Member Info for UncleBean

Morning all. Welcome to the start of H2 for GFM. No news but they'll be plenty to chew on in the next 6 weeks.
With the 3 month shut down it's harder than ever to guess H1 results. FWIW here mine:-

Ore processed 293,649 tonnes
Zinc sales 13,790 @ $2,917 = $40.2m
Gold sales 6,212 @ $1,692 = $10.5m
Silver sales 94,339 @ $19.5 = $1.8m
Lead sales 387 @ $2,187 = $0.8m
Missing revenue ($3.0m)

Total Revenue $50.4m

COS / Tonne $65.10
COS ($19.1m)

Gross Profit $31.3m

Admin Costs ($11.3m)
Other Costs ($0.2m)
PBT $19.8m
Tax ($6.6m)
Net profit $13.2m
EPS $7.56
diluted EPS $7.01

Obviously the zinc price is a long way below this currently but 3 months extra production in H2 and an extra $10m+ in the bank means the future looks very bright IMO.

Make your own minds up.

In the absence of any trades let alone news:-

In the next two months we should have:-
Zone II commence operations (not overly hopeful considering 1st July is a week away).
Q2 production and revenues on excellent zinc and gold prices - giving an indication of current run rate production
AGM in Bermuda without small shareholder accessability (probably no trading update)
H1 accounts giving an indication of current COS / tonne and annual overheads. Later in the day last year we have a tele conference which would be fantastic to repeat

And later in the year a dividend policy (won't hold my breath for that).

Just a reminder of the Chairman's comments with the 2021 results:-

"This bodes very well for the future results of the Company when Zone II is commissioned and in full production. Since the grant of the new mining licence over Zone II in January 2021, the Company has been working continuously and tirelessly on obtaining approval for the design and development of Zone II. That approval is expected shortly and drive development is planned to begin on the 1st July 2022. In the interim, the first drill platform for resource drilling at Zone II was constructed in September 2021 and diamond drilling commenced in early October 2021."

And further in the accounts:-

"Whilst the Directors do not recommend the payment of
a dividend at this time, the Directors have discussed and
will further consider a dividend policy later this year when
current political, social and economic circumstances permit
enabling such a policy to be instituted and executed over a
consistent, long term basis."

I do my thinking on spreadsheets but a quick reference is the profitability set aside the historical price of zinc

https://www.lme.com/Metals/Non-ferrous/LME-Zinc#Price+graphs

And then consider the ramping up of production with the chairman's assertion that mining is essentially a fixed cost business.

If only the Board would communicate with us and yes, Roger's assertion that it was difficult to find shares to buy rings very hollow.

The extra profit from period zinc was over $4,000 would pay more than 1.5p per share in dividends. Option holders wouldn't get this though.

Let's think..... Is GFM a cash cow @ c. $3,500/ tonne?

Production increasing to 1,500,000 tonnes (upon final go ahead for new zones)
30+ years of mine life
No debt
Conservative FD keeps high cash balances
At current rates of zinc mined per tonne would give fully diluted eps in excess of 40c
Cash generation could easily top $80m in 2023
Market Cap £166m

Reasons for not being a cash cow
No dividends
Buy backs have stopped
Will PRC allow cash to be taken out of China?

So currently a mega cash cow for the company at zinc prices well below $3,600 but will that translate to a cash cow for us shareholders?

Don't know is the short answer. From today's trades it looks like 1 or 2 sizeable sellers. Why have they sold? Could be:-

Seen a better opportunity;
spooked by the steep fall in zinc price;
worried about a slowdown in China;
worried about lockdown at the mine - Hebei province has imposed draconian lockdowns in cities;
despair at no trading update from the AGM;
something else.

Personally I'm very happy to stay in GFM and would buy more today if I didn't have a more than full investment here. I think low 90p's a fair price for GFM at c.$2,850 for zinc, c.$2,600 when production reaches 1,500,000 tonnes per annum.

More good news from China. President Xi promising massive infrastructure spend to boost China's economy. Should underpin or boost the demand and price of zinc.

Patience. Market Cap is £204m with 20.2m options to be exercised at 30p and 40p. My guess is that each WEEK revenue is c. $4.3m, after tax profit of c. $1.12m (£863k) and free cash generation of over £1m (depreciation higher than CAPEX).

Don't think this will be fully reflected in the SP until this cash generation is being returned to shareholders, POZ remains above $3,200 (quite a gap ATM) and the risk from PRC is perceived to be less.

With the upcoming AGM and 2021 results announcement I thought I'd look at the last few reports (my first purchase was on 3rd October 2008).

