Member Info for the_shareminator

Silver exposure from holdings slightly reduced in favour of precious metal (PGM) producers, base metals and gold.

https://ncim.co.uk/wp/wp-content/uploads/2021/07/CQS-New-City-GPPM-June-2021.pdf

Inflation remains a focus for investors driven by better-than-expected economic recoveries, especially in developed markets whose post-Covid recoveries have lagged that of China.

Whilst generally positive for gold and commodities in the long run, there are some conflicting short-term implications, notably with regards to central banks’ monetary policy response as they consider shifting towards a tightening bias. The US Fed are now more openly discussing possible tapering of its US$120bn per month bond purchases and indicated that a rate increase may be appropriate in 2023, earlier than previously guided.

A strengthening of the US dollar index, which firmed around 3% over the month after FOMC minutes broached the subject of tighter monetary policy, weighed on gold, which declined around 7.2% over the month.

However, the declines occurred despite physically backed ETF holdings, which have typically been a marginal driver of the gold price, remaining static over the month and when assessed against the historic correlation with 10-year TIPS, the sharp US$130/oz decline during the month may represent a short-term correction.

The extent to which inflationary pressures are “transitory” will continue to have a significant bearing on monetary policy, and central banks may find it difficult to fine tune actions to counter potentially stubborn underlying inflation risks resulting from a combination of rising wages and pent-up demand.

In other aspects, policy actions may help spread pressures over a longer period. In this regard, China’s inflationary concerns prompted authorities to restrict speculative trading and release small quantities of base metals from the nation’s strategic reserves in order to dampen near-term inflationary pressures.

Elsewhere, Russia has expanded export tariffs to encompass nickel and aluminium in addition to some soft commodities in its efforts to limit domestic raw material inflation. Similarly, food prices have also risen sharply, prompting governments such as Brazil and Russia to restrict exports.

The World Gold Council released its 2021 central bank survey, which indicated 68% of participants recorded higher holdings than five years ago, pointing to likely further additions as a “buffer against balance of payment crises”. Gold currently makes up 16% of central bank reserves.

During the month the Fund participated in placings by ASX-listed Ora Banda and Firefinch, reinvesting proceeds from the sale of Wheaton Precious Metals.

Sotolo up to his usual tricks today, posting nonsense.

Contrary to the lies, production is in line with guidance and costs are on track to meet guidance. The only person who thought they were worse than expected was Sotolo.

His 2019 comparison always omits the average metal pricing for that year which is convenient when making unsubstantiated claims about profit being half that in 2019.

For anyone interested, the average silver and gold price was $16.5/oz and $1414/oz respectively.
PBIT was $76.8m for the full year.

You can compare that to the approximate prevailing silver and gold price of $25/oz and $1800/oz respectively.
The cash build so far this year (H121) far exceeds the reduction in net debt made during H119, another indicator of improved profitability.

Another long mentioned complaint of his is falling reserves / resources despite the evidence over the years. Todays update concerning replaced ounces goes even further than in previous years, 29 million ounces at Inmaculada, 7 million at San Jose.

In their update today and of relevance to the recent unrest

"The recent unrest in South Africa has not impacted production. The Group has experienced logistics delays in getting the final product to the port, these delays have now been resolved. We are monitoring the international logistics situation closely, given the pre-existing COVID-19 related delays but expect the Group to maintain export volumes during Q3 2021."

Decent write up on Proactive: The City Pub Group snapping up bargains as lockdown ends

- The City Pub Group now trading profitably as restrictions ease
- England’s publicans wait for stimulus package after Super Saturday reopening
- City Pub Group PLC has plenty of potential, according to broker
- City Pub Group raring to go as re-opening date gets nearer, says chairman Clive Watson

The City Pub Group owns and operates an estate of premium pubs across the southern half of England and Wales.

The group’s pub estate comprises 45 free houses located largely in London, Cathedral cities and market towns, each of which is focused on appealing specifically to its local market.

