Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
I guess the difference is that HUM already have decent cash flow from gold sales at yanfilola to service the extra debt for expansion.. CNR doesnt have that, unless a toll mill deal appears (which is what I think MC was trying to pull off all along - get early cashflow to get better debt terms for project CAPEX but its not worked out like that :-(
regards
T123
Hi all - still holding a decent amount here despite selling a few going into the Nic election in early Nov.. im still nervous after April 2018 regarding stability in the country, although as MC said in the video, Ortega will win another term (as he has made sure that there is no other viable option on the ballot) and his government is pro mining.. if the result is accepted without widespread protests, then its all green lights for construction bar the financing options - And so I wonder what new CFO John Seaberg has got up his sleeve if he was prepared to join Condor at this point, knowing that mine financing is the crux of the whole plan here..
Like MC himself, Im very disappointed the SP hasnt risen with all the good news recently, PEA and drilling, new CFO etc. But as always I guess people are worried about dilution here etc. Expecting a smallish (£3-5 Million perhaps) fund raise through equity in the next few weeks to progress the plans - I would expect MC would want to conclude that before the Nic elections..
Im still not discounting the possibility of a small toll mill operation at Mestiza next year to bring in some early cashflow. Would help to reduce future dilution or even start paying back some debt early..
I agree - a rise in the gold price back to $2000+ by end of Q1 next year when the bigger CAPEX raise happens would be very welcome indeed.. raising money at 50-75p would be so much less dilutive than 30p-40p... :-(
regards,
T123
Yes agreed. Next up I would like to see a new Chief Operating Officer to join the new CFO and MC as CEO - they need an experienced guy who has built and operated a gold mine before, preferably in a South American jurisdiction!
On a side note, I noticed today that 1 bitcoin is now worth 26 ounces of gold.. And I thought - what would investors rather have - 26 physical gold britannia coins in their hands or 1 BTC in a virtual wallet.. isnt that the crux of the question for the world of finance going forward...
regards,
T123
Just regarding the 2300tpd SAG mill - there is also the option to increase the kw motor size for this which would increase the throughput to 2800tpd and get closer to 1Mtpa.. which I think is a no brainer now assuming the higher electricity need can be supplied from the new plant the government are building.. (and will it be completed in time?)..
Also, and I'm sure MC has already stated this, I believe there is an option to increase the plant capacity by adding further ball mills when the plant is up and running at 100-120koz pa... obviously for a further capex requirement etc.
Always a chance this could be bought out at this new PEA stage, but otherwise I think the Feasibility Study will be the one that provides the actual construction scenario CAPEX figures to a greater degree of accuracy (+- 15% rather than +-40-50% for a PEA)
The PEA study yesterday showing the 150koz pa study for $160M capex to include underground vs $150M capex for Open Pit only, showed that including underground for an extra bit of initial capex was actually much more profitable over the life of mine. I know thats a big CAPEX figure for a small company (its not for a larger mid tier/major) but CNR have the option to do a smaller funding round for a smaller 80-100koz plant first to maximise cashflow in the early years then grow the production out of free cashflow.. but we have to understand that in the industry, $160M capex for a plant producing 150koz per year is actually fantastic.. and both studies indicate payback within 12 months of operations.. so for the next (at the very least) 8 years of the mine life this just becomes a cash producing machine for a major.. and with a large land package, with possibility of 5M oz district etc, it all becomes very tasty.. it just needs someone to stomach the "risk" of Nicaragua, but Calibre have come in and done it, and Rio Tinto are their partners.. and First Majestic liked the project enough they accepted $3M in shares at 50p.. so the signs of interest are all there.....
One thing from yesterdays study that did surprise me and explains why the company has taken so long to do the water studies is that a river that flows through the open pit area and would need dealt with (rerouted?) and esp so to deal with underground scenario - the main reason La India mine originally closed for Noranda int he 1950s was that it flooded after heavy rainfall.. so would defo need dealt with!
regards
T123
They have recently announced much higher AISC costs than originally predicted and then that extra dilution today.. still at 58p it could be worth a quick trade.. glad I sold out there at 95p a few months back!! Otherwise it’s a buy and hold for about 2-3 years or until the gold price finally catches fire - so kind of the same as here then ;-)
Regards,
T123
Great find and great pics.. nice to see the mill arriving in nicaragua and the progress on groundworks.. so has mine construction started now or hasnt it? According the gov definition? Was hoping for some official clarification via RNS at some point.. should be a really good month of news here with PEA scenarios possibly released next week heading to the precious metals summits... And todays uptick in gold prices wont do us any harm either.. The article calls for a first price target of 65p, i think thats fair given the news to come..
