Petro Matad CEO Mike Buck confirmed that he believes the Exploitation Licence for Block XX in Eastern Mongolia is likely to be awarded in Q2. Watch the full video here.
The change from January was that an asset near the Gedabek mine is not being added to the mix. Instead they have a huge stock of copper ore in the open pit and want to process it while the copper price is rising. With 30% rises in copper and 14% increased production from a year ago that is a 42% increase in the copper income. Gold production has dropped and only partly off set by a rise in prices since H1 2020, but accounts for a greater share of the profit cake. The overall impact in GEOs then becomes marginal and they have stayed with the same target as late 2020. So for those following gold it looks disappointing, but for those seeing a huge copper stock pile of ore getting processed and out of the way its not looking so bad as the bottom line is still some good income for 2021.
There are rail transport links not far from Vejnaly they go to Zubovka and then can travel up to Ganja which is in road transport range to the mine. The rate per tonne for what is 3 grams of gold has to be worth it. Hence an evaluation of the cost assessment. Lets assume its not worth doing as a base case and we have no surprise in that quarter.
We knew Q1 was slightly weaker as staff were still returning post war service up to mid-January. The company also explained from my memory that the underground mine was to have a high strip ratio in 2021 as they were interconnecting parts of the mine plan. Some areas have high gold ore grades and some do not but the underground is set up for a better years in 2022 and 2023.
The mine life is believed to be 8 years but this excludes all the acquired territories and many new mine areas that have just been explored to date. The Hardman analysis had a greater mine life. AAZ usually trades 8-10 PE during the year hence a trading range of 130-170p.
The company has opted to produce more copper as the price is high along with demand. The increase is 14% and copper prices may go higher in the coming year. As a consequence the overall GEO rate is similar to 2020 in the earnings data. I therefore believed that the company was at a good value in the mid 130's and today's discount is attractive.
AAZ is a good story for 2022. The RNS like all of AAZ communications could be improved. The prospects at AAZ are significant and it should not have surprised anyone that a lot of planning has to be done. The company then has to decide how fast they should develop, do they pursue on cash earned rate or do they borrow and expand aggressively. Both options need looking at and also gauging views of stakeholders.
Overall I see AAZ edging back up and trading 132-152 range and paying a decent divi.
Although production is similar to 2020, there is a possibility of a positive surprise with ore being trucked from previously occupied mine sites. They need a gold price of $1665 and silver at $25 for there 64--72k GEO annual target. The net money earned in the first quarter was just over $7M. If they make $28M over the year it would be £20M.At say 17p a share an 8 PE rate is 136p and at 10 times earnings we have 170p. I would expect the share to trade between that range until we get more news. I prefer the option of a potential positive surprise. Divi yield could be 4% or so.
The company has a contract with Thyssenkrupp Material Trading to handle exports and they are or should be reputable. The normal route of export is via Mombasa in Kenya. Gold, Rare earths and gems are Burundi's number 1 export. Its a mystery as to why at this time they would suspend exports. The implications of it being long duration is jeopardise jobs in the country as the model of business is only just profitable to do. The company have done a lot of work over 4 years to understand the asset and work out how it could be mined. Another issue is that proven reserves are relatively modest and needed the $3.2M exploration programme to go ahead and prove viability as a profitable longer term project. It therefore makes little sense to suspend exports.
The significant growth story is actually junior gold miners and that is in a static gold price environment. Companies like Shanta growing production by 50% in the next 18 months. A number of other miners are not growing at all and totally dependent of gold price going up. At some point as the growth story gets better explained we might actually get a decent valuation.
