Member Info for TrekMadone

“ 1 and 11 trades , whats the theory mate if you dont mind me asking”

So PAY are due 6 RNS’s Monday then? I doubt it.

They are liquidity trades. Similar to ALGO’s. They are there to generate a market or move a price either way.

“ MM schemes…

Definition: market making incentive schemes that the Exchange is mandated to offer under Article 48(2)(b) of MiFID and Article 1 of Commission Delegated Regulation (EU) 2017/578

Page 58 covers it and also ALGO trades.

https://docs.londonstockexchange.com/sites/default/files/documents/rules-lse.pdf

Recorded on the MiFID2 MM agmt tab...

https://docs.londonstockexchange.com/sites/default/files/documents/20200401%20MIT%20&%20TE%20Parameters%20version%207.2.xls

Usual caveats

Trek

The hardest yards have been done with securing the finance, then the additional gold grades next to mine which is really just a bonus. We are undervalued on Killi prod alone.

Folks sell when they see a SP dropping and buy when they see it rising. The MM’s know this. Whilst we are main market we are trading on SETSqx which still has a lot of manual intervention. So to collect stock they can drop a price.

They particularly take the **** by pushing the spread out to deter traders in the name of illiquidity and regularly put small trades trades through as part of registered schemes.

They will also hedge their own books long or short. The PI has to be able to see through to value in a company and ideally not be in a position of having just invested need the cash. Those emotions are leverage to the MM especially after a rise.

The real news isn’t far off. It’s end of Q1. If you bought thinking the SP will be higher then and bar any black swan it’s a case of just waiting now. Even traders will mostly wait for big news. They don’t all day trade many hold positions for much longer. I have a calendar of fts250 stocks and news points to trade around.

—-
SETS v SETSqx..

“ The SETS is the primary order book for large cap LSE stocks and some of the more liquid AIM stocks. It features a full electronic order book with executable quotes and centralised clearing.

The SETSqx trading service is more commonly used for less liquid or smaller companies. SETqx listed products do not offer continuous trading as SETS products but rather trade via four intra-day electronic order book auctions scheduled at 9am, 11am, 2pm, and 4:35pm. Stocks can also trade OTC (over-the-counter) by individual market makers outside of these auction times.”

https://www.degiro.co.uk/helpdesk/trading-possibilities/products-and-markets/can-i-trade-london-stock-exchange-aim-segment

——-

MM schemes…

Definition: market making incentive schemes that the Exchange is mandated to offer under Article 48(2)(b) of MiFID and Article 1 of Commission Delegated Regulation (EU) 2017/578

Page 58 covers it and also ALGO trades.

https://docs.londonstockexchange.com/sites/default/files/documents/rules-lse.pdf

Recorded on the MiFID2 MM agmt tab...

https://docs.londonstockexchange.com/sites/default/files/documents/20200401%20MIT%20&%20TE%20Parameters%20version%207.2.xls

——

Although it often doesn’t feel like it MM’s are not all bad, without them the extremities of price movements would be worse, however, when you compare the value of London stocks with US. Something isn’t quite right!

Usual caveats

Trek

Hollywood BOWL… Sometimes you read something that just doesn’t make sense. Pubs closing, spoons loss, restaurant closers and then this….

‘ Bowling centre operator Hollywood Bowl reported a double-digit rise in revenue in the financial year that ended September 30, a record for the firm, as it significantly multiplied its profitability. It posted revenue of GBP193.7 million, up 49% from GBP129.9 million the previous year. Pretax profit soared to GBP46.7 million from just GBP462,000 the year prior. This figure was also ahead of financial 2019, its last year of uninterrupted trading before the Covid-19 pandemic. The company explained that it had seen considerable growth across all its revenue lines thanks to increases in footfall and spend, as well as an increase in the game volumes. Hollywood Bowl said it has continued this momentum into the start of its current financial year, noting strong demand an "encouraging" pre-bookings for the Christmas period.“

I still wouldn’t touch em with a barge bowl!

Ps my top score 177!

Usual caveats

Trek

“ B a n k s gonna be the ticket in 2023 easy choice”

Not that simple. Banks suffer from defaults as much as they gain from rates.