regards
T123
Looking a serious breakout in silver today after those NFP numbers.. perhaps PM's are finally getting the direction of travel sorted for the rest of this year with debt ceiling discussions and inflation increases still to come etc.. its going to be an interesting close to the year here..
regards
T123
Well I think you are just being greedy ISAP - dont you have enough? Leave some bargains for someone else ;-) :-D I bet you are the kind of guy who buys every yellow sticker in the shop too :-D
I just hope there is a 2nd part to that Crux investor video to allow MC to finish his rant - or maybe not as mark subsequently went on to tear a strip off that guy and they cant show it as its X-rated - LOL
regards
T123
AF - just listened to the whole thing. Wow. Just Wow... :-) Best interview Ive ever seen MC give to anyone - he got asked some tough questions there and came out of the corner fighting.. loved to see that.. You tell them Mark! Give 'em hell!
PEA numbers in 3 weeks will be fantastic at $1550 gold and AISC of $700... payback in 12-18 months for CAPEX and the afterwards the rest is free cashflow, zero debt company.. At 1700 gold, there is $100M profit here before tax..
Interesting comparison to K92 mining - $1.7B market cap with Q2 production of 25koz.. Condor will be 100koz producer when mine fully producing.. very interesting comparison Mark is pointing out there.. with the possibility of increasing production to 170k or 200koz as well..
Just need the elections in Nicaragua to go peacefully in November, and BFS in Q1 next year, followed by construction financing and construction decision EPCM contract etc, get ourselves a COO and start building it!
regards
T123
Nice work by MC - lots of synergies that one can conjure up with that CFO appointment..
The next hire I would like to see (and would have preferred to hear about this am) is a CHief Operating Officer - it’s going to need a very good COO to manage the EPCM contract with who ever gets appointed to build the mine.. MC just doesn’t have that skill set and I think it’s above Aiser Sarrias pay grade tbh..
But the appointment of a CFO from Calibre who was responsible for financing the purchase of the mills from B2Gold in nicaragua does sound very interesting..
And just as a BFS is being completed for Condor and a raise will be needed along with debt financing for the CAPEX.. spot on timing I would say..
Regards
T123
Ah thanks JMT - thats very interesting - i knew penoles had 75% here but didnt know FTSE required 25% free float! Well in that case, might as well start going down the special dividends route then... ;-)
FRES are going to have so much cash by the end of this financial year if silver even stays above $20, never mind hits $30 again that they should be looking to return that cash to shareholders or use it to buy more producing gold and silver assets before the metal prices really start rocketing..
Im liking the SP resilience at these levels, even with silver prices dropping today.. feels like its finally found a decent base level..
regards,
T123
FRES should be paying special dividends to shareholders right now from all the free cash flow they have and perhaps also using that cashflow for a share buyback program while the price is so low (and while PMs are so high historically).. I would prefer that they actually use the cash to diversify on PM projects outside of Mexico and even LatAm but they seem intent on staying put. So to increase the SP to a point where they could use that high SP to then issue equity to paper fund any future purchase / expansion, a share buyback program would be best.. so little free float here, it would do wonders for the SP..
Just my two cents ;-)
regards
T123
In my mind, the land is like an invoice dated for payment in 6 months - for a company like CNR which lets face it is cash poor at the moment, and whatever cash it does have is already earmarked for other things - geotech drilling, FS studies etc (BFS was estimated at $5M at one point I seem to remember which seems like a lot) - then why pay that invoice for land right now? (which is overinflated anyway). My understanding is that CNR know what the landowners want (many times more than what all the other landowners got (and will create very bad feeling no doubt if they pay it) and many many multiples of what land in Nic is currently worth) and the landowners know what CNR are willing to pay...
If it gets to Feb next year and the BFS is released, and buying 100% of the land becomes a sticking point prior to agreeing finance for the project and construction starting, then Im sure the deals will get done at that point.. Thats what landowners are gambling on of course.. I would also say the government might well be waiting till after the elections for any compulsory purchase orders to avoid any potential flashpoints.. and again they will only step in when it becomes a sticking point for finance, esp if the banks are leaning on them as they want the big loan at 5% interest!
