Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
"It could be a stitch up (I'm undecided - but it will all come out in the wash):"
It was so obvious that this was the next stage that was coming. Instead of owning making terrible investment decisions and taking a massive gamble when the writing was on the wall months ago, instead blame some shadowy stitch up scenarios for being the reason the gamble when down the tubes. No doubt there will be talk of a shareholder action group next.
Wasarunner - you simply called this wrong again and again, dreaming up totally unrealistic scenarios and reasons why small shareholders would be bailed out by the big boys. Its a small company with no reliable access to debt and capital and was distressed in unfavourable debt and commodity markets with Nickel unloved and a project that had clearly been badly designed. As many advised the cornerstone investors weren't interested in desperately trying to save their original investment by putting in more capital on current unfavourable terms, if they would have added more capital now, it would have been on terms highly punitive to all existing investors.
"One can reasonably expect a number of offers from the various Gulf States"
Its difficult to begin to describe how utterly delusion this is. Anyone externally interested in this, will not in anyway be looking to bailout existing equity holders and the notion that somehow the Gulf States are desperate to start a bidding war on a half finished mine with hundreds of millions of debt tied to and hundreds of millions more is just laughable.
You really need to wake up and smell the coffee.
Neither option 1 or 3 necessarily provide upside - option 1 could still result in massive dilution for existing shareholders even if there is some debt and option 3 could result in massive dilution for shareholders that ensures even at production the SP never recovers above the value you buy for today. If you believe option 3 is a likely option you'd wait until the funding is sorted before risking throwing your money into a black hole now.
"If assets sale gives shareholders £50m, that will be almost 20p. £10m gives 4p, £20m gives 8p."
If an assets sale gives shareholders £500million that will be almost £2 per share, but so what? An asset sale first has to pay off debtholders so the starting bid has to be in excess of however many hundreds of millions of debt is currently out there.
The situation the company is in makes it an utterly terrible entry point - its a high risk gamble that no one should touch with a bargepole, private investors are last in the queue in and almost certainly will get hugely diluted and more likely completely wiped out. Existing holders should also apply the same logic and protect whatever capital they have left and move on if for nothing more than your own sanity - but you won't as you are emotionally invested and hence dreaming up all kinds of unlikely scenarios.
"How much - what number? I think at a push it could be 1bn-1.25bn shares (4:1 or 5:1 dilution) at 20p."
A company in a highly stressed scenario raising at a 900% premium - sure of course. Any precedents for this you can name?
"Why have they not released RNS as its on company board ? You think they want anyone to know or potential infestors to invest here , It don,t make sense sometimes ."
Which RNS do you want them to release, I don't quite understand that?
In general though this is one of the reasons the valuation is so low. They hold around 70% of the equity so can pretty much do what they want with the company. They are also the ones to stand most from the gain in equity. So the fact that they seem to care very little about the value of the equity does raise a flag here, that the listing and equity price is not particularly important to the owners and so someday simply decide to delist it, or make a poor offer for the part they don't own, which they can then effectively force through.
Which makes this a gamble
Gold up $150 over the past week and a half. At run rate production for around 40,000oz per year, the increase in gold drives pre-tax income up $6million, call it £5million. You could justify the entire market capitalisation here just by the increase in gold price in the last 2 weeks.
There was an RNS - Altyn release news update via Businesswire and somehow LSE hasn’t synced it properly
"With the company moving to Canadian reporting rules, should we expect reporting metrics, such as this discussion surrounding NOI to change to something that is more easily comparable with other Canadian companies?"
Stas to answer your question - NOI is a forward looking metric and I'm no aware that the Canadian reporting rules will have any impact on forward looking statements. What the requirements will more likely impact is the standard and timing of the quarterly updates that are more tightly regulated.
"I agree that NOI is not one of the the best metrics because as an investor you are more interested in cash generation or more specifically free cash flow."
NOI is theoretically free cashflow from operations excluding SG&A costs - which makes a lot of sense from an operational metric, although what you say about I3E admin costs being high is very relevant and a cynic would say the NOI metric is something of a smudge over that.
However if the NOI forecasts don't take any account of the hedges even when up to an even over 50% of the revenues are protected and the sensitivites make no account of those hedges, then frankly the NOI guidance is a bit of a joke.
"Also I3e's quarterly update / guidance only provides a figure for NOI which EXCLUDES the impact of hedging and all other major costs except opex and royalties so you only get to see the impact on i3e's profits and free cash flow"
This is quite an interesting point Tony and raises a few questions as to how useful any of these NOI forecasts are.
Its says NOI is a non-GAAP metric, so it could be the case that they consider the hedge price as the revenue - but I think that is unlikely as I assume they just use their projected oil/gas price for all revenue assumptions.