Now life insurers on the other hand benefit from rate rises as mostly bond linked. I back PHNX and LGEN. Not so much Av but will do well.

Or you could go with metals. Physical assets tend to hold price in an inflationary environment. But then you have to factor that demand will fall off. However, copper is my fav as it’s not being replenished sufficiently.

https://aheadoftheherd.com/why-the-upcoming-copper-supply-deficit-cant-be-easily-fixed-richard-mills/

Then there is gold but it’s unusual atm. Being held back as strong USD due to rate rises to combat inflation even if that means a recession! That’s new territory from Keynes ‘animal instincts’ model where rates are to rise to curb overheating! There is no overheating!

But time shows that in an inflationary envo physical assets tend to do well. On that basis here are my picks to best inflation, not my multibagger potentials and I don’t necessarily hold all these stocks but have done at various points.

CAML - copper nickel miner ZERO debt. Two mines Kazakhstan and Moldova. Next to Ukraine by rail! You can bag 10% yield bi-annual!

ECOR - 20th C metals royalty company. So they get income from mines based on their net smelter rates (NSR) for funding but have zero exposure to mine operating costs! So they are agnostic to any inflation and just get a % of revs! About 4.5% yield quarterly. Sector leader but could do better divi wise!

PHNX - pensions provider. They take on books of others. The assets pay out what is base but they are paid for running the books and benefit from higher rates! Divi is around 8.5% and is in two equal payments. They are picking up more books esp after LDI and have a fixed divi policy. Read their recent TU for update. A virtual buy and forget!

LGEN - similar to PHNX but. Also broader asset base with infrastructure/equity/energy etc. yield around 7.5% biannual and divi policy.

SMS -smart meters and battery storage. Income is index linked. Divi policy yield around 4.2% quarterly

DEC - my fav, gas producer. Earnings in USD so good currency hedge. Revs hedged yield at about 11.5% after tax quarterly. They just increased divi by 3% and have increased divi every year since ipo! Overlooked!

Then you have other defensives like healthcare, GSK now a good pick for quarterly income about 5% and ULVR low quarterly income 3.5% but good inflation hedge.

Then there is the traditional defensives like water and power. PNN, UU, SSE then NG. However, I have as a sell as regulatory risks have increased significantly but I would bug YU in sector and TEP on pullbacks.

As for banks not until there is line of sight to upside and I would never buy the Z bank HSBA, they have sided with Russia, refused to condemn invasion and don’t recognise it as a war! Disgusting and are getting away with it. Where’s a spray can… Z!

Usual

Hi Bebeto,

Trek , I think it's too early at this stage to have an accurate assumption, your figures could be bang on we've no way at this time of knowing…….

Correct but it’s about as a PI ascertaining a confidence factor with the limited data available. Esp as a pensioner with 4x my annual pension invested here! Now is the first time we have had any realistic forward looking financial data.

They have to increase current production between 4 to 6 times to reach 2Koz per month and the two loans should be repayable in physical gold rather than from FCF as it's pre-paid gold funding.

The figures use physical gold based on…

10% production for 7m
5% production for 3.5m
14.577% production for 3m (algebraic calculation)

Whilst these figures are unlikely it shows the capacity to pay debt and have FCF left over at 2koz pm. I am more than happy now.

They now have the funds to pay for the expansion and the more gold they produce the more accurate estimates will be . IMO

Correct. That’s my point about capex is now covered. It’s an outstanding result!

The company is looking very strong now going into 2023, I do believe Vim Rutha will be transformational.

Agree

Usual caveats

Trek

Hi apro,

1) why assume 20.4 months term for OCIM Tranche 1 $10.5m or is that the term that is spat out assuming 2koz/month and 2% fee on 10% of production?

The loan is split into two parts. Part 1 is 7m and part 2 is 3.5m.
I have used a flat runrate based on 2kOz pm and giving away 10% of production at 2% discount for the 7m.

For part 2 of the loan, the 3.5m I used the same terms but assume it doesn’t get taken up until loan 2 for 3m which is in immediate effect is paid off.

