Member Info for Tornadotony

The slow stochs are showing first signs of a bottom formation. The share price has been under the Bollinger band for several days and remains so and I suspect it has to rally back into the Bollinger range. The weekly CCI is -340 which is about as bad as it can get. The RSI behaviour has only been worse on one occasion at 16 October 2014 after a drop from 621p to 412p. So do not feel bad if you have bought around these levels. The picture is extreme negative with sellers now all on one side of the boat. Now is the time to add on Tullow positions. Finally when the Fool say sell your Tullow shows its time to buy.

To laidback
Where do you get a future debt figure of $3.6b in six months?
TT

Bought second lot at the discount price of 144.59. The share price was 179p before Jethro and Joe were drilled. The removal of $50M brings the share price around 156p mark. Hence the comment discounted buy based upon the previous 3nd quarter valuations for given by the market for this stock.

The share were split 1.74 to 1 so looking backward is not the answer. The company probably had more proven oil reserves.

Share valuation of Tullow should not be based on PE rate. The multitude of assets in the ground which they have a percentage of gives its own value. So the entire west Africa portfolio alone has a value and most models at $55 a barrel of oil probably gives $7.25B. This covers the company debt and hence why they can rollover some of it over time. However they need to discover new oil of similar quality to replace their resources and reserves used. At 150p share price it trades at 0.72 of its book value. If PE is used and normalised against huge oil companies it would trade at 0.30 book value on that model which is not the way to value a mixed company like Tullow which is both explorer and producer working in partnership with other companies. Another factor is future oil price either up or down which has a big impact on the share price. At 144p the value taken off was $750M. So the question to ask is whether it was reasonable in having two wells downgraded and $50M in lost net cash flow. I thought the value of the two wells added 25p to the share price. Takes us to 180p and then perhaps 1/8 is taken off because of cash flow which gives 157p. I certainly welcome other valuations being given.

I have only bought 3000 shares on a small fry position but I would rather buy stock in a company applying common sense, governance and risk management when it comes to assets, the safety of staff and avoiding a blue horizon environmental disaster and not chasing after a production target. So the response to the company is overdone and it sends a bad message to oil companies and their investors. Tullow are responding to circumstances in the correct way.

Gone in at 153.66p as it looks as if Christmas has come early on this one.

https://finance.yahoo.com/quote/JNUG

Normal healthy retreat. This could run for 3 weeks if hedge funds and large speculators continue to sell.

Hi Mr Tibbles
Earlier issues with Centamin were mainly constrained by capacity issues rather than geological. The mine plan models in earlier phases were probably less complex. The company could operate on statistical models that had a lot of tolerances as plenty of high grade resource could be used either above or underground to recover lower recoveries or incidental lower grades of ore being mined (low hanging fruit). As the mining expanded into mature phases through the 4th and 5th phases the risk of dilution with lower grades has apparently increased. This issue has arisen mainly by discovery and a realisation perhaps that previous working models needed improvement that was raised by the Kees report which I posted on another website board. In 2019 they had improved the computer software in their modelling and so were acting on the Kees papers at least. Of course if events happen with the mining fleet, an incident to reduce access to high grade stopes or a major mill equipment failure or power outages and the like can all have negative impacts. We shall never know for sure on why targets were missed on reasons you suggest, but a huge number of successful people over time can believe they know best, ignore those around them and subsequently events catch them out leaving them to regret on what they could have done differently.

The interesting new development is a life of mine assessment for the Sukari asset. This is probably the first clear indication that geology models that were used needed a lot more work. Price was above my entry level so have stayed out. Gold price should correct at some point and in theory Centamin should be more sensitive to the direction of gold price.

Capital Group was mentioned on this Board on 30th March by the poster Visitor about selling their fund shares. The price had fallen from 25p to around 21p around that time. If a possible seller knew about the disposal of the fund beforehand and also had family relative connections and used them to be aware of the artisanal ore dilution issues that were discovered beforehand than the company could be implicated of insider trading for their own personal benefit or family benefit and that is a theft from all other investors and is a criminal issue.

https://equity-insider.com/2019/08/25/equities-analysts-cut-earnings-estimates-for-fresnillo-plc-otcmktsfnlpf/

The above is one of many analysts who have been reducing the outlook of what Fresnillo is likely to earn in 2020. In fact most analysts who are not appointed by Fresnillo in any way are all marking them down and the entire consensus which can be seen on market screener Fresnillo and looking at analysts revisions for 2020 shows a marked consensus drop. Of course analysts can be wrong. The point I am making it is their collective perspective that has helped bring the valuation down to the 600p mark. Fresnillo has provided bad results for several quarters in a row. I have a feeling they could well deliver another disappointment next week. Positive surprises do happen but for me to own Fresnillo before the report the price would need to be lower and below 590p for a discount.

Juxtapose

Thank you for your reply. I believe the most significant factor hat has lowered the share price is the sharp reductions in 2020 earnings that have been issued by most of the brokers despite the recent rises in metal prices. The revisions imply a loss of 33% of all 2020 earnings. The analysts have marked it down to 18.5PE rate which takes the price of stock to around 590p target on next year's earnings. I will look for an entry below that price as the stock will then be offering a discount.

