Member Info for Sher-Lock

If you add up all the savings, finance costs down 11.5 million, cap-ex down 66 million, special mining rights & profit sharing down 70 million and dividends down 35 million $ = 182.5 million $! Oh, yes, they write down to minimize taxable profits and now they cut spending for real important works in the mine. The test leaching pad at Herradura delivered an increase of 119,000 ounces of gold inventory = 38 million $ uplift in the income statement. As other mines had to shut of COVID-19, if they were affected or not, Fresnillo did continue to (mis-) use its contactors and workers to mine. What did they pay not to shut? A fair question here to ask! Why other well run mines owned by North American companies had to shut and go through weeks length re-start gimmicks. Mexican accounting is hair-raising and has nothing to do with lowering taxable income.

that is perhaps an important note, Woodside owns 35 and Far Ltd 15 per cent, both from Australia with the balance of 10 per cent by the Senegal National Oil Company Petrosen.

The ticket price of 300 million is for the 40 per cent stake (and not 100) - that is even better for CAP!

Did anyone notice the sale of Cairn's Senegalese portfolio to Lukoil for 300 million $? It includes the Sangomar development which is next to CAP Energy plc's Djiffere block. When production chicks in, Cairn can receive an additional 50 to 100 million $. CAP Energy plc has 30 million shares outstanding - can't calculate the current values of the two assets, but for sure, something is there and CAP is there as well. Lukoil is smart, buying a good asset and has the pockets for the investment to bring it to production. With the political interferences between China and the USA, no Chinese state oil company could buy it, but the Russians help out. Another smart move to put its political interests at work in Senegal!

What a chat group - are we here in the silver bullion market or at Fresnillo? Did anyone take notice on the typical lousy numbers of the first half of 2020? Earnings were below expectations, as well as a dividend cut. They blame the devaluation of the MXN of 21.9 per cent over the USD, what a joke. As I wrote earlier here, they hedged more than half of their gold and silver production at much lower strikes and they do not participate for quite a time on the rising spot prices. If silver comes in a bit, good for FRES as they have a lower loss on the hedge book. The production was reported a week earlier, 26.8 million ounces of silver and 381,000 ounces of gold (at silver/gold ratio of 80 = 47 per cent silver production and 53 per cent gold) you arrive at reported revenues of 1,054 million $ at an average price of 1,610 and 16.71 $ per ounces of gold/silver. Costs of sales were down only by 8 per cent to 733 million $ with all their operations in Mexico, lower costs of diesel in the first half. When we take average FX MXN/USD from 1H2019 at 19.15 and 1H20 of 23 with no cost inflation, the costs should be down to 663 million $. But as I say, they are transparent with their shareholders and they should leave the London Stock Exchange and trade the shares in Mexico where no-one cares about shareholder interests.

No one really can explain the trading pattern in the MAFL stock - waves. The stakes of the privately-owned gold mines should keep up in value with gold holding its high price level. Especially when we see the US economy is on a standstill after a slight recovery, or even on the verge of a renewed retracement - stimulus package number XX will be spoken. I wonder why investors always work with price objections - gold at 1'900, and so what? Gold can be at 10'000 like the worthless Bitcoins and then? Setbacks are always hurting more in gold than in other investments, but clearly the way is up. In the meantime, the nice balanced portfolio with the investments in oil (CAP) and zinc/copper (Lagoa Salgada) will appreciate and certainly keep their value (in the ground). Unfortunately, Robinhood cancelled its plans to expand in the UK, would be nice to see new RH-investors piling in MAFL ;-)

I wonder if investors start to realize that the major shareholder in Fresnillo, Penoles, has any interest to be transparent. If one takes the time and visits the penoles.com.mx website - it tells you everything. There was a press release June 26th on the current hedges of 23.48 million ounces of silver and 706'000 ounces of gold between July 2020 and December 2021 with an average call price of 19.04 USD for silver and 1'809 USD for gold. For silver, it is about a bit less than half the annual production and for gold 80 per cent. The Fresnillo mining complex is huge and the mining operator at one end doesn't know what is going on at the other end. Look at the managers, I doubt that one of them knows anything of underground operations. You can contact IR - or independent directors - no response at all. Another curiosity - you never see any of the well-paid directors purchasing own shares!