So I assume the 3m loan runs in parallel with the 7m and when it amortises the 3.5m is taken up.

Whilst that is unlikely it’s to prove affordability.

2) why assume 6 months at $500k/month for Philoro $3m loan when they said 6 tranches but no idea of period ?

That is correct. It’s an assumption that we have capacity from now to do so with 6 x monthly payments

————

The figures are flat and we don’t know the details. However, the objective of the exercise is more about proving affordability. So seeing a loan the size of your mcap the obvious question is ‘can it be paid back’. These figures show it can and with substantial headroom!

Usual caveats

Trek

Updated following RP’s well made point re 2% likely max.
……..

I had a look at the impact of the two new loans on the cash run rate. ONLY the company know the detail as it’s not all in RNS so this is a stab.

Firstly the significance of the new money on the accounts is huge. It’s now easier to calc financials where the AISC (all in sustaining costs) or opex expenses can be separated out from CAPEX/Expo. So the bau operation including debt repayments is now serviced from revenue. The capex/expo comes from the money raised. Once that 10.5m is spent it should be accretive and feed back into the revs lowering the AISC. You then can borrow more to grow and usually on better terms up to a point where you throw off so much cash you can then pay a divi!

I built a little excel so you can change the variables. It’s similar to what the finance guys will do so they can adjust for POG, fx, ounces pm etc.

INPUTS…

Variables

USD-GBP 0.81
POG 1750
Ounces PA 24000
Ounces PM 2000
AISC 1100

Loans

I have had to best guess this data as it wasn’t included in the RNS but the principles will be same.

Spot discount for each loan I assumed 2% as the CEO said ‘a minuscule amount’. Physical gold goes for a premium over paper.

Loan 1 part 1 $7m, term x, x to be calculated assuming 10% of output used to repay.
Loan 1 part 2 $3.5m, term y, y to be calculated assuming 5% of output used to repay
Loan 2 $3m, term 6 months (we were told this term), z% output used, z to be calculated

From calculations…

Loan 1 part 1 is effective from Jan 23 and will amortise after 20.4 months at $1750 POG, so Oct 24 or by Apr 24 if gold were $2500 POG

Loan 1 part 2’s effective start date is not yet know but it will amortise over the same 20.4 month period as part 1 if it’s the same terms as I have used 5%

Loan 2 is a fixed period of 6 months from Jan so need to find $500k pm.

Note of caution the % of output needed is as yet unknown until we get the guidance from the quarterlies due soon. However, for the full year 23/24 29.545 Oz’s are needed at the 2% discounted rate on $1750 POG which will be 14.577% of our 2kOz monthly output.

So attributable Oz’s next year assuming that loan 1 part 2 will commence after loan 2 has been paid which seems sensible.

3 months at 1508.45481 and 9 months at 1700 Oz’s

Revenue for Apr-Apr fiscal is $34694387.76

Taking away AISC of $1100 at 24k Oz, $26400000

=$8294387.755 or £6718454.082 FCF for 23/24 fiscal year on flat basis.

I have not deducted other debts yet but they aren’t much. Now you can see that this is real currency if they hit the prod and there is no pull on this cash as the capex is funded by the loans.

The metrics also change significantly if the Oz’s increase or of course the POG goes up.

The key message is debt is easily serviceable with a £6.7m FCF cushion for 23/24 fiscal year! That is huge!

I will work through some other metrics later happy for any contributions.

Usual c

Sabotage at Russia refinery???

https://youtu.be/06iPGvM9o8Q

Trek

We have nukes for that FFS! Idiots!

https://edition.cnn.com/videos/world/2022/12/14/russian-commander-khodakovsky-we-have-nuclear-weapons-for-that-ebof-sot-vpx.cnn

Usual caveats

Trek

Interesting article on cnbc app….

Earnings recession will surprise investors, drag market down in 2023, says Mike Wilson

Next year’s story for the stock market is all about earnings, which are going to fall significantly, said Morgan Stanley’s Mike Wilson. That rapidly slowing growth isn’t priced into the market yet, he said in an interview with “Squawk Box” Thursday.

