Member Info for shakhtar

Why on earth would Poly accept $5m worth of locked-in shares for its $10m worth of convertibles?! This, alongside with a recent note on Kapan performance, is what people should be considering. This looks to me a lot like a settlement of a post-acquisition dispute of some sort. There is something management are not telling here. Clearly Kapan is not proving to be such a great asset they thought it was. This tells me due diligence was rather poor, and/or Poly had hidden something important and this came to light now, and management were able to secure this settlement. I don’t see any other logic, for Poly that is, for this conversion into CGH shares. And cancellation of warrantees and indemnities proves my point - it is a settlement. This can only mean one thing - Kapan is a dud, barely worth the money that was paid for it, or worse.

Rastuss, “nominal” means it is in future dollar terms, that is adjusted to include inflation over the period that capex is expected to be incurred. As opposed to “real” which is today’s dollars. I’d guess 5.5bn nominal equates to about 4.5bn real.

Strong performance! Don’t understand why the market doesn’t appreciate the management’s consistent delivery on promises for multiple years now. Great company!

My numbers show NAV at £9 on consensus commodity prices. Granted, copper is depressed at the moment, but it still should be above £7, compared to peers most of which can’t match KAZ for consistency of production and its lowest cost base.

Let’s see if the half year results in August can give some momentum to the share price...

Daisan, let me assure you I have only one account registered here, if you are indeed implying that down-to-earth and I are the same person. I have better things to do than to support my views here that way. (I am glad however that I am not alone in my opinion about CGH). Anywya, I said all I had to say about CGH, for now at least... Without giving much away I can only add that I personally had a pleasure of meeting some of the "top class management" who run CGH and observing their operating style and as a result I am less optimistic about their abilities than you are. I genuinely wish to be proven wrong about the prospects of this company, for all the LTH's sake, but I remain in my belief that this stock is overpriced.
Really looking forward to reading the annual report - anyone knows when it will be published? It's almost end of June!
GLA

Daisan, as a holder you’re obviously seeing and hearing what you want to see and hear in all those company’s marketing campaigns, but for someone who understands something about mining, and mining in Kyrgyzstan in particular, it is obvious that company is trying hard to ramp up what is in reality a very mediocre project.
“The initial post-tax net present value for Tulkubash, using a 5% discount rate and a long-term gold price of US$1,300 per ounce, is projected to increase to US$70M with an undiscounted total cash flow of US$114M.”
That’s not just mediocre, that’s poor! A marginal project at best! Who are they kidding by using 5% discount rate?! Themselves and their shareholders. It should be at least 14-16% for Kyrgyzstan and the type of risks involved at this stage of the project. The IRR they report is 20%. I would not touch a project of this size, where the margin of error is so small, unless IRR was well into 40%.
Just think about it - “undiscounted total cashflow of $114m”! Do I understand what that means? That’s a total value that this project is expected to generate over life of mine! Before discounting to today’s value! Before adjusting for risks, including financing availability, execution risks, permitting risks, political and social risks etc etc.
The resource is 1.2g/t. Just trust me, this is poor, even for a simple leaching operation. This project will never work financially. They need to triple or quadruple the oxide resource before it starts to make some sense.
The Armenian mine was bought at fair value, ok even if one accepts there was a discount, maybe it’s fair value is $70-80m. So what? I repeat what I said - at market cap of $160m and with debt of $70m this company is ridiculously overvalued.
So far I haven’t heard a single argument from anyone on this board to convince me that I’m wrong. Put it into numbers people, show me where the fundamental value is coming from, apart from empty statements and promises by the “top class management” and I might change my mind.

Sxx4me, you really think you and I, or anyone else posting here has any effect on price?! Really?
And you are completely wrong about my "pattern of behaviour". I just posted a negative view on CGH - not trying to bash it, I will never buy that share - not even if it drops to 1p.
If you don't like opposing views, filter me out, be my guest, but leave your opinion about me and my investing style to yourself - this is a board for opinions on SXX and not on people that post here...

Thanks, will have a further look...
As I said, I'm not holding, nor am I shorting. Not deramping - just giving my opinion. I'd like to own this, and in time I will, and if the opportunity is now and I miss it, so be it, but it's just too risky in my view. I am worried about the financing that is being put together - CFO's experience is not inspiring any confidence. It is a hell of a difficult project to finance though so good luck to him.
I would never short this (unless I was a bond holder), but there will be a better time to go long - in my experience this is much closer to start of cashflows...