The revised Net Operating Income figure for 2023 after the Q1 update was USD75-80million and it was specified $45.6million was protected by risk management contracts. So when well of 50% of the project NOI was protected, it seems very bad form to simply not consider that in any forecasts, especially on the sensitivities when the impact of changes in oil and gas prices are shown on NOI - do these sensitives consider a large portion of NOI is protected or not?
None of which the hedge accounting gains/losses help with as they are not seen until well after the event.
I think if I3E are genuinely putting NOI forecasts and sensitivities out into the market that completely ignore the impacted of protected revenue, that is pretty amateurish.
Posted before I read you next reply - no worries, these discussions can get heated but no harm intended. I'm not arguing with you for the sake of it, you're a highly competent and respected poster but on this topic I don't fully agree with your conclusions and points.
Tony - really not sure why you are getting so agitated, my target audience is also fellow posters and I don't agree with some of the points you have made and so am trying to discuss them without throwing toys out of the pram. Fine if you don't want to respond, then don't respond, other posters can decide to read or not and take their own information.
You post this..
"Looking at the positive effect of hedging - February is nearly done and by my calculation - i3e have made a hedging gain of about $700,000 on its gas partially offsetting the weak AECO pricing."
So what does this $700k mean in terms of I3E's financial projections of cashflows, NOI etc etc - it means virtually nothing as the projections are made using the hedged price for the portion that is hedged. Again it could be a $1billion gain or a $1billion loss and it would have no direct impact on projections as the hedged price is what the projections are made on. It is far more significant on the unhedged production, but there are no accounting figures for that. The size of hedge gains and hedge losses on their own tell you very little, without understand the wider strategy, the proportion hedged, the upside opportunity, the downside risks etc etc. A company without hedges doesn't book any hedge gains or losses, it simply suffers more from volatility
Yes absolutely hedges need to be considered in financial predictions based upon on oil and gas price scenarios, but hedge accounting bookings don't tell you much for that - all you need to know is what is hedged and at what price and what isn't hedged.
One last point on why I call it notional.
If I3E announced they had agreed a forward sales contact to directly supply ABC refineries who will buy a fixed amount of oil in Q2 at a fixed price, you wouldn't see any accounting bookings to reflect the differences between the price sold to ABC refineries and spot price, the revenue received would simply be one booking.
"Its real accounting Spike and not "hedge accounting"
Its literally called Hedge accounting under IFRS9
"Looking at the positive effect of hedging - February is nearly done and by my calculation - i3e have made a hedging gain of about $700,000 on its gas partially offsetting the weak AECO pricing."
This is exactly why I describe it as notional - whether the size of the hedge impact is a loss of $1billion or gain of $1billion it makes very little difference for the end result which was already detemined (for the hedged proportion) as I3E forward contracted to sell a fixed quantity at a fixed amount, therefore there was certainty on the revenue and the end result is barrels sold multiplied by contracted price. The hedge gain/loss is simply a balancing figure between the committed forward contract price and the spot price.
Sure if I3E make a $1billion hedge you could say that taking those hedges out was a bad decision, but firstly that is only a view based on hindsight and secondly is also only a partial view as it doesn't consider what was unhedged. So in February I3E made a hedge gain of $700k which makes it look like a good decision, but given 60% of production was unhedged, you can equally say I3E made a bad decision not to hedge more.
This is exactly why I describe it as notional - its simply a balancing figure that can swing wildly one was or another without having much impact on the end P&L result. Its a volatility correction instrument.
"The net effect is identical - i.e. you only earn $71 on the barrel. So its a very real loss or gain and this exactly how it is shown on the Income statement in the Company Accounts - so notional accounting entry my a$$ !"
Its notional in the fact that months ago I have agreed a fixed sale price and so my budgets and forecasts are based upon that fixed sales price and so the spot price has pretty much zero relevance to me. If a company buys a flight ticket 6 months in advance for £300 and then on the day of actual travel find that the cost of booking the ticket is £500 they don't book £500 cost and then a £200 hedge gain.
Its hedge accounting, which is fine, its absolutely necessary as hedging does involve some more complex aspects than the airline ticket above, but if in future I contract to see all my oil at $70 per barrel then my revenue is number of barrels sold multiplied by $70 and any gains and losses between spot and hedge are just notional bookings to get the true revenue number, that i knew I was getting to in the first place.
Agreed financial hedges are a little different as they have ongoing fair value adjustments (i.e. the difference between hedge price and spot is not simply booked at delivery).
Record ore mined in H2, record gold sales in ounces and value in Q4, strong grades in Q4, $36million revenue in H2, around 40% increase on H1.
There was so much that could have been made of those numbers, however undone just by dropping in at the last minute a delay with no explanation whatsoever. Its not even that much of a delay, on a substantial infrastructure project in the current environment 3-5 months delay is not much and overall execution over the last 2-3 years has been pretty good, but they could make a bit more effort.
Which just raises the concern if the majority shareholders don't care much about the share price, what is the point of the listing - and as they could effectively take it back at any time, its unsurprising volume and interest here is thin