Member Info for Stockable

As with most oil and gas companies, the stock price is largely a function of its reserves and production against a backdrop of oil and gas prices. Unless or until all increase, it's difficult to see the price moving substantially upwards. That said, since acquiring the Chevron assets it has put in place a programme that it's acting upon. And, in my opinion, that's difficult to fault. It has laid out its programme via the RNS of 25th March 2019 – “2019/2020 Work Programme” and it's carrying it out. Now, should that not prove to work then I will divest and move on. But thus far it seems to be going reasonably smoothly. Delays and problems are to be expected but that goes with the turf. However, I would suggest that over say the next 12-18 months, its actions will be reflected in higher production and a revaluation of reserves.

It would be interesting to know whether the company intends to buy-in Gold tailings given the capacity that it now has with Elikhulu. The idea was mooted last year but nothing further has been mentioned. It obviously has its own tailings dumps but buying-in would effectively extend the life of its re-treatment operation.

With rising Gold prices and, of course, the problems associated with the pollution from established Gold dumps this could be a lucrative and worthwhile expansion.

Absurd to some but I think that shorters play an important role in the market. So long as their actions are based upon sound research rather than inside information. Or, even more worryingly, on the dissemination of false information. But as I mentioned in an earlier post, shorting a Gold miner strikes me as a very risky proposition. For sure, interest rates may dramatically increase or a Central Bank could divest its reserves and the price of Gold will probably fall. However, an international crisis could easily blow up, as it seems to periodically, and the Gold price may well increase substantially overnight. Unless a Gold miner has deeply intrinsic problems, it does seem a gamble. Far riskier than shorting most sectors. As I write, Millennium holds 1.12% of the stock. Not huge by hedge fund standards but still a good deal of exposure to something that is so inherently risky.

The company's AGM will be held later this month in London and I will be there so if anyone has any relevant questions please let me know. By the way, impossible to prove but I suspect that President is getting caught up with the issues surrounding the forthcoming general elections in October 2019. Just how this could impact the oil and gas sector may be worth exploring. Moreover, I will try to find out what might stop it from achieving its goals.

It may have re-arranged its debt finance to more favourable terms. But it's worth bearing in mind that its restructuring was largely based upon two metrics – the debt associated with Elikhulu required a Gold price of ZAR16,319 per oz. At the same time, it also needed Gold to be at least ZAR525,000 per kilo to meet its banking covenants. As I write, the price stands at just under ZAR19,000 per oz and around ZAR610,000 per kilo. It may not be completely out of the woods but much of the work appears done, especially concerning Elikhulu. Of course, it's a Gold miner and should the underlying commodity collapse in price then it will have immediate cash flow problems. But, thus far, it appears on track to deliver its turnaround. And, if the recent Edison report is to be believed, seems determined to restore its dividend.

A lack of skin in the game is not a criticism that could be levelled at Peter Cruddas, CEO and Founder. As at 31st March 2018, he held some 72% of the company's stock and he has not reduced his holding since that date. The downside is that he can do whatever he likes and that includes taking the company private. But I would have thought it made far more financial sense for him to build the company up as a listed vehicle and then reduce his holding or simply sell the entire business. Basically, his interests appear far more aligned with the company's shareholders than the CEOs of most AIM-listed companies. And, of course, while the company adapts to the new regulatory environment it still pays a generous dividend.

For those yet to read it, this article published in the Evening Standard in February 2019 is definitely worth closer examination. In essence, it points to an increasing struggle for resources in Africa. Moreover, it also highlights a growing US Government interest in small-cap mining stocks, including those listed on the AIM market.

https://www.standard.co.uk/business/how-president-trump-is-using-britain-to-fight-his-trade-war-against-china-in-africa-a4078031.html

Both CMCX and IGG have recently complained about the lack of volatility hitting their profits. If the latest European elections are anything to go by then that particular issue could be a thing of the past. We seem to be entering a period of global turbulence and they could find themselves as major beneficiaries. Both are cash rich and paying generous dividends. Although I hold CMCX, I am mindful that it needs to carefully manage its own risk in what could be a very volatile space.

There's a certain irony with today's RNS issued in respect to its AGM. Instead of the usual bland “Duly passed” comment in reference to the company's resolutions, HGM gives a breakdown of the votes. Basically, it applies the UK Corporate Governance Code. Not rocket science but really useful for investors. Sure, if a company follows the Quoted Companies Alliance guidelines, it will report the number of votes against a resolution if the total is greater than 20% of the votes cast. But that does not pick up on an underlying resentment or simmering problems. It just seems ironic that a Russian company should assist in the move towards shareholder democracy and greater transparency. The RNS is attached.

https://www.stockopedia.com/share-prices/highland-gold-mining-LON:HGM/news/highland-gold-mining-results-of-annual-general-meeting-urn:newsml:reuters.com:20190523:nRSW0072Aa/

Just an observation, but the OBA pipeline was completed in October 2016 and it's only now taking its first third-party consignments of oil. It may not be comparing apples with apples but President Energy bought the Puesto Prado and Las Bases concessions in Argentina in November 2018 and they came with extensive pipelines. It's already using the pipelines acquired to transport third-party gas. The amounts involved are, currently, very small. It estimates that it will create another value-added revenue of US$200,000 pa. But the point I am really making is that it's actually getting on with it. One key issue that I had with Amerisur was the lack of action at the drill bit. At times it appeared more like a property company acquiring real estate. Sure, different jurisdictions and environments but, at the end of the day, it's an oil company and will be valued on production and reserves and that is largely a function of action on the ground.

