Member Info for StarBright

SimonShares - the language in your post is really interesting. “...where do you think THEY will take the SP tomorrow? ... My gut is telling me THEY will take it to about £1.08 before retracing to mid to low 90s”

Who are THEY..?

That’s a fair point Poised. It’s a good example of a market inefficiency.

Where did I argue that AVCT carries the same level of risk as last week? You sound like Harry Enfield’s “Angry Frank” character..!

My observation was a general one regarding discussions on LSE. A wry observation that the relationship between risk and the potential for future returns is widely misunderstood. That is all.

I’m always amused by the enthusiasm here on LSE to declare a share as being “de-risked”. If the risk is truly all gone, so is the potential for future returns. The point at which a share is genuinely de-risked is the point at which it should be sold. Which seems to run counter to the intent of those declaring “de-risked”...

“To think that the SP can only reach some low X pence target due to the strictures of some narrow and selective methodology is complete and utter nonsense.“

Agreed. No-one is saying that though, are they?

Underneath the noise here is an interesting question. We have seen in this thread various suggestions as to how in-situ gold in Colombia should be valued.

15% of future profitability - Prof1
7% of spot value - from analysis of Continental sale of Buritica
Upto 8% of spot - Edison (referenced by me)
10% of spot ais an “industry standard” (not sure who posted this yesterday, will check)
5% of 2 year avg spot price - normbeef
42% of spot as with GGP - everyone proffering GGP as the model

I am otherwise engaged this morning, but will summarise/illustrate these later against consistent assumptions for production oz, PoG, JV%’s etc. We can take a look then.

The comparison was with the Buritica transaction which was was conducted when (according to Prof1’s post) the PoG was 1278. That’s the baseline for the 50% rise. You can’t just choose a different figure as a start point.

In Prof1’s example:

PoG 1278 - AISC 800 = 478

After 50% rise in PoG and a smaller rise in AISC...

1917 - (say) 917 = 1000

Value finder - if you’d like to offer an illustration of how a 50% rise in PoG equates to multiple increases in profitability please share it here.

Phoebus:

If 1.05M oz was worth £1.44bn at GGP, that would imply roughly £13bn for 10M oz. 25% would be £3.25bn or about £16 per OMI share.

That's fair. The central question can be summarised as "What is 10M oz of in situ gold in Colombia worth today?"

To condense this thread:

Professor1 highlighted that 11M oz at Buritica was bought for $1bn (£730m) a little over a year ago. 25% of that is 90p per OMI share. A 50% rise in spot since then might equate to a doubling of profitability, so £1.80.

Rob1967 prefers GGP as a comparative. Scaling up their 3.5M oz suggests £3bn. Of which 25% to OMI so £750m or £3.75 per share.

Still a big gap. I am interested to discuss which is more realistic and why. Isn't that what a discussion board is for..?

I'll decide what is and isn't for me thank you!

If drilling results are as good as we all hope, this has plenty of valuation runway. But all those thinking OMI might 10x or 20x - largely "because GGP did" as has been stated repeatedly here today - should note that OMI traded between 3p and 6p for nearly 30 months prior to September last year. We are at 30p today, not on the starting line.

There are big gains yet to be made here, but many posts today implying expectations not grounded by reality.

"If the resources here are 10m Oz and over, this will be minimum £3, maybe even more. It’s crazy to think this will only be worth £150/200m on resources of 10m (25% of it to OMI)."

Working backwards...

Your £3 x 202m shares = £606m or $830m for 25%

Implies 100% is valued at $3.3bn for your 10M oz.\

Buritica sold for $1bn in 2019, apparently for 11M oz.

I think we know that Zijin got a good deal - partly against a lower spot ($1300 ish) but do you really think Buritica has 3x'd in 14 months? That is what £3 for OMI's 25% would imply.

I think your £3 is too optimistic.

Phase 2 in the JV agreement worries me slightly. In the investor presentation it is summarised as:

"Phase 2 - earn additional 14% interest by sole-funding US$20.0
million over 4 years, completing an NI 43-101 pre-feasibility
study & making cash payments to Orosur of US$2.0 million."

If 100% is worth (say) $7bn, then spending $22m over four years might be more attractive to the Newmont/Agnico JV than spending $1bn on day zero to acquire that same 14%.

