Everything else goes up31 May 2019 23:37
Bar Hummingbird resources everything in the sector is taking off. Forgive my Friday rantings readers but it is self therapeutic.
The company had 709,000 ounces as reserves and $41M in the bank and around $61M debt and was valued at 34p. Total value £120M. It has 594,000 ounces as reserves with an update arriving. It had $13M in the bank and $56M debt and was say valued at 17p say in late March. Value £60M The accounts downgraded new fleet and plant by around £7.2M.
So £18M drop was the cash position change and $34M (28%) was axed on using up 17% of reserves. The market only priced those reserves at $16M as the current price for the remainder in the ground and Dugbe gives the current share price at 13p. So if the reserves are increased and quite likely to do so with several hundred thousand ounces would they return that valuation back. So for every 115,000 ounces will they up the valuation of the stock by $16M or £12M. If we get just 230,000 ounces added will they re-rate the SP by £24M on the new plan with two extra years at 130,000 ounces. The share price would be back at 19p. If the company starts to really deliver the profit on the future AISC from 2020 would they recognise that the cash position per annum improves by $30M after taxes and Mali share out and plant depreciation. So after 5 years the net cash say is say at worse $60M in the bank and they manage to convert another 390,000 ounces for a further 3 years as they flush out more reserve conversion having spent more than just AISC monies or they converted resources into reserves in Dugbe . That assumption takes us pass 30p. The company is still producing gold and is not getting any credit for increasing capacity, increasing its resource discovery, and de-risking the project in getting to higher grade ores. The dirty work is being done early and the high risk factors are being overcome and learnt. The basis for a fairly sophisticated mine planning model are being developed. I just feel its high time the stock got some support but we need very clear messaging from the company and we really need that LoM and reserve and resource additions and we need a commitment that the management are listening to investors and committed to delivering returns to the investor stakeholder as well. We are trading at 40% book value with the debt equivalent to the sale of the mine plant only and all the gold in its repertoire as just $60M or $101 per reserve ounce or $10 per ounce for all the gold in its entire portfolio and that is a daft low price and 1/3 the usual African valuation. My rant over and I wish readers a happy weekend.
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