Its portfolio consists of predominantly freehold, managed pubs, offering a wide range of high-quality drinks and food tailored to each of its pubs’ customers.

The City Pub Group PLC (LON:CPC) said it is currently trading profitably and at 90% of 2019 levels.

The publican has reopened 42 out of 48 sites, located across Southern England and Wales, while four are under development and earmarked to open in spring 2022.

The firm said the cost base has been significantly reduced and the performance has been “very pleasing”, however the continuing social distancing rules and absence of large bookings have limited trade.

This became apparent at the start of the European Football Championships, it added, where many customers did not want to watch live sport at pubs because of the social distancing restrictions.

“We look forward to all restrictions being lifted on 19 July and we believe that once restrictions are lifted, trade will build over the remainder of the year to above 2019 levels, although it is difficult to predict at this stage exactly when this might happen,” City Pub said.

The AIM-listed group currently has over £16mln of unutilised banking facilities, is cash generative and is starting to identify new acquisitions.

City Pub also revealed that it has purchased the freehold of the Roundhouse in Wandsworth Common, where it only had four years left on the lease, for a total consideration of £1.1mln.

''We have been very encouraged by how we have traded since reopening despite the continuing restrictions. We are cash generative and trading profitably demonstrating the strength of our business model,” said executive chairman Clive Watson in a release.

"City Pubs has demonstrated its ability to reduce its cost base and streamline operations, which bodes well for the recovery in sales and profit margin as trading restrictions are further lifted," they said.

"We believe City Pubs deserves to trade on a premium to its pub peers given its growth outlook. We expect further momentum will be driven from evidence of the operational improvement coming through with margin progression and upside from future acquisition activity."

https://www.proactiveinvestors.co.uk/companies/news/953444/the-city-pub-group-now-trading-profitably-as-restrictions-ease

"The lack of movement in the share price is because this isn't something for nothing. It could be 0.1p or 2p and the share price wouldn't change because the SP will decline on the xd date for each payment by pretty much exactly the amount of that payment."

You are assuming the market won't run the share price higher towards each ex-dividend date which is generally the norm when generous dividends are returned to shareholders. I'd expect some share price appreciation from here given it's yielding 14% across the three dividends. All other things (gold price, production etc) being equal of course.

I agree it's preferable spreading the payment over the course of 12 months (possibly longer) both for tax reasons and providing some stability to the share price.

Cartmel - THS are less exposed to Rhodium and derive about 40-50% revenues from Chrome, which is moving higher. JLP have limited exposure to Chrome but are somewhat diversified with fingers in many metal pies and looking to operate in other countries. If Rhodium keeps moving higher stock won't be available for long at these prices, especially if you are right about the unrest.

The risk of SA mine closures may be the reason why Palladium is heading back towards recent all time highs. It's certainly in greater deficit than Platinum. In theory Rhodium should be following a similar pattern but it's pricing is better reflected by actual supply in a much smaller market. When it moves, it is more prone to be volatile. So if there is an issue with one or more of South Africa's major PM producers, Rhodium prices will retest the $30k/oz level again.

Operationally speaking, it is all good news. Production higher than revised guidance, debt has halved

- 12.3% increase in gold production to 201,608oz, compared with 179,457oz in the prior year.
- Gold production was also 3.4% higher than the revised production guidance of approximately 195,000oz released in May 2021.
- Group net senior debt decreased by 45.5% to USD33.8 million (ZAR482.0 million), from USD62.0 million (ZAR1.1 billion) at 30 June 2020
- At Barberton Mines’ underground operations, the benefits of the increased mining footprints and the improved flexibility of having multiple platforms available resulted in the ca.25% increase in production for the year of ca. 85,000oz
- Elikhulu is expected to produce ca.55,000oz of gold in FY22, with improved tonnage throughput and higher recoveries from the planned re-mining area.
- Civil engineering works have commenced at Evander Mines’ 9.975 MWAC solar photovoltaic (“PV”) plant site and major components procured. The generation licence is expected imminently and the project is on track for completion during Q321 with an intention to expand its renewable energy capacity in the coming years.