Cerrado Gold released an update & presentation July 1st, mentioning - "We are currently looking to raise US$5 million at a price of US$0.80 ($47 million market cap) and would welcome anyone’s participation should they wish to invest (see term sheet). While we do not need funds for operations we see great advantage to position key institutions ahead of the IPO and feel an increase of resources in Brasil will materially help valuation for the IPO" - a nice uplift in that investment as well.

Nice run in the share price in conjunction with the move in silver. Looking at the Juanicipio JV partner MAG Silver, who raised 60 million $ at the end of April and another 50 million US$ at the end of June - all proposed to be used for the completion of construction - it smells like a big cost overrun. As we should know, Penoles as a major shareholder of FRES has no real interest in shareholder-friendly communication. You should only own the shares as a play to be included again in the FTSE 100 index, but otherwise, there are better precious metal miners. With all the shut-downs in the Mexican mining industry, the second quarter production should feel an impact, as the work in the expansion of Juanicipio. GLA

If you have to wait for years to get an appointment, you can imagine how long the list is with unheard cases - Panthera is just one of it. As the judge was replaced several times, any new one has no clue about the case and will put it on hold - postpone the hearing to a later date till a new judge will take over. The never, never, never-ending saga of Indian courts!

We have really to question when we see a 7.1 bid to 7.5 offer for 10,000 shares on each side that someone is selling 14,238 at 6.5 Pence! As long we have investors on board who place orders like that - we do not catch the rising tide of the commodity markets here. The market maker will sell the shares later at a much higher price and reap the profit on the back of the impatient investor.

Till the first zinc will be mined, we are going down the road for at least eight years. But that is a horizon investors have to commit in such a story as with further development, the value of the project increases. We are looking out for short term gains, quarterly reports and so on - does it matter? We know what MAFL has, and there is even the producing gold mine of Cerrado Gold in Argentina. Small bits and pieces which will work out in the long term.

COVID-19 is accelerating again in Portugal with 500 employees at a distribution centre of Continente Hipermercados infected. Tracing down the chain (lorry drivers) the infected rate is at 3'000. So the government intends to increase again the security measurements soon. Tourists are afraid to visit the country. Probably not so important this year if drilling will take place or not. School vacations were proposed between 10th June till 10th September - probably government is shut as well. Better to take it easy than having staff infected on the site of exploration drill work.

Incredible, since my last post - nothing was delivered and you still sit out the never-ending Indian story. They dilute existing shareholders for so many years by issuing shares at a discount to business friends. The courts in India will never speed up any case - why should they? Even if the new MD has some experience in Indian court battles - it didn't help the Oilex share price over the years. I wish good luck to those who didn't get a few cheap shares on the issue.

Fresnillo did make the return to the FTSE 100, but we are probably two months away that it could be the case. To bring COVID-19 and the performance of gold in relation is stupid. Everywhere is a mess and economies are recovering much slower than politics hoped for. To catch up the lost business during the last three months, we need a rocket recovery like a J and not a V-shaped one. This will not take place and latest in September/October we will face tremendous lay-offs. How should companies pay the debts they loaded up over the last few months without having profitable revenues? Cost-cutting is what takes place and governments will print more money to prevent the worst. Gold has to be mined and there is a limited quantity available - try to buy gold coins!

Stable results, but comparing the market cap of ASND and MAFL, everyone can make his own calculation which is cheaper.

Bottom Line: FRES reported a gold production beat (+7% vs. our estimates) and inline silver production. The gold production beat was a result of strong production
at Herradura (143koz; +17% vs. estimates), which benefited from higher volumes/
recoveries. Full-year 2019 production was within revised guidance. 2020 guidance
remains unchanged as of the capital markets day.