The read across for President is unclear. However, this article illustrates the difficulties faced by the big shale operators in Vaca Muerta. Most are heavily dependent on state subsidies. And the levels of those subsidies appears to be called into question

As a profitable and growing mid-sized conventional oil and gas operation, it does seem to put President in a favourable light. The Argentine Government has set itself a target of doubling oil production by 2023, largely coming from shale. If that growth is not going to come from shale then I would suggest that it will need to come from conventional plays.

https://www.petroleum-economist.com/articles/upstream/exploration-production/2019/economic-crisis-threatens-to-stall-vaca-muerta

The strong volume underpinning the recent share price rise is very noticeable. The price is rising but so is the average volume of stock traded. It may be the result of the timeline laid out by the company in its RNS issued on 25th March. A link is attached. Basically, its work programme should kick in by the end of May. That's to say, within weeks we should know just how far the company is progressing. Any delays or problems then the price could quite easily go into reverse. But the market seems to be signalling that its plans are on track.

https://polaris.brighterir.com/public/president_energy/news/rns/story/x2qkqlx

Quite a rare occurrence. A Director of an AIM-listed company going to the market and buying a substantial amount of the company's stock. Forget about nil-cost options or LTIPs. Simply buying the stock at the prevailing price. Also, it might be worth noting that Angus Winther is a very experienced investor. This includes a five-year stint at Evercore as a Senior Advisor. However one views it, he is certainly putting his money where his mouth is.

The company did not publish the results of the voting on the resolutions proposed at the last AGM. Instead, it used that awful phrase “Duly passed” in its RNS announcement of 9th May 2018. Does anyone have the numbers of votes cast for and against each resolution? This might give some indication of the level of shareholder dissatisfaction. Especially in regard to remuneration. And am I right in believing that the company will not reveal a breakdown of the votes cast at the forthcoming AGM?

The read across from this might be that investors expect delivery. Directors' remuneration is not the key issue. It's total shareholder returns. And, in that respect, public companies linked to GC have, for a very long time, failed to benefit shareholders. I would suggest that a successful outcome at Kazera would take a lot of pressure off his shoulders. A link to the article is attached:

https://www.thetimes.co.uk/edition/business/shareholders-take-aim-at-amerisur-boss-giles-clarke-q2fnvkqw7

This article may be only a snapshot but it does seem to give an idea of the problems that the BOD have faced over many years. Basically, it operates in a dangerous and volatile area.

As I have mentioned before, my doubts about Amerisur are not related to what's beneath the ground but surround the issues above it. And that's where reality meets geology. The article presents a difficult and fluid operating environment.

In fairness, many resource companies are based in not dissimilar areas. But it may go some way to explain why the company has never really achieved its potential for shareholders. Simply "Getting on with it" may not be as simple or straightforward as some investors believe it to be.

https://colombiareports.com/indigenous-injured-as-clashes-with-police-flare-up-in-southern-colombia/

Normally, I make no comment on day-to-day market movements. But today the price rise is not only strong but, as I write, it's on a volume that is around the third highest daily turnover in five years.

As I pointed out earlier, the company's plans can be clearly seen from the attached RNS that was issued on 25th March 2019. Whether it will achieve its objectives only time will tell. But, unlike many AIM-listed companies, it has provided metrics by which it can be judged. Its goals are set out for investors to monitor.

https://polaris.brighterir.com/public/president_energy/news/rns_widget_homepage/story/x2qkqlx

Say whatever you wish but the company has put its cards on the table and provided a clear measure by which it can be judged. This it did by publishing its work programme for 2019/2020 via an RNS dated 25th March 2019. Close to the top of the list was the following:

“By end of May, the renovation and commissioning of the oil treatment plant in Puesto Prado. The commencement of deliveries of oil from the field direct to local refineries will give enhanced margins (current production 150 bopd from this area) “

Long-term investors plainly have a reason for impatience but I would suggest that the RNS presents a substantial list of objectives that are simple to understand and make sense. Each a piece in a bigger jigsaw. And the first major piece should be delivered by the end of May.

Should it become apparent that the company is unable to achieve its goals then I will look to exit my investment. But, in the meantime, I am more than happy with the management just getting on with the job. Frankly, I don't need to know the minutiae. The plans have been clearly set out so let's see whether they are going to be achieved.

Incidentally, something that I did like about the above RNS was that the company's targets are quantified, timed and specific. They also appear to be achievable.

This piece from Bloomberg builds on an earlier post that I made in regard to the London Metal Exchange. It points to the use of blockchain technology to ensure that 3TG (Tantalum, Tin, Tungsten and Gold) can be traced to their sources.

Obviously, there is much work to be done but there does seem to be a will to ensure that supply chains can be successfully audited. And I would suggest that that is good news for Kazera.

What would be really interesting is if a major company on either side of the pond came under investigation for using conflict minerals on a large scale. The financial implications would be enormous. It would put Kazera in a very strong position.

https://www.bloomberg.com/news/articles/2019-04-24/using-blockchain-to-help-fight-conflict-minerals

This short article in the FT may be worth further investigation. Although it makes no direct reference to Tantalum, it does point to a commodity trading future where verification of the source is paramount. Bearing in mind the quantity of Tantalum mined in areas such as the DRC and Rwanda, it may well have broader implications.

The changes outlined will not come into force until 2022 but it does seem to demonstrate the direction of travel.

https://www.ft.com/content/1ac20e8a-61f7-11e9-b285-3acd5d43599e