The only major concern highlighted was the COVID-19 UPDATE however current political unrest is weighing on the currency, investments and South Africa's growth forecasts for this year
"The Group remains vigilant in its efforts to prevent and mitigate the impact of the COVID-19 virus on its people and operations, and continually updates its operating procedures and protocols based on the latest available information. The infection rate remains low relative to the number of employees in the Group, with some 257 positive cases recorded since the start of the pandemic. Seventeen cases are currently active, with a 93% recovery rate achieved to date."

On the flip side SLP's basket price has benefitted from rising Palladium and Platinum prices throughout the quarter.

With regards Covid, South Africa already accounts for more than 35% of the 5.8 million cases recorded by Africa’s 54 countries (11 July - AP News) and they are now ramping up vaccinations. Vaccinations began in late May for those 60 and above, last week for 50+ and later this month it's expected for those 35 and older. According to government figures two-thirds of its population will be vaccinated by end of February 2022.

https://apnews.com/article/africa-business-lifestyle-health-government-and-politics-6acb0706600fd00aaf842a4cb0af5e47

More likely the recent weakness is a result of a combination of headwinds and risks

1) Rhodium price fell to $17,500/oz this week, it's lowest level since early January and more than 50% off recent highs.
2) Rising covid cases in South Africa will get worse.
3) The rioting, triggered by political factors may lead to increasing unrest. Annabel Bishop, chief economist at Investec Bank Ltd yesterday highlighted the possibility of civil war.

Numbers 2 & 3 are also affected PAF given it has touched 3 month lows despite a strong set of year end Operational Results today.

Supp

The half a billion revenue target may seem somewhat challenging for TClarke given that it’s more than double that achieved in 2020 and some 50% higher than in the peak year of 2019. However, the company has an excellent reputation in the industry, with 90% of turnover in 2020 coming from repeat clients, with a range of growth opportunities available across its five man sectors. Pipeline bid opportunities are said to typically exceed £1 billion. There is decent earnings visibility already, with £288 million of the 2020 year-end order book due to be recognised in 2021 and £168 million in 2022 and beyond.

Analysts at Cenkos have a fair value price model which suggests a share price of 150p to 160p is justifiable for TClarke over the next 12 to 24 months, up from the current 131.5p. They are looking for earnings per share to recover to 15.4p in the current financial year, rising to 21.1p in 2022. If met, that puts the shares on attractive looking multiples of just 8.5 and 6.2 respectively. The historic dividend yield is a modest 3.3% but there is clear scope for increases in the payment if these forecasts are met, especially given that management have stated they continue to be fully committed to a progressive dividend policy.

While construction is highly cyclical industry, the UK is currently seeing a resurgence in activity. The recent UK Construction PMI Total Activity Index reported a rapid rise in new business volumes during May, with output growth accelerating to its strongest since September 2014. What’s more, new order volumes increased at the fastest pace since the survey began just over 24 years ago.

One company looking set to benefit from this is TClarke (LON:CTO), a specialist engineering company focussed on delivering complex, technical engineering solutions to key projects across the five sectors of Infrastructure, Residential and Hotels, Facilities Management, Engineering Services and Technologies.

Engineering Services is the largest division, making up almost 40% of revenues in the last financial year. One of TClarke’s flagship projects here is the KGX1 at Kings Cross where it is working on delivering a major office for Facebook. Elsewhere, the company is working on a 950,000 sq ft premium office development in the City of London, providing services such as installing CCTV, power generators, wiring and lighting.

TClarke was another company facing a challenging year in 2020, with revenues falling by 31% to £231.9 million after the effects of the pandemic lockdown disrupted operations and supply chains. From mid-March to the end of July there were multiple site closures or sites operating with much reduced numbers. That forced underlying pre-tax profits down from £9.2 million to £5.1 million. However, the company remained cash generative, with net cash at £10.2 million at the period end and the dividend was able to be maintained.

