Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
Tony did you read the article - consideration is not payable until first oil.
Cambo would also be an exception due to its size and the sellers being Shell are hardly analogous to I3E. We can see the value of Tain as Repsol just walked away.
Do you believe anyone would pay cash to I3E now for the Serenity licence?
Joe - the market value and accounting carrying value are two different things. While I3E still have an intention to take it forward it’s appropriate that it carries some value on the balance sheet.
However it’s pretty clear that no one in the North Sea is buying undeveloped assets for upfront cash payments so in that sense it’s worthless as it stands.
I still think it’s a drag on the SP - the fact that they confirmed no capex for this year was positive but it still remains hanging there as a potential near term money pit, although I suspect most investors by now expect it to be relinquished in the future, unless there is a drastic change in political environment
G_G_G - I doubt it, Deltic have just run a full farm out process and no one was interested on commercial terms so why would Michael Spencer throw good money after bad? They are completely dependent on Shell for monetisation and it seems obvious Shell have limited near term interest.
However even if Michael Spencer was interested he is investor of last resort - so why do it at 20p, why not 5p? And so the board have got to decide whether massive dilution of all other assets for Pensacola that the industry has just turned its nose up at is worth it.
“I still feel Selene is worth more than the current share price”
If there is success at Selene it may well spike the SP up but then there will again be an extended period of nothing and Delt will be back in the business of trying to farm out more of Selene to try and fund more appraisal and ultimately development in a market where very few are interested - so if Selene does progress it’s unlikely to see production before maybe 2027 and Deltic might be lucky to still own 5% of it (or shareholders are further diluted by future raising)
Really hard to see any investment case now, other than for a spike if there is some Selene success - and that’s a risk as failure likely is the end
“Not sure we could even sell a unified Tain and Serenity if they picked up the Tain license so probably best to drop and focus on Canada“
I’ve been saying for a long time there is no cash being paid for North Sea projects pre first oil. Serenity is worthless as it stands.
“I have no idea where they go from here, but think the best case scenario would be to find some parties with deep pockets and raise £10-12m. This would mean an extra 50% shares in issue at today's sp. “
G-G-G - Deltic announced in their RNS today that they did not believe they could raise equity.
Market cap now is £18million, any raising would be heavily discounted, so I’d suggest they would be looking at 100% more shares, but even at that there is no interest. I think the last hope is following the announcement today, someone comes and takes the rest of Pensacola off them, other than a small revenue share of maybe 3% if it ever gets to production, which frankly I doubt it will subject to a complete shift in political direction.
“ The dialogue is clear, but do you beleive the Major Shareholders are accepting what could be an end to the company?”
Why would it be the end of the company? Selene will go ahead and other prospects potentially have more interest. I think what is clear is the larger shareholders here are not willing to put substantial new funds in themselves and do not want to be diluted substantially in their stake in Selene and other prospects for the sake of Pensacola which the industry has just completely passed getting involved in.
“ Dilutive yes, but the options are an almost complete loss. The same issues will surround Selene and other prospects.”
In which case this is already a dead duck and no one will touch it with a barge pole - as they allude to though Selene has a different profile as it can be tied back to existing infrastructure so it is more attractive.
They are totally reliant on Shell developing Pensacola and I believe a substantial reason the farm out has failed is that Shell were not able to give any future farm in partners any comfort they would actually go ahead and develop it so there is no point diluting heavily just to end up in a dead end anyway.
Again - read what the company have just told you. They don’t expect to do an equity raise.
“22p would raise just over £20m“
The SP is now 22p and any fundraising would be heavily discounted to that - and as they’ve just announced no one in the industry is interested in Pensacola. It’s highly likely based on discussions they’ve had any equity raising is either not possible at any price, or on terms that are so dilutive it’s better to give up Pensacola than dilute existing shareholders share in Selene and other prospects which do seem to have more potential.
Did people not read the RNS - they don’t expect to be able to do an equity raise, which is no doubt based upon soundings already done.
“ This, coupled with the impact of the political and fiscal regime on UK E&P company valuations and investor sentiment means that the Board believes that accessing traditional equity capital, as the Company has successfully done in the past, is unlikely to be a viable option to allow Deltic to meet its 30% share of the Pensacola well (currently estimated to be roughly GBP£15 million net to Deltic).”
I think it will be lucky to hold 20p - Deltic's main asset is effectively worthless, the only really hope I see now is by putting out this message they may be able to find some vultures who now come into the process and allow them to keep a sliver, but I think even that is rather unlikely as future monetisation relies on Shell committing to development and I think that is probably unlikely unless the political environment changes.
“Should it be the case that the forward strip forecast for gas prices deteriorates, the Company is well positioned to both reallocate its drilling locations to more oil weighted development opportunities“
I don’t understand this statement - why are they allocating any development budget to gas, when gas prices are already on the floor? One of the weaknesses of I3E is the low oil production, so why not focus only on oil.
I can see where SP and market cap is where it is - they are spending around $50million to more or less maintain production so true free cashflow is somewhere around $20million per year.
You need to think about this like an iceberg. The equity is the part that you can see that is above the water, the debt is the underwater part.
You are all thinking that buyers might be circling to try and take a bit of the iceberg and you see the value compared to the equity and are assuming based on that value that can bite off more than the equity.
However what potential buyers are seeing is the whole iceberg including what is under the water - they can indeed bite off a huge amount more than the value of the equity, but they still don't get anywhere near to the surface due to the fact the bulk is below the surface, so your equity gets completely discarded.
Thee might be many people interested in the mine. What they are probably not interested in is paying to bail out existing shareholders when they can more likely get a much better deal after administration and they have much more leverage with the banks to force haircuts on the debt.
"How on earth CEO didnot know about that trouble long time befoce that and did he do anything to announce so more solutions will be found than it is too late."
I'm not sure where you got this timeline from - the interim results were released on 17th August and then the announcement of a cost overrun was 2nd October so almost 7 weeks. The interim statements also included language highlighting risk factors that there were still substantial unknowns.
Its likely on 17th August they had some idea that some revisions may be needed but no idea on the magnitude - announcing uncertainties at that point was likely premature and no doubt holders would have been furious if that was announced in that way. They were likely working through the details at the time and discussing with financing stakeholders, but it was only the release of the definitive review end September, early October when they had to go back to the market.
Fair enough - I won't continue flogging the horse, best of luck Wasa
"Spike not sure what your point is, I didn't make the investment months ago"
Sure, but you could have exited at about 70p when the first announcement was made about cost overruns when it was already pretty clear that the writing was on the wall for shareholders, either through massive dilution or complete wipeout. Instead you continued dreaming up ever optimistic scenarios and even down at 3p were talking about potential bail out placings with hundreds of percent premiums to the prevailing share price.
So now instead of examining your mistakes you are instead thinking its a stitch up.
Tell me something - why would the cornerstone investors not wait until administration to pick this up cheaply and most likely succeed in getting a substantial hair cut on the debt? Why all along did you think they would throw in more cash at a premium and be stuck with the existing levels of debt?
Nice updated, if somewhat random, but all adds to the momentum here.
Now they need to release the financial results, on time and ideally not at 5pm on the 30th April and hopefully the financial results don't contain any unexpected surprises.
At 50k oz production with current gold price, without the geopolitical and concentrated ownership risk, you could easily make an argument that £10 per share for a market cap of £270million is not undemanding. Do the geopolitical and ownership risk warrant an 85% discount? Not in my book, this could move very quickly if they can keep progressing operational, maintain decent communication and not have any nasty surprises in the financial statements.