Why would it "take off"? What are you basing your opinion on? This company is overpriced by a mile! Market cap of $160m plus net debt of probably around $70m, that's an EV of $230m! For what? A small mine in Armenia that Polymetal couldn't get rid of and had no buyers until Volynets showed up at the door, and a mediocre resource in a country with one of the highest political and social risks. The only reason the share price is so high is because Martin is buying up all the liquidity there is in the market. Let's hope he doesn't run out of money as this will crash to 6p, where it belongs.

That's correct.
"On or around 25 May 2020, the conversion price will be adjusted (but only if [it] is lower than [$0.2443]) based on a pre-determined formula as defined in the Terms and Conditions of the Bonds. If the adjusted conversion price thus calculated is less than U.S.$0.1954, the conversion price will then be reset to be equal to U.S.$0.1954"
What worries me even more is this:
"In addition to receiving Ordinary Shares, holders of Bonds will receive a Make Whole Amount (as described in the Terms and Conditions of the Bonds) upon exercise of their conversion rights."
Could anyone tell me how this "Make Whole Amount" is calculated? If this is what the name suggests, then this Convertible appears to be a "death spiral convertible", which basically means that the bond holders will hedge this by shorting the shares at the same time, so the share price can go only one way, and that's not the way the shareholders want...
I do like the project and have been monitoring this share for quite some time, but I am staying out for this very reason - the convertible bond financing will keep on driving the price down, at least until there is a strong catalist to reverse the trend, and that will only be approx. half a year before operations commence, when the projects is sufficiently derisked and cashflows are imminent. Until then, the risks are just too high and the debt will mount, pushing share price down further.
In other words, I will probably start buying cautiously below 9p, but this will likely drop to around 6-7p, at which level one can safely pile in and hold long term. I'll set an alarm for end of 2020. Until then - good luck all!

https://www.mining.com/web/the-big-copper-short-is-back-as-macro-fears-return-andy-home/?utm_source=Daily_Digest&utm_medium=email&utm_campaign=MNG-DIGESTS&utm_content=the-big-copper-short-is-back-as-macro-fears-return-andy-home

Rastuss, I think resource this size will always have a value (consider Pebble which still has a value despite people believing it may never get developed); hence it will always have a buyer. Baimskaya may be larger than Pebble once fully drilled out, and one day it will be developed, whether in the hands of KAZ or not. In other words, the option has a value, and yes it may be less than what they paid (particularly if they decide not to develop it and put it up for sale), but I'm sure they should be able to get $200-300m back for it in the worst of times. Currently the market attributes negative value to this option, which is where the value arbitrage lies...
As to the consideration KAZ paid, if I remember correctly, there is no provision for shares already issued to be replaced with cash (and those shares are now worth almost $100m less than when they were issued!). You are probably talking about the final payment of $225m, which will be paid in shares if the mine is built or cash if it is not. That is payable in 2029, and if it happens to be cash, that's peanuts in current value terms and means that all that $5bn capex will not have been spent. Think about it...
I maintain my view that market has completely misjudged this acquisition and mispriced the option on massive expansion. If copper price moves higher in the next 5-10 years (and I doubt many would argue that it wouldn't), KAZ will build the mine and will become at least a $25bn market cap company. And if the share price does not reflect this soon, I'd be surprised if the company stays public for much longer as the Kazakh majority shareholders will take it private (and we all get screwed). The best time for this will be when copper price bottoms out - probably some time this or next year.
GLA

Absolutely agree with @hash on Baimskaya. Never understood why the market took such a dim view of this investment, as if sinking $5bn of capex into it was a done deal. No, KAZ management are not stupid, and Koksay is an example of this. They have clearly been mothballing it because copper prices are just not high enough to build it, but when the price is right, it's 3mt of copper in the ground to be developed... Baimskaya is similar, just a much larger and more promising asset, but the approach will be the same. They paid just over $400m to take control of the massive resource, with the rest paid in shares, and now it is just a call option on a massive expansion as and when copper price will be right. And yes, there is also an option to sell it if buying it turns out to be a bad decision. So we have a company producing 300kt of copper at the world's lowest cost of just 90c and just about to add further 70kt through a no brainer expansion of Aktogay, with two real options - one on a massive Baimskaya and the other on Koksay. It's the best copper producer out there and is cheap as chips at the current price, in my view. DYOR of course.