Attracting the attention of investors, in the results management set out details of an ambitious plan to grow the business to £500 million of revenues within three years, while maintaining operating margins at current levels of 3%. To achieve this, TClarke has aligned its resources to match the anticipated growth in revenues, with a number of areas expanded including the core Engineering Services business with capabilities also increased in technology and infrastructure. The company intends to grow market share organically by winning and delivering larger scale opportunities across all sectors throughout the UK and will continue to target Data Centres in Europe on a selective basis.

The most recent news was a May update that revealed trading in the first four months of 2021 was positive and in line with expectations. Encouragingly, the forward order book now stands at a new record level of £472 million, up by 3.5% since the end of December, driven by project wins in technologies (data centres) and infrastructure (healthcare).

As a result of the performance, and buoyed by a recovery in metals prices in the second half, the company made the perhaps surprise decision to hike the full-year dividend from 6.5p to 14p per share. This represented 57% of free cash flow, just above the upper end of its dividend policy range of 30-50%. Also due to the strong cash flow, net debt at the period end was down significantly, from $80.2 million to $36.2 million over 12 months as CAML further looked to reduce its borrowings.

Into 2021 and in April the company announced a positive operational update for the first quarter of the year indicating that, while production was impacted by the cold winter months, its targets set out at the time of the full-year results remained on track. At Kounrad, copper production was 2,880 tonnes, with all of this leached from the Western Dumps during the winter period for the first time. Sales meanwhile were 2,875 tonnes, with full year guidance being for the production of 12,500 to 13,500 tonnes.

At Sasa, there was a period of unplanned mill maintenance, which resulted in a loss of production for up to four days. However, 11,521 tonnes of concentrate containing 49.8% zinc and 9,730 tonnes of concentrate containing 72.1% lead were produced. Given that deliveries from Sasa to smelters occur on a regular basis, payable base metal in concentrate sales for the quarter were similar to production levels at 4,779 tonnes of zinc and 6,686 tonnes of lead. Guidance for the full year is for 23,000 to 25,000 tonnes of zinc in concentrate and 30,000 to 32,000 tonnes of lead in concentrate.

Since the beginning of 2021, copper prices on the London Metal Exchange have risen from $7,740 a tonne to a current $9,432.50 as Chinese users have looked to restock depleted inventories. While prices have slipped back from over $10,700 a tonne in May the outlook looks good for the foreseeable future, with demand set to stay high and supply issues continuing – it can take up to a decade to commission a new copper mine.

Shares in Central Asia Metals have reacted well to the rise in the copper price, with the current price of 245p being more than double last year’s low of c.113p. They still look cheap, however, in my view, trading on a multiple of 8.5 times broker VSA Capital’s 2021 earnings forecasts and yielding a historic 5.7%. With steady metals production expected and with a historic free cash flow yield of an impressive 9.8%, that should enable the company to continuing paying down its debt and returning income to shareholders.

Following the April production update analysts at Berenberg reiterated their 290p target price for the shares. Meanwhile, VSA Capital is more bullish with a 325p target, saying that Central Asia Metals is its preferred exposure to copper.

Despite the recent rises, Richard Gill, CFA, believes there still looks to be plenty of value available amongst London’s small cap companies.

While the pandemic reduced the global demand for copper in 2020, an expected reduction in supply of the metal over the coming years looks set to benefit the bottom line of producers. According to analysts at S&P Global Market Intelligence,
“… consumption will outstrip production over the period to 2024, resulting in a growing refined market deficit and increasing copper prices.”

On the demand side, increased usage from the power and construction sectors is expected to continue, along with growth in copper-intensive new green technologies such as electric vehicles. According to Berstein Research, global copper production would need to rise by between 3% and 6% per annum by 2030 for countries to meet the targets of the Paris Agreement on climate change.

Looking set to benefit from this demand/supply imbalance is AIM listed Central Asia Metals (LON:CAML) the owner of the Kounrad SX-EW copper project in central Kazakhstan. The company operates a copper recovery plant at the site which recovers copper from waste dumps that originated from the Kounrad open-pit copper mine, an asset which was decommissioned in 2005 following 71 years of activity.