The comment of one analyst who is mildly neutral on the stock

The comments from analysts on the Q4 production report was mixed. One pointed to the target they have reached and that there was not another negative surprise. The others mentioned the slight miss of their production target; we talk here about two per cent!
The Penoles 3rd quarter report showed the improvement of the financials, mainly out of its consolidation of Fresnillo. In Q3 & Q4 2018 the gold price averaged around 1’270 USD, in Q3 & Q4-2019 we had an average of about 1’500 USD. On silver Q3 & Q4 2018 around 15 USD and in Q3 & Q4 2019 an average of 17 USD. The higher selling prices should compensate to a certain point the lower production and I would guess, the P&L looks better for the second half of 2019 compared to 2018.
The capital spending is already included in the 2020 figures, and those costs will end up in the AISC figure. The AISC is anyhow a significant variable, as the companies can impact their tax load. Some are capitalising the costs and add them up in the carrying value of a project and others expense a lot of costs.
The silver price is always moving faster in such markets, as it is the secure and liquid hedge for the big institutional gamblers. The demand for silver will move higher as we see more and more proposals on CO2 reductions. Solar panels need silver and there is no chance to recycle old solar panels so far. The same issues we have with Teslar’s lithium-ion batteries, there is no capacity to recycle them and what I hear, and there are already vast stockpiles of used ones which are waiting for a breakthrough in recycling. Playing the clean side of investments; silver is probably better than lithium.

The third-quarter production was reported 23 October 2019 and comments by analysts were not significant. Unfortunately, FRES is not reporting financials for that quarter. I contacted IR and asked, why the mother Company reports 3rd quarter financials and not FRES itself - no response. It is a bit strange as FRES has to deliver its financials to Penoles that they can communicate their financials. But interesting to point to some highlights from the Penoles report:
" ...n and the non-controlling interest was also higher, due to the better results of subsidiaries with minority interest such as Fresnillo plc and Tizapa."
"Net Sales (US $ 55.5, + 5.3%); due to the following: …...
• US $ 46.1 due to the higher gold and silver prices, a benefit partially offset by the reduction in prices of base metals and the realisation of concentrates…..."
"Inventory Changes, favourable at -US $ 64.7 since in the 3Q19 a credit of -US $ 14.0 was recorded; contrary to the charge of + US $ 50.7 made in 3Q18. In both cases, it was due, to a greater extent, the effect of changes in gold inventories in Herradura leaching patios…"
"...EBITDA for the quarter of US $ 269.2, had an increase of US $ 73.9 (+ 37.8%), while Operating Income was favorable in US $ 41.0 (+ 81.7%) to US $ 91.2...."

Despite reporting a weaker production in the third quarter, higher metal Prices increased revenues and profitability. A reduction in inventories at Herradura was a significant positive on results as well. The metal Prices in Q4 were at least the same on average than Q3, if not a touch higher. If specific improvements in mining took hold in Q4, the production report should be not so weak than Q3. Below the bottom line with a good Q3, we could figure out of the Q3 release of Penoles, FRES should finish 2019 with a definite beat. Analysts behave like a heard, first promoting the stock in the first half of 2019 and then suddenly getting cold feet. When the stock trades higher, they will return and find stories about why they turn bullish again. FRES is a bargain and favouring a Mexican based precious metal miner than all others listed on the LSE. What most Investors Forget, the part of the gold production is currently 60 per cent (taking the current silver/gold ratio of 86x). I sense that they try to lower expectations to start to over-deliver again. Secondly, Penoles could retake FRES private, why all this mess with Investors when the free float is just 25 per cent of the share capital.
Unfortunately, management of FRES does not look like to have the interest to improve communication with investors/shareholders. Even with a share price trading so low, we do not see any management transactions, taking the chance to buy some shares. In two days we know more and keep fingers crossed they did better!

We should the judge in charge plea the state of Rajasthan guilty when he receives his monthly salary from the same guys. It goes for years, always with the same hope that anything changes (state and local governments), but nothing takes place. India is India and as long you have no arbitration court in place who could rule between India/Australia of breaching investment interests (like we have it between Mexico/USA or Peru/USA) there is no end to the odyssey.

The case in January will go nowhere as the state of Rajasthan is represented by a director. Either they do not see any importance to defend their positions with lawyers or they have no money to pay them. As I wrote many times here, India is a highly difficult place to do business as a foreign company. Even with the local partners on board, things do not get easier - it is a rotten state and this is common in India. Good luck!