Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
Comparing the share price of Fresnillo with its major shareholder Ind. Penoles, we arrive on a 25% underperformance since mid-August. The share price of Penoles recovered entirely from the last earnings wash-out, not so FRES. For sure, there were a few brokers pushing FRES as the only big precious metals stock in the FTSE 100 index, after Randgold merged with Barrick. With the negative earnings revisions, the stock lost its top ranking status and over the last few weeks, most brokers eliminated the stock from their recommendation buy-lists. Three months ago Penoles/FRES were trading at 241.08 MXN/8.64 GBP, hitting a multi-year low at 172.66 MXN/6.01 GBP beginning August. Yesterday Penoles closed at 256.49 MXN and FRES at 6.74 GBP. This is a reasonable gap which still exists in favour of FRES - and on top, earnings revisions turned positive over the last four weeks. Last month they toured with analysts on their mine sites and they are working to solve the issues (lower grade etc.). They will solve it and reach the previous targets 12 months later, who cares at the end. When the share price trades at double digits - the herd will jump on the story and analysts will upgrade the stock again - leaving the first 3 GBP of gains to the hard believers.
The Shares of ist controloing shareholder Industrias Penoles moved up another 2.8% and closed at 247.66 MXN, the shares are back to the mid-June share price level. That equals to 8.12 GBP in Fresnillo, just on a comparable performance. Silver on the other side was trading mid-June at 14.95 USD, now 18.46 USD, but more important, since the end of June (15.32 USD) the move in silver will impact the bottom line of Fresnillo. It would be nice to see more Insider buying and I don't know what is the reason of management to hold off to buy a few cheap shares here.
The previous company of PAT, Indo Gold, started the projects in 2004 and was more or less busy in Indian courts. All the money they raised over the years went up in nothing. PAT burned 1.5 million USD, and they did not drill one hole. All the data of possible 6 million ounces is old news, and no-one talks about the difficult extraction. They will spend the recently raised money for management and lawyers, still having not drilled an exploration hole. They will need to raise at least two million GBP to start a first drill campaign, but first, they have to get the right to move on the property. Similar no goes with the investment in Treliver Minerals (former Anglo Saxony Mining) - nothing went off there for years and the spin-out Aforo Resources who had some exploration assets in West Africa - the last one was running out of money as they got no shareholder support. Great stories if one has a lot of time and deep pockets to survive with other investments. India is good for local people to do investments, but foreign companies face many different issues. Good luck to those believing in the Indian princess
Zinc prices are too low, and the smelters manipulate them. There are record low inventories in London and Shanghai; global mining output is up as well as consumption. Copper is a commodity for gamblers, like oil. In those future markets, most speculators are taking their chance to play any tweet by Trump. ASND is similar to TV (Trevali), and we trade in the last one even below the levels of the financial crisis, despite having good new management in place. No-one could tell me on which commodity in the metal manufacturing industry you could link zinc, i.e. consumption of nickel or ferrochrome is up = strong zinc demand. We will see, but if ASND and TV are facing profit margin squeezes, for the others is no difference.
Industrias Penoles who controls 75 per cent of the share capital of FRES saw its share price recovering from the sell-off late July and is back to 205.64 MXN (29th July 207.28 MXN) after hitting a low of 170 MXN on 5th August. FRES was trading at 7.9460 GBP 29th July and hit an intra-day low of 5.70 1st August. Today we trade at 6.6840 GBP, still 16 per cent below 29th July. Silver is up 3.4 per cent in the same period and gold up five per cent. Looking back at both metals for the running quarter of FRES, silver is up 11 and gold is up 5.6 per cent. Far more than the small adjustment in this year's production outlook. Mexican companies are not run in the same way as Canadian mining companies and they could learn to add shareholder value. At least we saw the first purchase of 1'600 shares of a director in years, reported 31st July. Many analysts who pushed the stock after Randgold lost its UK listing status, where caught on the wrong foot and like always the herd mentality forced them to lower the ratings or price target. When the shares trade back at 9 GBP we will see the same game of upgrades. Still the favourite of big-cap precious metal stocks on the LSE with clear long term advantages over HOC or the Russian miniers.
https://www.ascendantresources.com/English/Investors/press-releases/press-release-details/2019/Ascendant-Resources-Achieves-Strongest-Operational-Performance-in-Q2-2019-Since-Its-Acquisition-of-El-Mochito/default.aspx
Excellent second quarter operational results. Should help the bottom line as well - will see more on 7th August.
Same cheap play as MAFL and who knows when the zinc price will start to fly as demand in Q2 was again higher than global production & inventories down again.
It was not the only High Court order in favour of the company in the long journey of getting this project one step ahead. The State of Rajasthan never accepted any orders from the HC and there is not much hope this will change soon. Mody was in place for the last five years and there was no change and the same will be five years out. India will never change its rotten bureaucratic system. And at the end you have to question how they want to process the gold from the hard rock resource and if it will be economic! Chart techniques are useles in these small stocks as the market makers decide where they move the bid/offer.
You are more than right, but here are details we know and it is just an issue of communications to the public that investors are aware of what is coming.
The payment at the end of June will probably balance out the share price losses in the portfolio like ASND which is down from 0.51 CAD to currently 0.37 CAD from the end of March. Therefore the NAV from the end of March of 13.65 Pence should be more or less balanced out.