Sitting on the surface, the dumps (known as Eastern and Western) have a significant amount of contained copper metal. The company’s processing plant produces copper cathode (the primary raw material input for the production of copper) and the metal is delivered from the site by rail and sea to end customers, mainly in Turkey. The plant was completed on time and under budget in 2012 and began producing copper shortly after. Since then, over 110,000 tonnes of copper has been produced, pretty consistently year-on-year, with costs in the lowest quartile of the global copper cash cost curve.

Alongside its copper interests, CAML owns the Sasa zinc and lead mine in North Macedonia. Sasa is an underground mine that processes c. 820,000 tonnes of ore each year, producing a separate zinc and lead concentrate. CAML typically receives approximately 84% of the value of its zinc in concentrate and approximately 95% of the value of its lead in concentrate from smelter customers.

The last financial year was a challenging but profitable one for Central Asia Metals, with results for the year to December 2020 coming in ahead of expectations. Net revenues for the period were down from $171.7 million to $160.1 million as a result of lower commodity prices, with a leakage at a tailings storage facility at Sasa also causing some disruption. EBITDA of $95.7 million and free cash flow of $58.9 million were also down slightly but remained strong.

Recent CPI data from the US suggests it has already peaked and markets are now pricing in what the Fed have been saying all along, that inflationary pressures are temporary.

With regards your comment on unprecedented debt monetisation there is a reason why it has only had a limited impact. The vast majority of this stimulus does not reach primary markets immediately but rather enables banks to make purchases and lend through bank credit at lower rates. During the 2 years of QE1 silver prices remained below $20/oz and it was only during last 2010 when prices rocketed, owing to factors outside of QE which had been factored in.

My point being the price of precious metals is not inextricably linked to the current levels of bond purchases, which are enormous ($120 billion per month) but nevertheless are not at risk of defaulting or pushing the US into a hyperinflationary scenario.

With regards precious metal miners, there are plenty of good buying opportunities around even assuming long term gold and silver prices of $1500/oz and $20/oz respectively

PM Miners are my worst performers this year. Some are fairing better than others like WPM, SHG, PAF but overall rather poor compared to picks like WRKS (up more than 200%) and DWHT (up about 100%) and neither really warrants that kind of rise despite the strong outlook and improving figures.

I think it may take another quarter or two possibly for PM stocks to gain a bit of momentum. The market appears to be valuing miners like FRES using prices of $1700/oz gold and $24/oz silver and so I suspect quarterly results will add clarity with regards improving margins.

Wed, 9th Jun 2021 09:17

RNS Number : 3081B
Resolute Mining Limited

US$20 million early debt repayment

Resolute Mining Limited (Resolute or the Company) (ASX/LSE:RSG) is pleased to advise that it has repaid US$20 million in advance of its first scheduled debt repayment.

The voluntary early repayment reduces the Company's Revolving Credit Facility (the RCF) balance to US$130 million and lowers borrowing costs. The RCF also provides Resolute with the flexibility to redraw funds to the US$150 million facility threshold, at the Company's discretion, up until the maturity date which is currently March 2023.

A summary of the debt maturity balances following the US$20 million repayment is set out in the graph provided in the full version of the announcement at www.rml.com.au.

Resolute's first scheduled debt repayment under the Company's Term Loan facility is in September 2021. The Company's intent is to repay all Term Loan obligations through the generation of operating cashflows. Additional free cashflow may also be applied to further reduce the RCF as options to extend the maturity of this facility are assessed in accordance with the lending agreement.

Resolute's Chief Executive Officer, Mr Stuart Gale, commented on the accelerated debt repayment: "This early repayment strengthens Resolute's balance sheet and reduces ongoing borrowing costs. Our teams remain focussed on improving operational performance and with that cash generation. The flexibility of the RCF then provides us with the option to continue repaying debt ahead of maturities with operating cashflow and proceeds from potential non-core asset sales."