“People assume earnings are going to come down, but it’s the magnitude of that decline and how fast it’s going to happen — we think that is where the surprise is,” said Wilson, the firm’s U.S. equity strategist. “That negative operating leverage that we see from that falling inflation… is what is going to hurt margins, and that’s irrespective of whether there is an economic recession.”

He’s predicting 11% decline in year-over-year growth for S&P 500 companies next year. While his year-end target for the index is 3,900, he anticipates it will drop to between 3,000 and 3,300 in the first quarter.

The earnings recession will be brought on by a whole host of reasons, including an economy that has been overstimulated, demand destruction from higher prices and the Federal Reserve’s rate hikes this year, Wilson said. There will also be a reaction from corporations.

“At some point confidence just fails and the corporations stop sending because they’re like, ‘We’ve got to batten down the hatches a little bit,’” he said.

Trek

Russian 60 bucks price cap explained…

“ …..The West will implement the cap simply by refusing to provide essential services, such as ship brokerage and insurance, for Russian crude that is sold above the limit….”

https://www.aljazeera.com/opinions/2022/12/13/putins-plan-to-take-on-the-world-economic-order-hits-a-wall?utm_source=sendinblue&utm_campaign=Weekly%2014122022&utm_medium=email

And the proposed central Asian gas alliance…

“… The Kremlin wants to sell even more, but Russia’s northwestern gas fields are too far from the existing pipelines to China. They can however be easily linked to the Soviet-era network.

“Moscow is trying to use any tools at its disposal to stake as much of the gas pie in the People’s Republic of China,” Temur Umarov, a Sinologist and expert with Carnegie Politika, a think-tank formerly based in Moscow, told Al Jazeera.

While Russia’s proposal to join the union took Kazakhstan by surprise, Uzbekistan has poured enough cold water on it to thwart the entire idea.

“Tashkent made it clear it wasn’t interested in joining the union,” analyst Ilkhamov said.

In the meantime, Kazakhstan says it is still “evaluating” the proposal – and cites Western sanctions imposed on Russia as the main stumbling block.

“Kazakhstan will not allow its territory to be used to circumvent sanctions,” Kazakhstan’s Deputy Foreign Minister Roman Vasilenko was recently quoted as saying.

https://www.aljazeera.com/news/2022/12/13/will-putins-natural-gas-union-fail?utm_source=sendinblue&utm_campaign=Weekly%2014122022&utm_medium=email

Just catching up on some of the macro!

Trek

Hi RP,

Yes I put 10% in as used what I thought were figures that were tough but physical gold is usually at a premium and that would likely be higher than what RM implied.

5% spot = £6679302.63 FCF next fiscal.
2% spot = £6718454.08 FCF next fiscal

Like I said these are only projections on best endeavours. I will factor in some other metrics later but even if you take 50% of that FCF the SP is a steal! There are miners out there with no mine and higher mcaps! Worth also noting 0.95p is back to first base in terms of capital raise!

Usual caveats

Trek

You know my views on this stuff but this is a lol!…..

“ Twitter changes rules over account tracking Elon Musk's jet

Twitter suspended an account that used publicly available flight data to track Elon Musk’s private jet..

Twitter on Wednesday suspended an account that used publicly available flight data to track Elon Musk's private jet, despite a pledge by the social media platform's new owner to keep it up because of his free speech principles.

Then, hours later, Musk brought back the jet-tracking account after imposing new conditions on all of Twitter's users — no more sharing of anyone's current location.

But shortly afterward, the account was suspended again. That came after Musk tweeted that a “crazy stalker” attacked a car in Los Angeles carrying his young son.

He also threatened legal action against Jack Sweeney, the 20-year-old college sop****re and programmer who started the @elonjet flight-tracking account, and “organizations who supported harm to my family.” It’s not clear what legal action Musk could take against Sweeney for an account that automatically posted public flight information.

Before Wednesday, the account had more than 526,000 followers.……”

https://abcnews.go.com/Technology/wireStory/twitter-suspends-account-tracked-owner-elon-musks-jet-95226694

Usual caveats

Trek

Tro,

Don’t know if you hold GCAT still but I posted some numbers there. It’ll be lost in noise so look at my history if you hold.

