Member Info for the_shareminator

Have to add my thanks for the consistently sound and accurate analysis that has been shared on this board. It has helped me stay (relatively) sane through the crazy lows of last year!

I am interested to hear what we all think the likely dividend policy will be in the years ahead given CAPEX is set to fall dramatically from 2021. Ragnar indicated EBITDA of $40m and half that as being on the table. Even 25% of free cash would be game-changing I think but I have yet to come to any conclusions based on available information. We know they have been conservative in the past with a goal of expanding operations and output. Further acquisitions like Phoenix may come along. PAF couldn't make good use of the asset but it naturally complimented SLP's operations. Might there be more of these to come in the next year or two?

Your posting is becoming more and more illogical...

Since gold peaked most of the UK traded gold producers have fallen including PAF, SHG, HGM, AAU, HOC as well as CMCL, FRES and CEY which can be partly attributed to bad news and poor results. HUM and TSG are none-movers, KAZ is the exception. The sector is weakening after gold topped out, there have been people trading and looking for a lower entry. It's actually normal TaffyJack, sounds like you are not familiar with these concepts...

Most here understand that results in the coming quarters will send this stock to £1. No guarantee when that will happen, just that it will come and patience will be rewarded. Why? cash on the balance sheet is set to rocket. A minimum 25% of cashflow is expected to go into dividends.

Keep talking down the stock, we will all be around to remind you when this hits £1

Asking and answering your own questions is a good way to stifle debate. I've said it before but I'll say it again, it's a pointless exercise trying to justify the use of WACC. This investment would be very different if it was loaded with debt that could not be repaid in the short term, but such models do not differentiate between such risks and therein lies the problem. An increase in WACC denotes an increase in risk, without actually accounting for figures. At the beginning of an investment this will hold more weight but not when a company is generating around $25m FCF per year.

What you label as standard practice just isn't the case and multiple sources will tell you investors prefer to set their own targets (required rate of return approach) when determining whether an investment is worthwhile.

TaffyJack - I very much doubt anyone here invested with the intention specifically of outperforming the lender of the $8m loan. ie base their investment around beating their fixed interest rate.

Putting it in perspective, $640k servicing cost is peanuts compared to the $24m swing the company experienced in net cash/debt last year. I can't speak for other investors but earnings growth, increasing profitability and a growing cash pile are far more important to my decision making and in the context of debt here have a far larger impact than using the WACC although.

If earnings come in flat this year, then net cash will still rise above $20m assuming forecasts are accurate. The 6% dividend yield is also far more relevant. If debt was out of control or in some way restricted dividend payments or cash build then your point might hold more weight but WACC isn't particularly relevant here.

Regarding the exploration costs, which were added into their cash-flow calculations all nice and sweet but without an explanation as to what it's being used for and the high degree of liklihood the LoM will be extended leaves them looking rather silly. It should have stated further drilling of resources to a higher degree of confidence will lead to subsequent increases of the reserve, the benchmark for increasing the LoM in the report etc.

By the way you're posting on a public bulletin board where investors come to share views, of course people are going to respond. Especially if they don't agree with your attitude or choice of reasoning.

A couple of statements suggest that production will improve as we move through the first half.

"Open pit mining will continue predominantly in Stage 4, with grades improving towards the reserve grade throughout the first half ("H1"), with waste stripping to commence on Stage 5."

"The mine plan schedules a progressive quarter on quarter performance, with the underground contribution largely consistent, and the open pit increasing as the grade improves with depth."

"The Sukari mine plan production is weighted towards the second half of the year, with approximately 55% of ounces produced across Q3 and Q4 2019." - Let's assume lower end guidance, 45% of production is 220koz and from there 105koz is the lower end guidance for Q1. This suggests Q2 lower end guidance is 115koz.

"Q1 is scheduled to be the weakest quarter, budgeting for 105-115koz. The open pit is performing in line with expectations and the focus is on the resolving the factors driving increased dilution from the underground, including a new stoping plan and backfill plant." - I believe management have a better understanding of the issues they are facing and what lies ahead, but I take your point the company has it all to prove given their credibility is at an all time low.