A slight worry for me about the project is the fact that CNR are also dependent on the Nic Gov to complete a new power plant a few km from La India to supply the plant with power and esp for a larger motor for a bigger mill throughput.. for 120koz pa hopefully.. they still have 2 years to complete it of course, but a manyana, manyana attitude in these countries is a barrier to progress for them.. they need to get their finger out..
regards
T123
If November elections pass without incident and the status quo is maintained in Nicaragua, and if this hits 20p or under as you predict, then I also predict that I will be holding c.1M shares here for the run up to production..
The market is currently waiting to see how much dilution is going to be required to fund the CAPEX portion of the mine build.. On a 70/30 debt to equity ratio, and total CAPEX at $80M, I would say equity for the build plus working capital will be $25-30M. We will also be looking to see what the current AISC figure comes out at - last time it was $690oz, but lets see.
Assuming a BFS in Feb/March next year, with construction decision soon after, Id say you are looking at 1st gold pour in Q2 2023... What will the gold price be at that point I wonder.. ?
For a 100koz plant at $1700 gold, with $700 costs, thats $100M EBITDA. For EPS that will be roughly 50c per share assuming 200M shares in issue at that point.. So a p/e ratio of even 5-7 would give a $2.50-$3.50 valuation here.
The company will then grow to 120koz and 170koz pa at least using free cashflow..
The new PEAs in 3-4 weeks time should contain all we need to know, inc IRR, AISC, CAPEX etc.. Whether that causes the market to start waking up to the possibilities here, lets see - I have my doubts too tbh.. Until the wider markets start realising what a bargain the gold equities are at these valuation levels (Barrick, Newcrest, Poly etc all included) then they may well continue to avoid the space.. but the rush of money when it does happen should be like the "rising tide that floats all boats.. "
regards,
T123
The official LME tin price may be falling, but meanwhile, back in the real world..
"Physical tin users in the United States, which finds itself at the wrong end of a freight-disrupted supply chain, are paying $4,000 per tonne on top of the LME price, if they can find anyone with anything to sell, which is a big if.
...
European consumers are paying an extra $1,500-$2,000 per tonne for physical metal, the highest premium since Fastmarkets started its assessments in 2009."
Its a bit like us trying to buy physical silver in this market at $23 / £17 an ounce.. the real world price bears no resemblance to the official CRIMEX price of buying precious metals..
They can drop the official price all they want, but that just makes physical metal even more scarce as everyone rushes to buy / stockpile !
regards,
T123
Good to know the worlds central banks are all following UBS advice.. er, not...
https://www.kitco.com/news/2021-08-16/Central-banks-are-stepping-up-their-gold-purchases.html
Talking down gold while buying it hand over fist.. must be a complete coincidence.. $1800 gold later would be hugely bullish after the criminal oops sorry I mean fat fingered $4 BILLION gold sale flash crash in 15 minutes when no one else in the world was even awake let alone buying gold last week, an excellent sales strategy of course. .. or maybe it was UBS selling and the Central Banks then buying it all straight back.. AHAHAHAHAHAHA
https://calibremining.com/news/calibre-announces-additional-high-grade-drill-resu-3417/
Calibre down today on the TSX as well despite posting good news on grades - Nicaragua specific, or just a beat down of gold mining shares as gold is obviously useless as a store of wealth now, despite rampant inflation and persistent low interest rates...
Im sure the central banks have managed to scoop of lots of that useless metal though at cheap prices just before they completely revalue them and thus increase the asset base for their countries to offset the debt they currently hold.. to say that its a joke is the biggest understatement ever..
regards
T123
As an aside, what do people make of this announcement in latest results..
"As previously disclosed, the corporate income tax reform introduced in Mexico in 2014 created a withholding tax obligation of 10% relating to the payment of dividends, including to foreign nationals.
Historically the Company has been making dividend payments out of retained earnings generated before the tax reform came into force and no withholding tax has therefore been applied. Dividend payments relating to 2021 and future years will attract the withholding obligation. However, foreign shareholders may be able to recover such tax depending on their tax residence and the existence of double taxation agreements."
10% foreign national tax on Div is a bit annoying - is there a way to reclaim this - does UK / Mexico have some agreement in place for double taxation? I mainly hold FRES in a SIPP and ISA..
regards,
T123