As a result of having the AstraZenneca vaccine, my wife experienced Bell's Palsey along with just about every other listed AstraZenneca side effect. An MHRA yellow card was filed last week (3 weeks after first dose) after the only system remaining was Bells Palsey and had not recovered. The GP reported that several other patients had Bells Palsey after the AstraZenneca vaccination and thus far, all have recovered by week 12 and some recovered by the 4th week. My wife was told to keep her June 2nd dose vaccination for the time being. If the symptoms are not fully recovered the current protocol is to delay a second dose. My wife has noticed the recovery is very gradual and she gets episodic events of it. So at least in her week 4 its not like in week 1. I hope others who are unfortunate to get this side effect hope the info is helpful and not to panic and allow the immune response to ease back from the vaccination jab and that you might have delay timing in getting the 2nd one. I think the incidence rate is around 1 person in 5,000.
On Bloomberg last night, one analyst gave a very strong message of what to invest in and what to avoid like the plague if you accept USA inflation is on the horizon. They first argued that inflation was happening far more severely as led by FED officials. For starters the green energy push was highly inflationary as it was pushing up a range of commodity prices in short supply. They included incidentally copper, nickel, a vast array of rare elements and these price increases are long term and will continue to push far higher. Secondly in USA a proportion of individuals do not want to re-enter the workforce on low pay. So fast food restaurants are having to pay workers a lot higher wages. On top of that Biden wants a minimum $15 wage and that is pushing up wage pressures across the board. So despite Covid-19 taking out 9 million jobs a huge number of job vacancies are arising. So USA is heading for a big structural increase with inflation. As for the shares to buy, its the miners especially those producing copper. So one of the priorities that AAZ may need to deal with is not just managing improved gold production, but to have one of its assets focussed get on producing lots of copper. Such a development would add 15-20% to AAZ share price. It has shed loads of copper that it can produce. The future is gold/copper miners and AAZ has hardly been noticed thus far.
Looks like we have triple bottomed this morning. I should add that none of the UK listed miners have given Q1 reports yet. We should here from them all fairly soon.
I was curious to know if anyone asked anyone at Synairgen if they approached the National Hospital for Neurology and Neurosurgery (as they have interferon lab tests) along with a company like Randox Laboratories to produce an easy to use diagnostic to measure antibodies raised against interferon 1 that account for 10% of all severe patients affected by Covid-19 and how early these antibodies are raised in the course of Covid-19 infections (for all of the NHS and overseas markets). Having a second test that identifies patients making mutations of interferon and also for those with autoantibodies to interferon would identify the 15% of patients that are seriously hospitalised by Covid-19 requiring ICU bed use. This would identify several hundred people early enough, if the test had a turnaround of a day, that would avoid very long prolonged stays in ICU. This cohort is vastly cheaper to treat with Synairgen's inhaled beta interferon as well as having a diagnostic test being done (where 90% are normal and 10% identified as requiring Synairgen's inhaler). Such a collaboration of test and prescription along with our vaccine rollout could help eliminate much of the Covid mortality and help live a normal life despite Covid-19 and its mutations still arising.
As we hit 157p. We may see traders take the share back a bit or try and breakout of the channel. I suspect the former. They will of course be buyers on a pull back as they recycle positions. We may see this kind of churn until we get an RNS.
Dividend policy thus far. Divis have only be paid since 2018 financial year close. The first two years the divi cover was just over 2.1 times or thereabouts. So far 6 cents was paid out. If the profit level was similar to the previous year as we had lower production off-setting higher price then we might get 3 cents or 2p divi.
I have done extremely well with AAZ in 2020/21. I can not believe it has double bottomed and that i would get the chance to add at that price. I have bought stock although had no reply from the company. I still expect an RNS either tomorrow morning or Thursday. We could do with a communications office in Guernsey instead of Baku. This company could be in FTSE 250 by 2024/2025. They need to evolve the standards befitting to that status over the next 3 years and things like communications may prove helpful for future investor relations as well.
On the hourly its just 20 on the RSI which is oversold. The slow stochastics on daily and weekly are on zero. The monthly is approaching zero. I prefer buying on reading like this instead of jumping on the band wagon to late at 80 RSI massively overbought signals where people usually take profits.