of Baimskaya, and if they are indeed planning to build it, no bank in their right mind will give them money to buy it out, as Baimskaya would need massive amounts of financing. So the only way for them to do it is with an equity partner with deep pockets. This could be either Chinese or Arab sovereigns or Russian oligarchs. Neither of those are stupid and would want a massive equity stake for helping take this private, quite likely controlling stake. I just don't think Kim agreeing to this. So, in summary, I see it as a highly unlikely scenario.

Rastuss, agree with you entirely. My point is that $436m cash they paid plus $150m now plus maybe another $215m in 10 years time is not particularly material. So, they may have wasted 3 quarters of EBITDA - that's not a lot! And they have NOT wasted it, it is invested in the future. However distant that future might be, you must agree that this is a very good deposit and one day will deliver 10s of billions of value to the company. Or it would be a $1bn or so written off. Not massive given proved cash flow generation from Bozshakol and Aktogay which would generate at least $1bn each year for the next 28 years!

With all respect to you, too, Outofideas, if you think 50% downside for KAZ is material, then you don't understand KAZ. It went down to 65p and then up to 1100p, now it's back to 380p, and as painfull as it feels, this is normal for KAZ. I remember how in 2009 after the financial crash KAZ was the FTSE best performer going from 180p to 1560p in just 12 months.
KAZ is being thrown around like this because the company doesn't care about its share price. It is controlled by a Kazakh oligarch who is in for the long run so he doesn't care if price today is 300p or 1100p. And the company behaves accordingly. This gives us all an opportunity to trade it, and hopefully make some money. That's if you can stomach the ride... )

I disagree with you, Outofideas, and if you read Rastuss previous views, I bet he would disagree with you too - that on the rights issue, I mean. Kim is intent on maintaining his majority stake and I just don't see him participating in any rights issue, nor do I see him ever agreeing to the company diluting his stake, so you can forget about equity issuance. They will keep on raising debt, if needed, from their Kazakh friendly banks, or Chinese, which whom the company has very close ties not only in construction of all of their projects (as Hash noted the other day), but also in supply of copper concentrates.
I really do think analysts are not seeing the picture clearly here, or they are deramping on purpose. I'm beginning to suspect the shares are manipulated down by Kim&Co to give them an opportunity to take it private. The value in those long life low cost operations is immense! Not to mention Baimskaya, which once built will produce copper (and gold!) for over 100 years.

I actually also agree with Rastuss that final payment will be in cash. For reasons I set out in my previous message - the project will be delayed - whether because of the market conditions, delays in government delivering the infrastructure or just general project delays - projects like this in the remote conditions like this do not get built to the originally envisaged timetable. Which is why I think cash settlement will be triggered before share payment is due.

And for the same reasons (this project being delayed) is why I think the market is over-reacting by assigning to much value downside risk to KAZ. I believe KAZ will reduce its present debt load significantly before any serious money is actually committed to Baimskaya. KAZ is a cash cow at the moment, and Aktogay 2 will come online sooner than people expect, adding further significant cash generation. In other words, if copper price stays low, Baimskaya gets delayed, so no cash flow problem, but if copper price rises, huge cash flows will reduce debt quickly, so Baimskaya can go ahead. In both scenarios KAZ should be worth much more than the current PE of just 4.5! Rediculously deramped by analystst, this is a huge value opportunity. All IMHO. DYOR

Agree with you, however, on the debt load. It is massive. Having said that, they are not stupid (and neither should be markets). According to my calculations, at today's copper prices the project doesn't fly, so unless market picks up, the feasibility study will retun a negative result and Baimskaya will be delayed until better times. I really don't think them spending $5.5bn (nor banks giving them money to spend, nor potential partners lining up) on this project at today's copper prices. Hence I'm not worried and see this as opportunity to add to my KAZ holding. Yes, the sentiment, trade war, global recession etc etc. may cause KAZ to decline further, but my guess is we won't see a price much below £2, so downside is limited, but upside is huge - KAZ has a fundamental value of about £8-10 (1x NAV) and market just doesn't see it at the moment with all the stuff going on.

If I understand the terms of the deal correctly, the cash payment is $225m and is payable, if things don't go to plan, in 2029. Frankly, that's nothing in the grand scheme of things, and the present value of that liability in today's terms (discounted at 14%) is $60m. Not material.