Cash and bullion balances were US$106.0 million at the last quarterly update (31 March 2021)

https://clients3.weblink.com.au/pdf/RSG/02383046.pdf

I'm sure management will find a happy medium while the price of gold remains at this level. We have a $40 million cushion for security. I would be surprised if there were special dividends though as the whole point of the equity raise last year was to improve the balance sheet to fund the development of West Kenya and Singida

I am not sure what the point of that little exercise was except that you've explained why larger isn't always better. RSG had a mixed year in terms of performance, held back by strikes on top of all the other issues Mali-based producers faced and yet they still turned over record revenue of $618m with an impressive EBITDA of $246m, 169% up on the prior year.

They were penalised for hedging when gold was rising and so did not benefit to the same extent HUM did when gold spiked for a couple of months last summer. But in terms of performance now realised gold price is less than 5% off spot: Q121 realised gold price for the quarter averaged $1,729/oz compared to the average spot price of $1,800/oz. Operational costs were higher at Yanfolila than the combined operational costs Resolute published last quarter.

HUM does not generate significantly more cash, that is wrong. If your point was it did so on a per ounce basis last year fair enough, but Resolute's reporting of $170m D&A each year should give you some idea of the scope of their operations, these being non-cash expenses. I don't believe Hummingbird compares favourably in terms of it's exploration spend to extend LOM at Yanfolila, although this year they are stepping up a gear.

What has hindered Resolute's reduction of net debt has been the falling through of the $100m Bibiani sale - impacting group cashflow forecasts. On top of this senior lending requirements to hedge production are limiting exposure to improving margins. The new low cost loans will reduce annual interest and repayments going forward and the Ravenswood asset will continue to generate income for RSG (linked to gold price & performance) of up to A$200m in the coming years.

I wouldn't like to guess share price performance this year but I would suspect both Resolute and Hummingbird will make similar gains from current levels whilst gold continues to rise. I certainly wouldn't write off one for the other given the track record for each has not been particularly grand for either..

Anglo American is to demerge its thermal coal operations in South Africa to a new holding company called Thungela Resources Limited, that shareholders will receive shares in.

Thungela shares are to be credited to Anglo American shareholders this Friday in anticipation of the company's primary listing on the Johannesburg Stock Exchange (JSE) and standard listing on the London Stock Exchange (LSE).

Thungela had 16.5 Mt of attributable export production to its name in 2020, with its operations close to an established rail network with secure access to export markets via the Richards Bay Coal Terminal. It has 137 Mt of reserves and 756 Mt of resources, along with seven operations (four open-pit and three underground).

Mark Cutifani, Chief Executive of Anglo American, said: “Anglo American has been pursuing a responsible transition away from thermal coal for a number of years now. As the world transitions towards a low carbon economy, we must continue to act responsibly – bringing our employees, shareholders, host communities, host governments and customers along with us. Our proposed demerger of what are precious natural resources for South Africa allows us to do exactly that.”

He added: “We are confident that Thungela will be a responsible steward of our thermal coal assets in South Africa, benefiting from an experienced and diverse management team and board. While representing just a small proportion of Anglo American today, we are laying the foundation for South Africa’s leading coal business, setting it up for success to deliver value for all its stakeholders. Looking forward, we believe the prospects for long-term value delivery are greatest as two standalone businesses, each with their own strategy and access to capital.”

The proposal also allows Thungela to attract new shareholders and to access new sources of capital as an independent company offering direct exposure to thermal coal.

It is expected Thungela’s shares will be listed and admitted to trading on the JSE and LSE on June 7, 2021.

Following completion of the proposed demerger, 100% of the issued share capital of Thungela will be held by Anglo American shareholders who will each receive one Thungela share for every 10 Anglo American shares they hold. Each Anglo American shareholder will also retain their existing shareholding in Anglo American. Thungela will hold 90% of the thermal coal operations in South Africa with the remaining 10% held collectively by the employee partnership plan and the community partnership plan.

https://im-mining.com/2021/04/08/thungela-acquire-anglo-americans-south-african-thermal-coal-operations/