"That sort of blows a hole in the daft research - limiting gold production to 26,000 oz pa for next 3 years -that was paid for and promoted by Altyn."
Yep agreed, it was that report that killed the upward momentum the SP had. Interestingly I can't find that report on the website any more and the links in the RNS no longer work.
Well no RNS but I've put an order in here to increase my position as that presentation showed a lot of confidence and professionalism - I think its fairly clear the exit rate for 2021 will be somewhere around 9000oz per year so this is way undervalued.
Trans Siberian Gold was taken out for around £100million in August - production was about 45000oz per year, TSG had better grades, but ultimately the AISC was around the same. Political risk is at worst the same, if not higher for TSG and crucially proven reserves and resources for TSG were far far lower and there was significant ongoing spend on exploration to try and extend resources and mine life.
For me this offers comfortably better value than TSG did, due to the much larger resource and clear path to substantially higher production.
Presumably as the presentation is date sep_14 it is officially released tomorrow and I guess they’ll be an RNS.
I think it could cause some interest.
Outstanding presentation - significant step forward from the research note that had production flatlining at 28oz per year.
Full year forecast for 2021 is 30,000oz and I struggle to see the company would put that in a presentation now without having a high level of confidence it will be achieved, which would mean 17,000oz produced in H2 and then 2022 forecast is for 38,000oz.
I suspect Q3 production report will show around 8000oz of gold produced and then Q4 should be 9000oz.
The entire junior gold mining sector is a but unloved at the moment which isn't helping things so momentum keeps being taken out of the share as gold dips back below $1700.
I think the two main things that are holding back at the moment are.
- The research report that shows that all free cashflow is being invested back into mine development over the next 3 years, but there is no substantial increase in production beyond current rates of about 26000oz per year until 2025
- The fact the company keep referring to the need for capital, so there is nervousness about a placing.
I can only think the company must have been sandbagging for the research report - after years of overpromising and under-delivering, now go the other way. I find it inconceivable with all the investment happening to increase mining, increase grades and improve processing they cannot increase production up towards the 40,000oz that you highlight.
On the capital raising side to get to 100,000oz per year they do need it sometime in the future - however, if they can get production up above 30,000oz and beyond, the amount needed comes down quickly and there is more chance of a large portion being financed by debt.
I'm convinced they will move quarterly production towards 8000oz by the start of next year and potentially towards 10,000oz towards the end of 2022 - then as capital need recedes I would expect this to move up very quickly as its impossible to ignore the cashflows compared to market price.
"There is a sizeable profit but there also seem to be lots more ways to spend that money....consultants, equipment, mine upgrades, new highly paid staff."
True but mine upgrades and equipment are needed for development and as long as its not excessive I'm ok they spent money on consultants and decent staff to help them expand in the right way - the fact that the total cash cost is sub $800 shows at this stage its not excessive.
Cash might be only $3.5million but not current assets (i.e. cash, inventory, receivables minus payables and short term borrowing) has jumped to $15million which is very healthy.
Not an awful lot in the report that we didn’t know already but the all in cash cost of production at less than $800 per Oz is impressive.
"West Newton has been looked over by at least one national household gas supplier in this last year, FACT."
None of the major UK household energy suppliers have any upstream assets - they buy gas on the wholesale market from wherever it is available.
"UKOG was worth nearly £1bn with a fraction of what UJO has."
UKOG market cap peaked intraday about £450million and highest closing market cap never exceeded about £300million. They also had all the ramping about the Gatwick gusher and acreage that could contain 100bn barrels of unconventional at a time when UK unconventional was all the rage, with BBC interviews and expert promoter Lenigas pushing it everywhere.
Ribeye - 2P reserves in the current producing zone are 260,000 net to Union Jack. If 500bopd is maintained (to enable your PE calculation to be maintained) then those reserves are depleted in 4 years. Valuing production companies is always based upon 2 factors, free cashflow and reserve life.
The pennystone has another potential 750k net to UJO - its currently only contingent and not proven as it has no development plan, or planning permission - it may also need further appraisal but that is clear.
Even taking the 2P and 2C - that is only 1million barrels net to Union Jack - generously you might assign a valuation for UK onshore of $10 per 2P and $6 per 2C - that gives Wressle a valution based upon oil in the ground of around $7.5million, or £6million. It comes nowhere near to supporting the current market cap.
If you don't believe me, then maybe look at Union Jacks broker - the ones paid to promote Union Jack. They are assign a share price of 3p per share for Wressle production and 8p for Wressle appraisal - a total of 11p per share.
http://unionjackoil.com/wp-content/uploads/2020/06/UJOFINAL.pdf
“Nonsense. Wressle alone puts the company on a forward PE of 10, with other assets producing and 3 more assets ready to drill/sidetrack, CASH and the royalty deal already announced taking care of most of the G&A costs.“
1. It doesn’t put it on a forward PE of 10 as that is only the profit of Wressle without deducting company administration costs.
2. Why would anyone pay a PE of 10 for an asset that would deplete in 4 years?
"I say the market is waiting for the CONFIRMED flow rate at Wressle. The more major players don't invest until we get confirmation.
If it's 500 b.o.p.d or more as hoped we should see 40p plus here I think."
There are no major players investing here because of Wressle - the 2P from the Ashover grit and Wingfield flags where there is current production approved is 260,000 barrels net to Union Jack - at 500 bopd it would be depleted in less than 4 years, although of course it will decline so will produce on ever reducing levels for many years.
There is the upside from the other zones, which does look decent and has 750,000 barrels of 2C net to Union Jack, but Wressle overall comes nowhere near to justfiying the current market cap, regardless how much cashflow it might produce in its first peak year.
This is all about West Newton.
Its fairly simple - this isn't worth 35p per share (£32million market cap) on Wressle plus the other small prospects alone. There are also a substantial amount of that attributed to West Newton with a risk weighing. There has been a brief relief rally from Wressle as the cashflow is important, but this will not likely drift around possibly back towards 30p until news of West Newton comes.
"Not producing yet so a bit under the weather and the council says 500 a day that means they got to average 20.833333 recurring barrels an hour to keep it down to 500 a day if it was 600 that would be easy setup 25 barrels an hour.
so the setup must be taking the time to stay within the rules."
I think this is the greatest post I've ever seen on LSE.
Gywnwin - you know it doesn't come out of the ground in the actual barrels? They fill them afterwards.
"They already have cash to make the upfront payments. The CEO has planned that. Stop the scaremongering."
Doesn't matter if they have the cash or not - it doesn't change the fact that from an cashflow perspective the company will likely not be cashflow positive in the first year of Wressle.
"spike501, I have to disagree.
Wressle on it's ow provides revenue that UJO were sorely missing as a junior oiler. Profits from Wressle provide UJO with much needed income that will greatly reduce the need for future fund raises and with it the risk of endless dilution."
Wressle doesn't provide enough for substantial development of other sites - this year it will likely be at best cashflow breakeven as UJO have to pay £2million to the parties they acquired their stake in Wressle from and any cashflow in excess of this will maybe cover adminstrative expenses. Next year will probably be decent and provide £1-2million after operationally expenses, but further out it will begin to decline.
I didn't expect much increase on this - operationally its great news and helps with cashflow, but the current proven element of Wressle is small, so overall is only worth a few pence per share.
The SP will be substantially one way or another by West Newton.