ATB

Trek

Had a look at the impact of the new loans on the cash run rate. ONLY the company know the detail as it’s not all in RNS so this is a stab.

Firstly I don’t think folk get the significance of the new money on the accounts. It’s now easier calc financials where your AISC or opex expenses can be separated out from CAPEX/Expo. So your bau operation including debt repayments is serviced from revenue. The capex/expo comes from the money raised. Once that 10.5m is spent it should be accretive and feed back into your revs lowering the AISC. You then can borrow more to grow and usually on better terms up to a point where you throw off so much cash you can then pay a divi.

I built a little macro so you can change the variables which will update the run rates I guess similar to what the finance guys will do so they can adjust for POG, fx, ounces pm etc.

INPUTS…

Variables

USD-GBP 0.81
POG 1750
Ounces PA 24000
Ounces PM 2000
AISC 1100

Loans

Spot discount for each loan assumed 10%
Loan 1 part 1 $7m, term x, x to be calculated assuming 10% of output used to repay.
Loan 1 part 2 $3.5m, term y, y to be calculated assuming 5% of output used to repay
Loan 2 $3m, term 6 months, z% output used, z to be calculated

From calculations…

Loan 1 part 1 is effective from Jan 23 and will amortise after 22.2 months at 1750 POG, so Oct 24 or by Apr 24 at 2500 POG

Loan 1 part 2’s effective date is not yet know but it will amortise over the same 22.2months as part 1 if it’s the same terms as have used 5%

Loan 2 is a fixed period of 6 months so need to find $500k pm. Note of caution the % of output needed is as yet unknown but we will know when we get the guidance from the quarterlies. However, 317.46 Oz are needed at the 10% discounted rate on 1750 POG which will be 15.87% of our 2kOz monthly output going forward.

So attributable Oz’s next year assuming that loan 1 part 2 will commence after loan 2 has been paid

3 months at 1482.54 and 9 months at 1700 Oz’s

Revenue for Apr-Apr fiscal is $34558333.33

Taking away AISC of $1100 at 24k Oz, $26400000

=$8158333 or £6608250

I have not deducted other debts yet but they aren’t much. But now you can see that is real currency if they hit the prod and there is no pull on this cash as the capex is funded by the loans.

The metrics also change significantly if the Oz’s increase, or the discount is less than 10% and of course POG goes up. It’s now easier to type in any changes as we are given more facts but the key message is the debt is easily serviceable with a £6.6m cushion!

This makes it easier for me to work out EPS fully diluted, P/e, EV etc.

I used similar metrics as one of the original investors in ARB at 4.3p saying they’d be £1 as the principles are the same. Here you can also read across to SHG which is where RM is likely getting his 100m mcap from or 5.5p a share!

Ps no problem if anyone has an alternative view.

Enjoy!

Usual caveats

Trek

All closed now. Just had email re UK..

“ TOUCHSTONE ANNOUNCES CLOSING OF UNITED KINGDOM PRIVATE PLACEMENT
CALGARY, ALBERTA (December 14, 2022) - Touchstone Exploration Inc. (the "Company") (TSX, LSE: TXP) announces the closing of its previously announced United Kingdom private placement on the same terms as were provided in the Company's news release dated December 6, 2022. The new common shares issued in connection with the private placement have been conditionally approved for trading on the Toronto Stock Exchange and have been admitted for trading on the AIM market of the London Stock Exchange.”

Sub 100p is buy zone now. Risk to upside. SP will just be heading back to where it was.

Output increases by 10x next year! Just a question of time as real stuff is happening with real people; real assets and physical activity. I say that to stress this is not just on a spreadsheet of optimism. It’s physical like my GCAT that has rerated the past few days. Exactly the same principles here!

Usual caveats

Trek

Hi damofari,

I was replying to Trot about his well made concerns regarding inflationary impact on Unit costs and what the company has been doing to mitigate that as best as possible.