Servicing the remaining $8m debt is $640k per annum, not very much at all. Why would the discount rate increase, risk is reducing and future returns of cash-flow as indicated in the report look solid if not conservative. Have you noticed they have factored in $4.5m exploration costs in each of the years following but no explanation as to how this will benefit the company and what is likely to come. The recent interview mentioned exploration will continue at about the same rate this year.

The debt will likely be repaid long before 2025 so assuming an investor holds for 5 years reinvesting dividends and the stock price remains flat, they will net a 34% return, higher than the remaining debt servicing costs I would wager. Not to mention most here agree the stock is only heading higher.

Special dividend today

Rebess your glass looks empty, can I top it up for you?

The EXPECTED shortfall in Q1 is already known. I quite agree that the forecast will be accurate coming so late into the first quarter but the market may get ahead of itself as it often does.

Is the market not forward looking? Assuming average results the market will be anticipating a better looking quarterly 2 estimate before we even receive the results (due early May). I think £1+ will come around before long but no idea when this will bottom. Give it a couple of weeks.

Assuming production remains on track, with it rising in line with forecasts throughout this year I think price action will head in the right direction but then I'm a glass half full sort of chap

Daisan, the reasoning is not lost on me. I'm just stating a fact, it's a pretty pointless exercise. This isn't an explorer with no access to cash at PFS or DFS stage. We are at the stage of consolidating operations and extending the LoM using cash-flow whilst building our cash reserve. Justifying the removal of a combined 1.2 million ounce resource spread across producing assets with the majority confirmed to Measured or Indicated confidence makes little empirical sense.

Tiger you should have seen that coming really, given your previous...

I agree journalists are often wrong and spread misinformation depending on their interest. Mugabe may be gone but the problems have not. The debt has not. It has in fact shot up under this new government which is making inflation worse. We will see what happens in the coming months regarding confidence in Zimbabwe.

Of the update, the 10% (tax free) export credit incentive ("ECI") programme for Zimbabwean gold producers will be withdrawn. The effects are estimated to reduce Caledonia's earnings by approximately US$5.4 million and will among other things reduce Caledonia's cash-flow going forward as these revenues were not eligible for remittance outside Zimbabwe. Now they will have to make up for this fact in order to cover the 'loss' and you would expect that to come first and foremost out of the quarterly dividends. It's surprising therefore that they chose not to use this opportunity to announce it but I am sure it is under review. What should also be under review is the capital expenditure program with a view to delaying it until the risks subside.
The company has now finally come out and stated that it's 'unclear' whether the new government policy "will address the increasing inflationary pressure in Zimbabwe" for the reasons given earlier.

Not sure which part you found interesting TaffyJack. A quick scan of the preview tells any investor all they need to know about the 'quality' of that piece. That and the relevancy of it now that we have the Gadir underground mine JORC resource.

Don't understand your point regarding AAZ's debt. It's probably half what the company has in cash at this point so more than covered even with the dividend coming. Are you expecting the debt to increase? 8% sounds ridiculous nevermind 12%!

Hardman stripped the company down to production of the proved & probable reserves for the Gedabek open pit and the nearby Ugur deposit. That is worth 146p according to their calculations and still assumes the company will pack up shop in 2025.

Let's remind ourselves of the resources they excluded
- 833,000 GEOs at the Gedabek open pit mine
- 200,000 GEOs (au+ag) at the Ugur open pit mine
- 180,000 GEOs (au+ag) newly announced at Gadir underground mine (not inc copper/zinc)
- ongoing exploration at Gedabek, Ordubad and Gosha

The company spent $4.5m on exploration last year and still managed to move from a net debt position of $18m to net cash of $6m illustrating their ability to push ahead with extending the LoM to beyond 2025.

Hope noone is invested here.

Trade and other payables of US$12,606,020. Burning cash daily.

Have been waiting a while for these to dip, small top up at 159 for me. About 6 weeks to go before FY results and the quarterly update a week or so after that. After CEY and FRES cut their dividends, you would expect investors to rush to better performing producers like HGM. We will see

Tiger - "big advantage"? No comment. Renowned economists and other financial commentators are lining up on the opposite side of the fence however.