Outofideas, the number of shares to be issued for the remaining 25% of Baimskaya yet to be acquired (which, by the way, will be 7-8 years from now) has been fixed at the time when the deal was struck, it doesn't change with the share price decline. In fact, at today's SP, that deal is now worth $700m to Abramovich, not $900m as announced.
Re you comment on CEO sale, there is nothing worrying there at all. It is quite normal for a UK tax resident director exercising his/her share options to immediately sell 47% of the amount received to cover tax payment arising on income crystallised from receipt of the shares. He had to pay that tax at the time of receipt of the shares - and that's a lot of tax - so unless he wanted to dip into his savings account to cover tax, his only choice was to sell part of the shares. Frankly it's a no-brainer and is actually a good sign that he kept the remaining 53% of shares he received. I'd be worried if he sold the whole lot, but as things are I am actually comforted by the fact he kept them.

Rastuss, thank you for tour opinion. I have been reading this board for couple years now and have enjoyed your debate with Tucson. I must admit my view is more aligned with that of Tucson. I have been investing and trading (both) in Kaz since 2007 and have done well with this share, and I would fully agree with your view back in 2008, 10 or even 12. But this has been a very different company since Mr Ni departed to another world and Kim sold a chunk of his shares soon after. I have closely watched what was happening and I actually think that was the time when the Leader of the Nation exited his investment in Kaz, if one believes that he had one in the first place. What followed since was a serious of thought-out strategic moves - yes, including the gift of a chunk of the company to Kim. Yes, copper price turned and Tenge devalued probably returning what is now known as Kazakhmys back to profitability, but there was sound logic to that restructuring - I firmly believe that without it we wouldn’t have this discussion now as the company would have gone bust, and not even Kim with all his connections could help keep it afloat. I can’t think of any wrong move since 2013 and do not see any influence from Kim on the strategic direction, operating decisions, or financing decisions. Of course he maintains significant influence through his shareholding and board seat, but corporate governance is far superior to what it used to be under his chairmanship. I don’t doubt for a minute that investment in Baimskaya was nothing to do with Kim having some sort of a backstage deal with Abramovich or the leaders of two nations helping each other. In fact, I wish it was the case - maybe then there would be no questions about whether road and power infrastructure would actually get russian state funding - it would have been a given. I actually do think this acquisition was a result of a bold vision and sound strategic logic supported by confidence stemming from project delivery success on Bozshakol and Aktogay. I just don’t see any shady business any more at Kaz - a view that clearly you and the wider investment community do not share. Given the history that’s understandable, but after 5-6 years of current management making next to no errors in their project delivery, ramp up, operation management, and financing, surely the company deserves a benefit of a doubt. My point is that all too often I see investors supporting hyped up companies with dubious prospects and little in way of fundamental value, but in this case they totally disregard all that because of what happened to ENRC or management missteps of the post-listing strategy, which is now ancient history in my opinion.
I wish Kim sold half of his stake to open up the company for a potential takeover. The quality of its assets and Baimskaya project is second to none. It should be trading at twice the price even at today’s copper prices.
All IMHO. DYOR

Copper up a bit
First Quantum up 7.8%
MMG up 5.1%
Glencore up 3.8%
Antofagasta up 3.1%
Southern Copper up 1.5%
Large miners all up 1.5-2.0%
KAZ DOWN 6.3% !!!
Investors have capitulated. It’s not the operating performance - results were excellent! They seem to hate Baimskaya and the strategy the company has taken. I don’t understand why investment community gives no credit to the management for delivering year after year, and for their long term vision.
Why do companies like Solgold, Seabridge, Northern Dynasty, with no production and no money, have multimillion (over billion in some cases) valuations, but the lowest cost producer of 300kt of copper and 200koz of gold with $1.25 billion! of annualised ebitda doesn’t get any credit, and is instead given a substantial negative value for developing what could be the most promising project in the world?!
Any opinions? I’m at a loss here.
P.s. added 6000 shares at 415 today

Great to see costs reduced, particularly when compared against previous half-year and Fy2018. The expectation was for an increase so SP should react positively.

Rupps, please don’t embarrass yourself with a comment like that. If this is truly your opinion please support it with an argument. IMHO comparing KAZ and SSX is just nonsense.

I understand your defensiqveness, I really do. You are invested here. If you bought in at the lows, I really think you should consider taking profits now. How long can Martin afford to prop it up before he runs out of money, or friends? The numbers just don’t stack up. So they paid down $2m of debt or so. At this rate they need Kapan running for another 17 years to repay the debt.
Their reporting leaves much to be desired which means they are hiding problems
I don’t like this practice of reporting production in Au equivalent. That’s rubbish - give us full breakdown of metals and respective grades so we can assess resource dynamic. Give us full and transparent operating performance analysis, details of what exactly was settled by Poly debt to equity swap and why and at what cost.
They can play this game for maybe another 6-9 months, but at the end all will become evident...
Or maybe Martin has deeper pockets and more brain than I give him credit for. Look, I could be wrong, but this does feel and smell bad. So I’m staying away. Not shorting either given Martin’s waiver and low liquidity.