But looking ahead, in December there should be the next payment and this represents roughly 1.12 Pence per share, the same in June 2020. And then it starts to get even better, December 2020 the payment represents 2.25 Pence, the same in June 2021 again. Adding up those payments and assuming no chnage in value of the other holdings we end at a NAV of 20.4 Pence. And if the ASND will expercise the last option to get 80% of the LS project, MAFL will receive another payment, corresponding of 5.6 Pence = a NAV of 25 Pence by December 2021 = 30 months out from here. Steady growth with an expanding resource base making LS an even better value for the remaining stake.
With a NAV of 13.5 Pence, why should the Company allow to let its Shares fall to 5 Pence? They have and will get more cash in a month and they could do someting shareholder friendly and pay a dividend or even buy back some shares.
Global zinc mine supply increased 9.4% y/y in March to 1,093kt (12,872ktpa), latest data from the ILZSG shows. Growth in both Australian and Chinese mine supply contributed to the strong y/y numbers with Australian mine output increasing 90% y/y to 121.4kt (1,429ktpa), predominantly driven by the ramp up at New Century, while Chinese mines produced 354kt (4,168ktpa), up 5.7% y/y. Refined zinc output fell 2% y/y in March with 1,087kt (12,809/ktpa) produced globally with output drifting lower across China, India and Japan. Global zinc metal usage increased 6% y/y in March to 1,132kt (13,333ktpa) with ILZSG data showing the zinc market broadly balanced in Q1, posting a 15kt deficit from a 248kt deficit in Q4 2018.
MAG Silver is an exploration and development company whose principal asset is a 44% interest in the high-grade Juanicipio JV in Fresnillo, Mexico. Fresnillo (FRES LN) holds the remaining 56% interest and is the operator of the project. MAG Silver continues to advance other prospective exploration projects in Mexico.
Fantastic asset with fantastic upside potential. Upside comes from significant exploration potential, ability to grow resources and significant economic benefit of being able to leverage new infrastructure from this flagship asset. MAG’s minority interest puts the company in the back seat, but they’re riding in a Tier 1 automobile with a proven driver. The relationship and partnership between MAG Silver and Fresnillo appears to have improved notably. The value of MAG shares could continue to rise as the company moves towards production.
• Juanicipio continues to advance: The JV recently formally approved Juanicipio. Not a surprise given significant underground development has already been completed, but this should remove any remaining doubt about advancement of the project. Timing of completion of construction is guided to late 2020. BMO estimates commercial production begins in Q1 2021.
• Well capitalized balance sheet: Management is glad that they raised capital when they did. As of March 31st, company had C$129 million in cash on its balance sheet which will cover expenses well into 2020. Management will reassess working capital needs mid next year.
• Great location, great operator: Not necessarily new, but worth re-highlighting the existing skilled and knowledgeable labour in the area. Fresnillo is also a proven and well-regarded operator.
• Resource growth and exploration upside: The Fresnillo Silver District is one of a kind. The project continues to add significant discoveries including the Valdecanas Deep Zone West (2015), Valdecanas Deep Zone East (2016), Anticipada Vein (2017) and Pre-Anticipada Vein (2018). Discovering of a new upwell zone could provide tremendous upside potential.
• Plenty of upside that is attainable: In addition to good exploration and resource growth potential, this asset will benefit from having new infrastructure in place. The project is being constructed to allow for an increase in throughput and the ability to capture value over the long-term.
If you think so, great! The Modi Government was in place for the last five years, and the old Indo Gold got nowhere at any courts. India is an unpredictable place to do business, and it will never change. Shareholders of Indo Gold who committed funds to keep the thing afloat were sitting out for more than ten years – with no return. Management expensed the incoming funds, and that was it. There were always new investors who got hot on the story and committed new funds, i.e. Singapore. Even the project in Germany with Treliver Minerals is going nowhere. You can have a great thing, but to extract the resources is a different story. India’s government takes it seriously with environmental issues, like when they closed Vedanta’s copper smelter in the state of Tamil Nadu. Therefore it will be not an easy thing to mine this great gold reserve. There are better plays in the exploration of gold deposits around in better/reliable jurisdictions.
Pretty quiet here as well in the trading of MAFL shares. Since the NAV update and a brief spike in the share Price with some volume, Things went the usual way - little selling and market makers take down the bid price constantly. Today's trading is another example - a sale of 725 Shares with a value of 58 GBP - a joke! The three purchases took out the offer at 8.5 Pence and what are market makers doing - lifting the offer to nine (to go short again) and Keep the bid at eight to take out any frustrated shareholder. We are getting nowhere if management is not communicating more - similar silence at ASND.
As a follower of this chat, I post the first input into this group. The NAV is one thing and the market makers in the stock another. It is always the same game market makers are playing here. They go short when the share spikes and hope to cover it cheaper with a least half a Penny profit.
The last NAV report looks good, but since the trade war between the USA and China intensified, industrial metals sold off as well the shares in the sector. Everyone things global economic growth will slow, but the total China exports to the USA are less than five percent of China GDP. China will grow faster over the next ten years than the USA or Europe and will need more raw materials for infrastructure projects. Therefore the fall in the price i.e. copper comes to the favor of the country. I would be not too much concerned about short term moves in commodities as the longer term trend in consumption is still up.
The current market cap of MAFL is 3.24 million GBP and investors have currently to live with that discount to the NAV. But a interesting point is that ASND will pay in total another 5.5 million USD or 4.24 million GBP to increase its stake to 80% of the LS project, according to the agreement posted in the 2nd August 2018 RNS. In theory, they could acquire MAFL for less than the future payments and pay in own stock. As MAFL owns close to three percent of ASND outstanding shares, the acquisition would be even less expensive. It was just a thought I had recently and perhaps it will change a bit the attitude of investors to see the real value in the MAFL shares.