Granto, I respectfully disagree. If investigation shows this was tax evasion and money laundering, lots of parties will get drawn in multiple criminal and civil lawsuites. The Ukrainian authorities will levy unpaid tax plus penalties (100% of unpaid tax) plus interest, so this alone could amount to some $60-80m. The anti-money-laundering authorities in Ukraine, Switzerland and UK may investigate and fine the company further. That could be several hundred million in total. The company will sue the CEO and the charity. The charity might countersue the company. There will be criminal charges brought against the CEO and possibly the company and its directors. There will be legal costs running into $20-30m per year for the next 3-4 years. So, all in, this could be a $500m affair. And that's not considering damange to management credibility and company's reputation. So, all considered, a $600m drop in market cap is reasonable and at the end it quite possibly will be closer to $1bn. I'm guessing 170p would be a reasonable level for SP to settle at, but would not be surprise if it will test 130p level as someone here suggested.
Last year Glencore faced DOJ probe and market cap fell by $10bn despite the highest ever fine for corrupt practices being less than a billion. And Glen's sp stayed down since, so we can expect same happening here. Having said all this, I do think it's a good buying opportunity in the long term and will be looking to enter at around 170-180p level (no advice intended - DYOR and usual caveats apply). GLA

The RNS says it was Vladislav Kim selling, not HSBC. Isn't he the largest shareholder? If he is selling, he must know something we don't.

There's your answer in the announcement just out. That's 4 million shares sold, and if he keeps on selling we can expect the price to be pushed down a bit further until this overhand clears out.

Rastuss, don't be modest, good man! Judging by the history of you posts here I was expecting an in-depth analysis for the future of KAZ along the following lines:

With the acquisition of Baimskaya and the resignation of Nazarbayev, the scene has now been set for KAZ Minerals to become RUS Minerals. Abramovich and his mates have just sold $500m of Norilsk shares and $200m of Evraz shares so I'm guessing they are positioning to rotate into KAZ. Once they build up a sizeable stake at these low prices, one should not be surprised to see Evraz make a takeover move on KAZ using its (very pricy) shares as currency alongside some cash. Vladimir Kim would sell his stake into the offer with the cash portion of the proceeds going to the retired leader of the nation as a thankyou for his support over the years (while keeping the Evraz shares part for himself to continue benefiting from the new alliance). Putin probably has a stake in Evraz already, through Abramovich, so it works out well for everyone...

Anyway, if this was indeed the plan (and I am first to admit this is all pure conjecture on my part, so DYOR and usual caveats), we should not complain as they would need to pay at least £9-10 per KAZ share to make this happen. Why so high you'd ask? I am guessing Nazarbayev, having seen £10 not so long ago, would not accept anything less for his stake, but by building a sizeable stake early at current cheap prices (i.e. averaging down) and using Evraz expensive shares, the Russians should be able to offer this price with little hesitation.

So, with this in mind and copper price fundamentals improving every day (copper in deficit already this year), I'd say we can relax and wait for £10 to be reached well within this year.

GLA

Hi Rastuss, I haven't seen anything further on what Dmitriev was talking about at Davos. Having said that, there were some news a few days ago about Udokan getting $2.9bn financing from the syndicate of three Russian banks. I suspect since Udokan now got financed by the banks, and there was no mention of the RDIF or Chinese or Arabs participating in this financing, the likelihood that Baimskaya was the project Dmitiriev was talking about is increasing, I would have thought, but who knows... KAZ is reporting results tomorrow so hopefully they might shed some light on this...

I disagree, causal. KAZ is undervalued - full stop. It is one of the lowest cost copper producers in the world. At this copper price the company easily makes $1.3bn EBITDA which should justrify a much larger EV than the current $6bn. KAZ is trading at 0.65x P/NAV compared to Antofagasta's 1.0x and that's not counting NAV of to the greenfields (Koksay and Baimskaya). Ok, granted, it should probably trade at discount to the likes of Anto, but not by so much. I think fair value of KAZ operating mines at current copper price should be at least £7.70. Plus some value should be given for the greenfields - say $500m or 80p per share. That means share price should be £8.50 before we can start saying that it is not justified. And every $100/t move up in copper price from current levels should be adding 25p to that share price. All IMHO and usual caveats...

https://www.investorschronicle.co.uk/shares/2019/01/24/rising-to-the-challenge/

Interesting how KAZ is mentioned twice in this article - both in terms of the author's analysis of top picks by private investors, but also as one of Share Money's (last year winner) top picks for this year. Bodes well for KAZ SP this year. Let's hope they are right...

I've been doing a bit more digging and found this, dating back to Sept 2015: https://rdif.ru/fullNews/938/
Google translated it, looks like RDIF was then looking to invest into three projects - Baimskaya, Udokan and Natalka. The last one is a gold one, so this leaves Baimskaya and Udokan as the two equally likely candidates that the RDIF chief was talking about. 50% chance then - not bad odds ))