The latest Investing Matters Podcast episode featuring financial educator and author Jared Dillian has been released. Listen here.
It should be 20p+ already because of the speed and size of the Covid-19 sales in such a short time period, plus the known sales to major US sporting venues since the last update. The opportunities for Cov-19 are massive, they got multi-million dollar sales at the click of a finger, over just March 2020, from a standing start and the tech is going to be a massive part of lifting the lockdown. They could easily sell over $100m by year end. Where then for the share price! Just do a google search for "mass fever screening". WSG are the second highest non-advertised google link.
If you look at the recent drill results:
1. The average grade, including gaps, has risen from 1.12g/t to 1.18g/t. Calculated from the top of the highest intersection to the bottom of the lowest intersection of each drill hole. So much of a muchness.
2. The average grade in the high grade zone, has fallen from 8.2g/t to 8.1g/t , although the average width has risen from 38.8m to 40.5m wide. Again, much of a muchness.
3. The infill drilling therefore had great results as to be expected, but that is largely infill drilling. The drill hole that appears at the top end of the hypothesised high grade horseshoe, HAD047 was a flop finding just 45m x 0.36g/t gold and 0.05% copper. I note, had this hole been a success, every Tom Dick and Harry on here would have been trumpeting it. Clearly more work is required at that end to work matters out.
4. Also interesting is the description "Mineralisation has now been defined more than 400m in length, up to 150m wide and up to 600m below cover". Contrast to the previous March exploration results which said " a strike length of 450m, to vertical depths of 600m". That appears to be a reduction in strike length.
In short, I can see why the share price fell today. The share price was pumped for extreme success whereas the reality was largely more of the same. Yes that same is exceptional, but the share price already priced that in and more. Buy on rumour sell on news, regrettably the usual market story, but in this case entirely justified.
HAD047 appears to be disappointing. Clearly designed to test the extension to the NW high grade zone (see Figure 11 on page 21) and failed to hit anything of note - just 45m x 0.36g/t Au and 0.05% copper.
The link is from the results appearing here:
https://www.asx.com.au/asx/statistics/todayAnns.do
Here, but can't get it to work yet:
https://www.asx.com.au/asxpdf/20200430/pdf/02229965.pdf
Agreed although I add that even 10m oz won't cut the mustard. 10m oz of easily recoverable reserves (not 10m of resources) are what are needed here.
The number of gold mines in the world that are producing over 1m oz of gold per year are very, very few and far between.
Here is a possible (and optimistic from my perspective) schedule for mining:
2020 - Resource announced
2020-2021 - Exploration decline
2021-2022 - Feasibility studies, permitting etc
2023 - Underground construction starts
2024 - First gold pour, 250k oz production
2025 - 500k oz production
2026 - 700k oz production
2027-2033 - 800k oz production
The total ounces produced in the next 13 years are 7.05m. Going 13 years out is quite a way for an NPV.
At an average of $500/oz profit, this is worth $3.525bn. $500/oz profit is reasonable given the average gold price in the 2010s of $1347/oz and the fact that this is deep underground mining.
A 30% share of the above for GGP is therefore worth $1.0575bn.
In £ this 30% share is worth £846m. But that of course is future earnings.
Applying a discount rate of 15%, this is worth £213m.
The discount rate is more than fair given the likely CAPEX funding costs that will need to be secured and the costs of that finance, inflationary costs, together with the risk of the gold price falling 3-13 years out. FWIW, I ignore the likely ordinary dilution along the way for administrative costs and drilling costs elsewhere.
Of course the next man in will usually want some of that NPV for themselves too, so I could have been much tougher here.
GGP's market cap is £278m (mid point) and fully diluted is c£320m, and both figures i.e. significantly in excess of the £213m detailed above.
Looking at NPVs based on discounted cash flows, with the inputs above, GGP is significantly overvalued on current information.
As ever, these are just my personal views, DYOR.
I'm quite happy for $200 per oz for anything high grade that can be mined within 10 years of today.
I'm not happy for $200 per oz for all gold, irrespective of grade, location, recoverability etc.
The point is simple, really simple. Go and look at how much Newcrest paid per oz for Red Chris in 2019, come back on the board with the answer and post it.
No, I haven't been putting the shares down for months. I stated on this board on 17 March that I had just bought 3m at 3.05p. That is not putting down the share. I just have a different method of valuing the company to you.
7p per share *4.2bn shares fully diluted = market cap of £294m or $367.5m
$367,500,000 divided by 100/oz gives 3,675,000 oz of gold
GGP has a 30% stake so 3,675,000 / 0.3 means Havieron needs 12.25m oz of gold at $100/oz to justify a 7p valuation
Happy to receive corrections on the maths
At 7p, fully diluted, this values GGP at 12.25m oz at $100/oz.
