Member Info for Tornadotony

$36M Second mine build.

Uplift is $400 not $300 in previous. late evening error.

Nicotinenelly and other interested readers,

1. First of all as you know Barrick will receive 2% free carry on all revenues generated from a future West Kenya mine and they made it clear they would be disposing the shares when convenient and that happened to arise at the placing.
2. A non-executive who is 70 years old and served at the company for 7 years may well be near retirement or have personal reasons for selling their shares which is not that huge or significant is not an influencing issue imop.
3. Odey own over 13% and did not take up the placing so their holding dropped by a fifth. So they did not sell.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Shanta Valuation
1. The company has 653,000 reserve ounces. Typically multiply by $100 = $65.3M to enterprise value. Average gold price $1300 long term gold price (not $1700).
2. The company has $3,176,000 resource ounces. These are a mixture of measured and inferred and so at $20 per ounce average ounce it adds $63.5M to enterprise value ($1300 per ounce long term gold price).
3. The company has $35M net cash over debts in the bank.
The above 3 items = $163.8M at 1.34 to the pound = £122M
4. Although the plant in 2019 costs is $85M, lets put a fire sale valuation of 25M. Grand total £140.6M Enterprise value.

The cash will be used to create new resources over time in West Kenya so there is an EV conversion on gold in the ground value but that happens over 3 years.
The company is of course a low cost producer and has a 7 year consistent production record.

So the £140M valuation is at $1300 gold price. This equates to a share price of 14p for Shanta.

So what should the uplift be for $300 more per ounce. if $100 was taken for a reserve on $1300 gold than it should be $130 at $1700 gold which is $85M enterprise value. For resources at $1700 gold $26 =$81.4M. With cash at $35M= $201M plus plant we have $219M say enterprise value. This gives a value of 16.3p value.

All the above is not based on earnings, but just resources and reserves and all the kit and equipment they have and priced in African territory low value risk adjusted rates. When profitability is accounted for in that within 2 years the company has a second mine for $36 and it has generated $28M profit after all those second mine build costs that ads further to price especially if reserves mined out were replaced from resources.

I therefore do not care what other investors do as the team is competent, they have a great growth plan, they have plenty of reserves and resources the growth rate in 2 years is 25% for 2023 at static gold prices. They also have other growth opportunities to add to the existing plan which they mention in their last presentation. I have done my research and I believe Shanta share can do well.

I have added as well. The weekly chart says we are on strong support line. Certainly well below the placings levels. If gold averages $1850 in 2021 and AISC is $900 = £56M earnings. $1800 gold and $950 AISC = £50.74M. How can company be trading below 3PE. If the company being AIM was given 6PE and gold was $1500 and AISC was a $1000 and the company earned £29.85M would give a share price of 16.9p. This is a company with 3M ounces of good quality gold producing 80,000 ounces a year. That is 30 years production at the 80,000 rate and you get a PE of just 6. Seriously I do not know any other miner valued so lowly as this.

Currently £143.48M. The company had $35M in the bank after placing. £26M is cash being spent to convert 700,000 ounces of gold into reserves. Although the value of doing this is $70M lets assume a low conversion rate of 50% which equates in the ground value of what was spent of £26M. This gives a forward earnings valuation of £117M a year. At the current gold prices and lets assume there is a lift to 2000 at some point for awhile in 2021 gives an outward earnings of £50M. So the company forward PE rate is just 2.34 times earnings. Of course they are building a new mine against the income but this yields a production increase of 32,000 ounces from 2023. At 1700 earnings this gives a 2023 earnings figure of £62.8M which is 3 years forward PE of 1.36 times earnings. Not sure if I can find any share with that kind of future metrics.

The bottom might be 63p on closer inspection of the triangle/pennant formation. However as time moves on it becomes 64p. Anything can shake up the markets. The pattern could break any time from 14 December to 21 January. Nonegspleeze and others I just post what we can all see. With regards to my own position, Pensana is only 3.5% of my portfolio so I can do nothing and observe. If SP breaks down I can add and if it goes sky high I have something to sell if I wanted to.

BP falls back more than Tullow.

3 month chart is extremely close to Fresnillo and only slightly better than Hummingbird. AAZ and CEY match each other for reducing production targets for different circumstances. Current drop is most likely sector related.

Dogstar

Please note that as oil prices go up, Tullow may spend more on Capex. So if oil goes higher they drill one of those three wells in the Jubilee plan say in Q2. It is this type of activity that slows down the rate of increase in the Tullow share price or alternatively the company is paying off more debt. What it does do is improve the chances of a higher Tullow share price in 2022 either having removed debt pressure or creating higher production. It is not some kind of magical force suppressing the stock price. That said the SP may well improve but maybe not to the extent some imagine here.

Ell

I am still long on Tullow. I just say how it is as the company goes through its transition year.