Is it possible that this provision could work against OMI because it has effectively capped the price of that 14% at $22m + 4 years? I understand there would be a negotiation about an agreed early end to the JV, but my initial reading is that the phase 2 clause could work in favour of the JV partners not OMI.

Some of the tweet content is copied directly from slide 11 in this: https://www.orosur.ca/files/Turner-Pope-Investment-Presentation_December-2020.pdf

Some isn't. I'm not sure if that is noteworthy or not...

Prof1 - that is indeed the big question. Let's hope it is one the company is faced with soon!

To answer the original question... All of the information in the tweet had (word for word) been previously disclosed to the market in this presentation https://www.orosur.ca/files/Turner-Pope-Investment-Presentation_December-2020.pdf

So the tweet contained nothing new.

https://www.northernminer.com/news/continental-stays-on-track-at-buritica/1003809739/

This is an interesting article on Buritica, from just before the sale to Zijin was announced. It gives insight into the practical difficulties associated with the area.

Buritica is next door. Both it and Anza are high grade epithermal vein deposits. Continental (which owned Buritica) was bought by Zijin, a Chinese mine operator, in Dec 2019 for USD1bn.

The question under debate is whether the Zijin purchase provides meaningful guidance on valuation for Anza. I am not convinced that it does because it is SO hard to understand/compare the in-situ reserves based on the publicly available information. But it is interesting to evaluate.

Well.....

Continental's own announcement https://www.continentalgold.com/en/zijin-mining-to-acquire-continental-gold-in-friendly-all-cash-offer-for-c1-4-billion/ recommending the transaction says:

“Continental’s 100%-owned Buriticá project in Antioquia, Colombia is one of the largest and highest-grade gold projects in the world and represents a highly complementary addition to Zijin’s international asset portfolio. The Buriticá project is expected to produce approximately 250k ounces of gold per annum on average over a 14-year mine life at LOM all-in sustaining cost of ~US$600 per ounce. We believe the sizeable, high-grade mineral resource of 16.02 Mt at an average gold grade of 10.32 g/t (being a measured resource of 1.40 Mt with a gold grade of 13.70 g/t and an indicated resource of 14.62 Mt with a gold grade of 10.00 g/t) presents excellent opportunities to expand production and extend mine life. Continental has successfully advanced and substantially de-risked the Buriticá project with commercial production now clearly in sight and first gold pour expected in the first half of 2020. Continental also holds a sizeable and highly prospective land package in Colombia that, combined with the Buriticá project, provides Zijin with the leading position in an emerging world-class gold producing region.”

Can anyone shed any light on why the figures in the release above appear so different to those in the Reuters piece quoted earlier..? They can't both be right, and one will give wildly different metrics to the other. I am frustrated by my lack of familiarity with the subject matter here...

Well.....

Continental's own announcement https://www.continentalgold.com/en/zijin-mining-to-acquire-continental-gold-in-friendly-all-cash-offer-for-c1-4-billion/ recommending the transaction says:

“Continental’s 100%-owned Buriticá project in Antioquia, Colombia is one of the largest and highest-grade gold projects in the world and represents a highly complementary addition to Zijin’s international asset portfolio. The Buriticá project is expected to produce approximately 250k ounces of gold per annum on average over a 14-year mine life at LOM all-in sustaining cost of ~US$600 per ounce. We believe the sizeable, high-grade mineral resource of 16.02 Mt at an average gold grade of 10.32 g/t (being a measured resource of 1.40 Mt with a gold grade of 13.70 g/t and an indicated resource of 14.62 Mt with a gold grade of 10.00 g/t) presents excellent opportunities to expand production and extend mine life. Continental has successfully advanced and substantially de-risked the Buriticá project with commercial production now clearly in sight and first gold pour expected in the first half of 2020. Continental also holds a sizeable and highly prospective land package in Colombia that, combined with the Buriticá project, provides Zijin with the leading position in an emerging world-class gold producing region.”

Can anyone shed any light on why the figures in the release above appear so different to those in the Reuters piece..? They can't both be right, and one will give wildly different metrics to the other. I am frustrated by my lack of familiarity with the subject matter here...