Can someone tell me if the extra $200M costs identified in July 2019 are being taken off the earnings during H2. If this is the case then the share price value has to be lower than 590p and this gives a PE rate would be 32x earnings as the annual earnings become 23 cents.

Hi Sotolo
The 3 month time frame will give you a tighter pattern between Centamin and the ETF fund which probably includes Centamin as a percentage of it. Whatever the management achieves, Centamin like most other gold miners is following a seasonal pattern. Physical buying in the jewellery sector has been awful for some weeks. The investment buying has been losing momentum and so the physical buyers will be hoping for a gold price discount. I suspect that discount arrives during November and the retail sector starts to revitalises the gold market. The gold miners therefore have a chance of drifting back down with the price. Whatever price it falls back to is not relevant to most long term holders as both Centamin and the gold price has a seasonal high as we go into January and February 2020. It is relevant to those who like to manage their portfolio by taking profits and buying their stock at a lower price and making more profits on a second dipping rise. Its only the lucky who get the bottom and top exactly right so your guess is as good as any on when to buy and sell. The above is just my opinion but the evidence thus far is showing probabilities that both gold and Centamin are heading lower until someone with big pockets decides they like the prices and piles in. It may be useful to keep an eye on the Friday weekly COTs reports as most of the market was on the bullish side of the boat and the best time to buy is when it is mainly bearish as COTs positional changes trigger the market moves.

https://www.hl.co.uk/shares/shares-search-results/v/vaneck-vectors-gold-miners-ucits-etf-gbp/share-charts

Centamin is trending with the above. It is possible for the current downtrend to continue.

Shareminator response to questions

1. The company has stated the whole production forecast is under review and is to be restated by end of June with LoM plan. The next issue is I think is the dilution effect on g/tonne. They hope to beat 2.46 g/Tonne and said there was some improvement but need evidence of sustaining it. It should be stressed that g/tonne in January was high and the dilution grade was very low afterwards and we do not know if they were getting fully back to the average of quarter 1. Hence my feeling it might still be well under 30,000. They were quick to say something about the LoM update but said nothing about the dilution issue raised on 16 April. 2. As for the wet season I was working on a best case of 24,000 ounces and was unsure if work on the second ball mill could be disruptive and it tends to be more costly and injury prone. I agree with the last quarter being the best. All of this however is relying on no new problems. I am really concerned that the pit modelling and geological work had not picked up dilution voids. I am not sure they have a handle on the quality of ore delivered to ROM. Finally the Gonka stripping may drift into Q1 next year so okay costs could be lower. Perhaps the quantity of earth being moved is overestimated on my part and I compare with what may have been spent in ramp up and remediation works. The company is transparent about its revenue but what is not and what it does include in the AISC is a good question to be raised at the AGM.

The annual report says $4 of the $21M cash end of December is restricted and held by Coris. The First quarter report only says cash at $13M. So only $9M is possibly unrestricted cash flow. $1.5M was paid to Liberia re-Dugbe. $5M is due in debt repayment next month along with a $1M interest bill and at least $1.5M-$2M tax charge to Mali Government etc. This exhausts the current cash flow shown in Q1. In Q2 the loan of $9.5M is probably paid out the ball mill being fitted and this occurs in Q3 and this equates to the same as the over draft facility. It is unlikely that Q3 cash flow would generate much above costs. So the real up to date cash flow is what emerges in Q2 earnings. What we have is a lot of guarded statements. At 22,000 ounces they have nothing to add to cash flow and at 30,000 ounces they might have $7M or $8M. The Gonka stripping is likely to cost around $12M or so in Q4 which is likely to restrict cash generation in that quarter. Any Placing also has to give the Mali government a 20% free carry. The alternative against placing is replacing existing debt with more expensive greater levels of debt. I do understand that there is two lots of $9.5M. Sadly they are getting used up. I am not sure if the $2M per quarter admin charges are included in the AISC and of course the charity projects also do not stop and usually would not be an AISC cost. Q3 has an additional essential charge of pumping lots of water out of the mines.

If the dilution issues have continued then a placing has to arise. I suspect a new story is being put together with resource and reserve report and it might use a placing to repair a damaged cash flow situation. The stock should have returned to 15p this week with the recent gold rise but instead has retreated. Its not a good sign and I can no longer put lipstick on it.

The_shareminator

Your assessment of risk is well said. In January the company mined 10,400 ounces and everything was going as they hoped. It looks as if the problems came into play late February and March and scuppered what may have been a good recovery quarter. If the dilution had not occurred the AISC for Q1 would be around $990 per ounce exactly as expected, cash flow would have been $9M profit. It is staggering how just 7,000 ounces not being mined out can dramatically impact the quarterly results. If they can achieve 30,000 ounces this quarter the AISC would be near or perhaps in the $800-850 range. What is clear is that the mine plan requires a lot of diligence to deliver. A lot of these issues seem to reduce once the mine shell has attained more depth.