Re hedging. DEC have improved the hedging floor by 13% and 15% next year out. 80% is hedged this year and next and 40% in 24. I get your analogy but it doesn’t really apply. Their MO as you say is in plain sight. You are buying baked beans and hoping for mushy peas but everything you see says baked beans and when you pop the can it’s baked beans! I don’t get how folk can complain it’s not like the tact has changed since the bought. It’s been bake beans since the IPO!

Jerome just announced a 75bps rise in rates and guided to 5.1% next year. Dow gone jittery again. Then you have China easing lockdown but expecting manufacturing output to be significantly affected by covid as their jab is rubbish and their hubris prevents them buying from the west. Vax rates are really low. Then add in the real estate crisis. Etc

The point is the economy is really on a knife edge. Next year gas could be $1 a therm or $10 we don’t know. Bit if it is $1 it’s too late to hedge! Yet DEC have fixed their borrowing costs, improved their hedging floor and just increased the divi.

They have increased their divi annually in whatever price environment since IPO.

https://www.hl.co.uk/shares/shares-search-results/d/diversified-energy-company-plc-ord-gbp0.01

But they can’t be all things to all people. If you want to hedge your DEC investment with some E&P exposure then I suggest you have a look at TXP. It is forecasting to increase its production by 10x next year. SP has been hammered. They just got a placing away. They have production + a new well, cascadura, about to come on line q1 next year. Their potential onshore is akin to offshore! The geo is amazing and a good team. It’s my biggest holding. Even more that DEC which is my second highest. So you get my conviction and it balances out my exposure.

Anyways one thing for sure is DEC offers up plenty of discussion points!

ATB and good luck with your investments

Usual caveats

Trek

Hi TheTrotsky,

Re unit costs. Yes they were up 11% in Q3 as a result of commodity driven expenses…

The company listed some actions….

“ the Company is actively pursuing opportunities to improve its unit-level expenses including production-enhancing initiatives, such as well swabbing and workovers along with cost mitigating initiatives like reduction compressor rental and water handling costs.”

They also have benefits to come through from economies of scale following the acquisition. Multi-skilling, own rigs, travel bundling, outsourcing etc

Probably the most notable offset was higher hedged pricing. That is also carrying on to 23…

“ 3Q22 Cash Margins(a) of 50% (76% unhedged) increased from 2Q22 (48%; 77% unhedged) reflecting higher price realizations, strengthened by its Central Region assets, and efforts to mitigate inflationary pressures. The Company's 3Q22 average realised price of $21.95/Boe ($44.94 unhedged) increased 16% compared to the 2Q22 average realised price of $18.97/Boe ($43.15 unhedged), offsetting increases to Total Unit Cash Expense of 11% over the same period.”

The leveraging is fixed with a 5.7% coupon and amortises well ahead of the asset life so we don’t need to worry about interest rates.

No doubt though wages will also increase which has not been factored in yet. But they are still 50% cash positive and increased divi. The model is playing out as intended albeit in a slightly lower trading range. I am underwater here now with a substantial holding but not bothered and will use the next divi to grab some more. So a lower SP has benefits!

Usual caveats

Trek

1p…. 1.25p soon

Remember this, HNW paying over the odds.. (14th Feb RNS)

“…. which included £300,000 received from an existing major shareholder at a price of 1.25 pence per ordinary share..”

Our previous placings were higher than yesterdays SP. Now look at what we have achieved!

I am not worried about the quarterlies. Market looks forward not back. We now have finance and outstanding grades with potentially a new mine right next to our equipment.

When we kick off TZ that’s also a huge derisking factor for the SP as some will not invest in single project goldies for obvious reasons.

Like I have said before the SP will drip over a year and then rerate in a few sessions. You really don’t want to miss those bumper days. So much upside will be attributed now that our finance is sorted.

Without cash you don’t earn the right to sit at the table. That’s why many juniors are so harshly punished and folk can go on and on about potential but potential is only realised with money!

Usual caveats

Trek

Hi PF,

I added a few more here today as well. Between TXP, GCAT and PXC you will do well next year! All 3 offer significant upside and have real assets and proper teams in place. Just need to monetise them which sets these apart from pure exploration plays where one should at least derisk some holdings before a major event.

TXP on a lull atm but will turn soon enough.

Usual caveats

Trek