From the Chairman's 2020 results statement:-
As the Company has grown and generated cash, inevitably various opinions have been voiced in relation to the share price, share buybacks, dividends and even the realisation of the value of the Company. It is enough to say that your board continues to evaluate all these options on an ongoing and meticulous basis and remains committed to ensuring that the views of all the shareholders are considered and, where possible, acted upon, a course of action that Solomon himself, with all his wisdom, would find difficult.
With the past behind us, I look forward to the next year of this incredible journey;

From my guess as to where we might be:-
H1 2021 revenue of $54m will be beaten in H1 2022 if the zinc price stays above $3,800. This is based on the exceptional amount of gold recovered in Q1 and the note of zinc sales to date giving me encouragement that not mining has been spent exploring the most beneficial areas to mine;
H1 PAT of $13-$16m. This guess depends on c. 320,000 tonnes being mined in Q2 and the COS returning to historical cost/tonne mined + 12% inflation and admin costs being minimal during Q1;
PAT of $52 - $63m if an annual run rate of 1.375m tonnes pa is mined in H2 and current prices are maintained. I know this is below the minimum target of 1.500m tonnes but the new licence is yet to be operational;
A full year at 1.5m tonnes at current commodity prices would give a minimum PAT of $82m, fully diluted eps of 43c;
with c.174m shares in issue a dividend of 1p per share would only cost $2.3m;

I could go on but I thought GFM to be a fantastic investment (whilst noting the perennial threat from PRC) with zinc at $2,900 so looking forward to brilliant statements over the next three weeks. As the Chairman has often stated that mining is a fixed cost business the price of zinc substantially above $4,000 x more than 1,000 tonnes a week being sold my guesses above could turn out to be substantially exceeded.

I've been estimating revenue for Q2 in my head this weekend. Following this RNS I've completely underestimated. 4,000 tonnes of zinc sold already on Q2. 1,474 ounces of gold produced in Q1. Amazing.

Hi Skop. Thank you for your thoughts. I took my thinking from this interview with Roger. He is discussing the 2021 HY results. Roger mentions that smelter charges had reduced from 40% in 2020 to 23%, or even lower, in 2021.
https://www.commodity-tv.com/play/griffin-mining-excellent-interim-financial-results-increasing-zinc-production-over-next-18-months/

At current POZ I think we'd achieve Q2 revenues of c.$49m which is close to the $54m in the whole of H1 2021.

Quick maths:-

Weekly zinc sales 900 tonnes x $3,225 ($4,300 less smelting charges) = $2.9m. That's over $900k more than a year ago- EVERY WEEK.

With the expectation that recurring production should be 36% higher than previously then revenue could be approaching $1.0m more than that calculation EVERY WEEK.

A lot less than it will be soon when investors wake up to how much cash GFM will be making from zinc at this level.

I have far too many GFM but sucked into buying 7,131 more this morning. Although a couple of weeks before generating serious cash GFM sells c. 900 tonnes of zinc each week. Even $600 above the previous quarter's average price is over $0.5m extra profit each week assuming costs remain constant.

Hi. It's my biggest (only) concern. A weak West could lead to China flexing it's muscles further.

With zinc above $3,700 we'll be making fortunes if it stays at this level for a few months. Could rise further when China starts up manufacturing after the Olympics.
https://www.lme.com/Metals/Non-ferrous/LME-Zinc#Trading+day+summary

I totally agree. Probably slightly less than 20c fully diluted EPS so a p/e of c. 5.8. Ok the mine is closed but work to improve capacity is, hopefully, being undertaken. Run rate upon reopening of over 50% higher than 2021 with easier to extract metals from Zone II once final permission is granted should give H2 2022 EPS of 83% of full year 2021.
Dividends? More than enough cash to get through the closure and put in all desired works. FY results will be released after the mine has restarted so no reason not to declare a dividend although CAPEX will probably be used again.
Biggest positive will be relaxation of quarantine rules in China and AUS allowing "Western staff" to renew usual work on/off arrangements.
I have far too many shares to buy any more but will certainly not be selling in 2022.

The high zinc price (and huge amounts of cash being thrown off are one. Huge rise yesterday almost all of which fall through to the bottom line. A great end to the year.

I think it was on a teleconference on 9th August at 4pm. If you ring 0330 551 0200 you might be able to hear a recording.

Agreed. Unfortunately the chairman said in July/ August that they were still waiting for the local PRC to approve of GFM’s operating plans before mining could start.

The last I heard was that the final operating plan for Zone II has yet to be given. I think this was in the call after the H1 results announcement. As you, happy to be corrected.