Tony

Canary you need to factor in the production is going down to 65,000 barrels a day. The company Capex covers 5M Kenya, Suriname drill and all the usual maintenance going into TEN and Jubilee without new well drills. $45 a barrel won't pay for those 3 wells being drilled in Jubilee. $11 Opex, $8 to pay debt £13 to pay admin, payment to government etc say its all $32 a barrel as with non Ghana cost of oil. (Huge drop since 2019 as Tullow planned). On top of all that add decommissioning costs and routine Capex and the figure is $45 as a true breakeven. Developing Jubilee programme is extra capex. At $55 a barrel the Capex is there for the wells but what about paying off more principle debt if it does not get moved out a few years.

Its relevant.

No Brexit Tullow goes up. As sterling drops sharply.
Brexit deal- Tullow and all UK equities go down a few points as sterling gets a serious upward bounce.

Davstock

If is the key word. $55 a barrel and the sun shines for Tullow. $45 and its a problem with $660M down the pipeline to pay off. The if could happen. Those vaccines may do some good and I hope they do. God knows how many of us here what to be on a December holiday using an airplane to get there and being economically active again. The fact is we don't know for sure and for us in the UK with Bojo (Blowjob if Brexit fails) and Handjob running things on the health side you have to forgive if we feel very risk conscious at the present time.

No matter how you look at it Canary, 3 extra wells in Jubilee need to be drilled and another six more need to be drilled in follow on years. The company has to reschedule a lot of debt. Les may be able to pull it off without raising additional funds. Les may get a nice deal on a farm down on the Guyana blocks or they sell off or get some money for a slice of the Kenya asset. However, if that does not happen and the bond holders and bank say raise $100M on a placing with some shares than Les has little choice, but to do it unless you want to see lower production volumes in 2022. The bond holders in response roll back their repayment date another two years for 6% interest instead of 7% or something like it. Overall its what the whole story looks like and what the payback is that makes the company a better investment that everyone can analyse and judge for themselves.

The trigger appears to be advanced hedge buying against higher oil prices late in 2021. Yesterday EIA had a 15M build in oil stocks which normally would crash oil prices down. As one side hedges for demand it opens up better hedging deals for oil companies like Tullow. I would not be surprised if they got some $50 hedge on the bottom side with some upside protection. The advantage to company like BP is they are making real profits out of it but Tullow's gain is compromised by lower production in 2021 and hence why the lift off was not as good as their share today. It does provide Tullow with more certainty of not losing money during 2021 and reduces a risk calculation going into the January RBL as the company will have a better hedge position in what is a transitional year.

The Iraq oil field explosion yesterday was a reminder of how middle east supply can be affected. It involved just two rigs but it does focus what can happen. Stocks are still sky high but the temptation to reduce oil in storage to low may have been resisted with such a reminder.

Oil is heading back down a bit along with oil stocks at time of this missive. Tullow may therefore be less volatile on a retreat compared to those oil stocks that got a higher lift today. We shall have to see if China and India move it back up again overnight.

As for a placing or a rights issue it would be for a fund raise to deliver lots of new wells in Jubilee. Depending how its done, how much and when, it could be well subscribed and not change the value of the stock as the financial input will lead to higher production in 2022 and with that some real profits above debt repayment.

Come on Cohan
Enough people here can throw in all the positives and I do not have to ramp it up like they found someone to buy the Kenya asset as an example. The issue being raised was somebody not seeing the downside and hence why I wrote it. It is actually very helpful having that balanced perspective and managing risk sensibly. Tony

What can go wrong for the price to go under 32p. As someone called the wolf to the door and needs to go and touch wood.

1. As a result of staff cuts and running things so tight and accident happens on a Ghana rig.
2. The winter outbreaks of Covid-19 become far worse and the roll out of vaccines is hampered.
3. Oil demand tanks after Christmas and as result of no Deal Brexit we have a lose lose outcome across all of Europe. Economic recession so great it can not be re-stimulated.
4. Iran dumps a shed load of oil in the market in January and praises Biden.
5. Republicans win Georgia Senate race and tell Biden what he can do with money printing.
6. Northern Hemisphere has the warmest winter on record.
7. USA dollar plummets and emerging market costs take off.
8. Tullow does a rights issue.

I am not saying any of the above will or could happen but it is an example of how unpredictable everything is. Another list can be put together as positives, but I would take nothing for granted at this time.

We are due a re-rate as the company goes into more detail on life of mines. An earlier RNS implied mine life is to double from 2024 to 2028.

Gold is putting in a lower high in the chart and preparing for a move higher imop.

If the new licences provide just 150,000 ounces that is significant and is 2 years additional production or adding 20% to 7 years of future production.

A bit of a fools errand. The list of unknowns that can influence prices runs in both directions. Next year is a big unknown for Tullow. They need to get through January RBL and some insight what OPEC Plus production has on the market. In February there is Suriname drill result and the list goes on. I would not even try to guess how it will all pan out.

Otherwise we have a breakdown for no reason. Sterling pound is weak, rare metals market has increased in value. Company has IP value and more asset value to include. It may be a fake move, possible bear trap.