This is now in the crazy valuation territory.
Bear in mind that not all gold found will be commercial, in the reserve area, targeted in the first 10 years and thus not all gold found will actually have any value at this point.
This may not be a sell on sentiment, but it is a clear sell on fundamentals.
I think we will have lift off here fairly soon. In my mind, this is a very, very good buying opportunity.
There will very soon be an announcement about the lifting of lockdown. Other countries have started this process (Austria, Spain, Denmark, Poland and Norway). The US is setting out its plans later this week. The UK government is now under heavy pressure from the Labour party to set out its plans to end lockdown and May 11 is being suggested as the date that shops and schools will reopen. It may even be sooner. Even May 11 is just four weeks away.
Once the timetable is set out, the uncertainty about when the analytical studies will be completed will be lifted. We know from the RNS that the work is "very near completion", that there are only a "small number of analytical samples to be processed" and that the FDA submission will be made "within a few weeks of the current government restrictions being relaxed". These points could not be clearer.
We also know that all the points raised at the Q-submission by the FDA have been addressed. The prospects of making an FDA application are very high and the prospects of FDA approval are high.
In short, you could not have clearer guidance from Angle that once lockdown is lifted, an FDA application will be made fairly shortly thereafter. We also know that announcements about when the lockdown will be lifted are imminent.
In my view, those who are wise, will be accumulating during the period of uncertainty, with the share price at its recent lows, as the share price will rise significantly upon the announcement of the lockdown exit strategy / the lifting of the lockdown / the recommencement of the processing of samples / the filing of the FDA submission.
If this does go down to 42p again, which is unlikely, it will not be for long. I think it more likely that we will now start to see people accumulating shares. A number of biotechs have started picking up well. There is money in the sector and Angle's turn will come. They are attractive, with a major inflection point fast approaching and, importantly, they have masses of cash (£15.5m two weeks ago, with a further £3.4m of tax credits also due / being applied for) and do not need to fund raise.
I would be surprised if we were not back over 70p by the end of next month. The downside is low and the upside is high. The fundamentals are good and the sector is good. It is very attractive at the moment.
As ever, DYOR.
Finally!
If you ignore the worse areas in the low grade zones, and focus on more targeted (but smaller) zones, obviously the average grades of those areas will be significantly higher.
What my findings means to me, if they are correct, is that the high grade zone is where the focus and the money should be - both the focus of shareholders and the company. I can see why high-grade selective mining is being considered by Newcrest as one of the possible options at the outset. In my view, it is best to value GGP based on the high grade material alone and to view the rest as just potential upside. But each to their own.
Clearly there will be other zones they will also target if they go down this route.
Also, Paddy's theory about this being part of one big circle / ellipse is what needs to be proven and what will ultimately determine the share price here.
As ever DYOR.
So for completeness, here are my calculations:
0.75g/t - the average grade excluding the high grade zone
1.12g/t - the average grade including the high grade zone
1.25g/t - the average grade of the intersections excluding the high grade zone
1.82g/t - the average grade of the intersections including the high grade zone
8.22g/t - the average grade within the high grade zone
The first two figures are taken from the top of the first intersection to the bottom of the last intersection, including the gaps, for each of the drill holes
The last three figures are just of the intersections, excluding gaps.
The last calculation comes from just the 19 intersections highlighted in Figure 2.
All the above are based on the current drill results and may change as further drilling, including infil drilling, takes place.
Happy as ever to be corrected. These are my amateurish attempts at calculations.
CB, it is perfectly reasonable to state:
1. There will be 10-20m oz at Havieron in due course; and
2. The high grade area at the moment contains a likely (with a very liberal assessment) 5.7m oz
You are just attacking the person (inaccurately) and you have nothing to say of any substance (i.e. about my actual figures).
Yes, eventually...
There is a difference between what Havieron will become and what has been discovered to date. I still agree that we will be over 10m oz in due course. That is a different calculation to working out the high grade zone discovered to date.
Oldtimer1963, and Numis have 5.5m across the board, high grade and low grade.
Hi Lenz and Paddy
I've been very liberal in my assessment. I've taken 600m depth the full way around the horseshoe which has not been proven.
Yes, higher up it looks to be more than 450m (minus the fault zone), however at the deeper end it appears to narrow significantly. I think the 450m to be a fair figure on current information to use across the whole depth and is the one used by GGP. I would rather have figures revised up in future than down.
Similarly, as for the future, I think it best to value what we have and to amend it than to make too many predictions now. I think paddy's theory about one big circle to be quite possible.
Thanks paddy, I think we have crossed posts, see mine below.