Zimbabwe added about 150% to fuel prices recently! That lead to rioting, hardly the picture of 'stability'. Not a lot has improved in that time but no doubt wages will have to rise accordingly to cope. On the point of wages rising, what is the inflation rate today? Just last month it was at it's highest in over a decade at 57% and that was prior to the launch of RTGS last week or the 2% tax on all electronic transfers.

What Zimbabwe dubbed a “managed float” has already got off to a rocky start as banks continue to refuse to exchange foreign currency. Last week the central bank said it had secured “sufficient lines of credit” to launch the RTGS however to quote EWN yesterday analysts are scratching their heads as to where the money could have come from. "People are bound to ask what backs this new currency. It’s no wonder people are distrustful. There is nothing to stop Zimbabwe printing money with this new currency,” said Jee-A van der Linde, an analyst at South Africa-based NKC African Economics.

https://ewn.co.za/2019/02/25/zimbabwe-struggles-to-convince-doubters-as-it-launches-new-currency?utm_campaign=recommendation&utm_medium=banner&utm_source=newsroom

The Sunday Times reports "Zimbabwe's new currency was stuck around 2.5 to the US dollar on Tuesday as tight restrictions on trading and exchanging it remained in place despite a central bank pledge to let the RTGS dollar trade freely." According to a banker at one of the leading commercial banks they are only helping to pay for goods and services and won't sell currency direct, "bring an invoice quoted in US dollars and then we pay on your behalf".

Western Union are also without dollars to sell according to the same article. In the country's second largest city of Bulawayo, an area known as the “World Trade Centre” for the amount of money that changes hands has been barricaded. Of course at the same time government debt has rocketed and that's before factoring in the effects the RTGS devaluation will have had making it even more likely the "foreign currency interbank market the central bank launched last week redundant."

https://www.newsday.co.zw/2018/10/govt-debt-to-hit-20bn-by-year-end/

Last week South Africa refused Zimbabwe's loan request of $1.2bn. Botswana have today offered half the sum for the diamond rights which were stolen from foreign companies back in 2016, which sounds like a desperate attempt to raise foreign capital..

https://ewn.co.za/2019/02/26/botswana-offers-zimbabwe-usd600m-of-loans-report

https://www.sowetanlive.co.za/news/africa/2019-02-26-zimbabwe-promises-fiscal-discipline-as-it-launches-new-currency/

https://www.timeslive.co.za/news/africa/2019-02-26-zimbabwes-new-currency-unmoved-as-transactions-stay-restricted/

But I take your point Visitor, CEY probably has a bit further to fall so buying earlier was premature. But as with all things, confidence will rise when gold rebounds. Palladium and rhodium are I'm almost certain the sole reason why we have just broken new highs, especially coming off the back of a rather sour looking quarterly update. The next one will read much better no doubt but that's a few months away yet. 30p this week or next?

Indeedy I have done, when all was quiet at 17-18p lol, now I'm starting to get jittery because we have touched a new high. SLP has done very well for us all these past few months

Visitor - You weren't supposed to tell everybody that! Haha okay TSG is a different kettle of fish though, highly illiquid at times and results have been mixed in the past. The past few updates however have been superb. The reason I derisked recently is I am certain grades won't continue rising forever and not at their current pace. The dividend yield this past 8 months will continue to look good but else there is often lulls where nothing happens and the 8-10% spread hinders redeployment of capital.

CEY is producing considerably more gold than TSG and SHG for example. It is loaded with cash, has credit facilities and owing to slim margins last year has the potential to rise much faster than the small-caps if gold breaks out. Also remember RRS had a PE way above 20 when Barrick came fishing.

Compare actual 2018 production of 472koz to 2019 guidance of 490-520koz. AISC lower end can come in at the same level but regardless, EBITA and operating profit is sure to rise with the gold price at current levels, helping to fund capital expenditure and higher dividends further out.

25.97 on the bid, palladium and platinum up again this morning

Well I just took a bite here! Contrary to what Strider4 says I think it's cheap. Point me to a better priced cash rich gold producer on the London exchange. Production dipped but was known weeks ago. Anyone selling today is not forward looking, simple as that. 500koz production estimated with gold likely to continue rising in the second half of 2019.