Member Info for ViciousHippo

Extract from RNS April 2023

The Company provided a full update regarding activities and the status of the Coringa project on 22 March 2023. As noted in that update Brazilian law provides for automatic extension of the trial mining licence or Guia de Utilização (“GUIA”) and the GUIA Operating Licence (“LOG”) if a formal renewal has not been issued at the date of their initial expiry and provided that renewal applications have been submitted prior to the expiry date. The automatic extension period for the GUIA, which is limited to 12 months from the expiry date, currently runs until 8 February 2024

Worst case scenario for this company is Coringa license does not come through. We are left with Palito and two ore sorters. Production at 30,000 oz pa. Gold slumps to $1700. Company is still worth around 20p per share.

Best case Coringa license comes through, second ore sorter adds 50% production or more at Coringa, gold stays steady at $2000+. Vale exploration uncovers something commercially viable. Share value then is £3ish.

Downside is 33%, Upside is 1000%. That seems a reasonable investment proposition.

It is a small company and cash fluctuates. Wildly so in small companies. It does not mean they are badly run. It is just the nature of being small. Year end bonuses and the purchase of the new ore sorter are big numbers. You can't avoid cash going down. The immediate shrieking on these boards always for CEOs to be fired is absolutely bizarre. As far as I can tell this little mine has been quite conservatively run with a long term view.

Cash of £600m is after borrowing £1bn. If you borrow £100 from your mate, you are not suddenly worth £100.

Maybe, after it goes down to 60...

Imagine if we could let AI responsibly take care of all the admin after a complex call and reduce the time it takes from one hour to one minute? That would free up more time for call centre agents to help more people on the phone and invest even more time in delivering exceptional customer service.

“At Capita, in further strengthening our relationship with Microsoft, we are demonstrating to our clients, their customers and our people that technology will be central to our growth strategy as a business.”

AI is good for Capita not bad. Yes some clients might attempt to do their own AI to eliminate outsourcing. More likely is they will want to focus on their core business and use the collective AI knowledge of a Capita in what it does best.

RBC note seems to me a deliberate narrative to push the share price down, that goes opposite to what the company has stated. The reasons maybe be allow traders to accumulate, or management to get cheap share options. If the former, perhaps there is a possible takeover offer coming

That's not a reason for it being delisted. That might be a reason for buyout offer (which would sent the price higher obviously)

At least give a reason for the delisting. You must have asked why yourself.

The Cityam article mentions AI as a negative. I would have thought for a people business like Capita that AI will be very helpful in reducing staffing costs, especially help lines etc. Is it coincidental this negativity is released to the market just before the the new CEO takes the helm? Seems to me there is a good chance Adolfo is making it clear to whoever wants to listen that he is taking on a dog. This pushes the share price down nicely to base his share incentive plan options on...

What's wrong with you people?

I think it is possible share price might go back down to 26p, before the re-rating. So I could see a steady decline between now and mid/end January, while the traders accumulate, then it's UP and UP. The timing of the ascent will be down to the Coringa licence. If that comes in (31 January deadline), it will be 100% increase in a day. If not, it will be more based around earnings announcements, eg May next year. Whatever, I will be filling my boots if they go mid twenties again.

I am informed by IR that the Mining Licence for Palito granted by the National Mining Agency was issued in October 2007 and is for an indefinite period.

In which case Palito alone is worth many multiples of current share price. Coringa (and Vale) are upsides to an upside. Jump in...

Let's assume worst case scenario and the Coringa licence doesn't come through. Then the company's value is down to the value of Palito and maybe some hope value on the Vale explorations plus current cash. Palito alone is very profitable. But what I don't know is when the licence for Palito is up for renewal. The only thing I could find was news from 2013, which didn't say how long the renewed (ie current) licence was for. Does anyone know?

The license for Coringa is the only thing holding this back. However it is a real risk. Another risk is that the license is issued with increased burdens eg higher than expected royalties payable to the indigenous peoples.

All the signs are good, but until we have the license in our hands and its conditions are manageable, this is still a bet. But a good one. If the bet goes in our favour, it's £1+ almost instantly I would have thought.

Small caps are out of favour. Need to wait for the inevitable rotation from large cap into small cap. Could take some time. In a recession CPI looks a good bet as it has long term contracts. They are low margin, but steady and safe. If they can prove strong positive cashflow at the next earnings report, and large caps looking less attractive, then CPI should start a steady climb up.

Technicals suggest the current drop will go to around 13p by December. It's no fun, but Capita has probably done enough to not go broke, and to be an attractive takeover target. 13p - if it comes - may be the low point, finally. Fingers crossed...

Costs should calm as the labour market slows. I presume their NHS contracts are generally index linked. So margins should recover. I doubt their recent purchase of the corporate health company will turn out terribly well. I suspect that was a waste of money, and worse, could turn to losses. However a big upside is they more cash than debt. Makes a refreshing change from most of the dross out there.

Overall this is a good bet, but will be a bumpy ride. I dont think the management team are the highest quality, but they seem very committed and are learning.

You'd think that the Community Engagement award Serabi received will count in their favour when the government officials are thinking about signing off on the license.

I would add that technically things look interesting. The weekly chart shows a 9 count drop. This has happened 6 times since the float. On two occassions the shares continued to go down. However on the other 4 times, the shares increased between 40 and 120%. So the odds are in our favour...

The results are underwhelming but the tone from management is far more encouraging - focussing on margins and cashflow, not revenue growth by acquisition. This will help price THG as a viable retailer, not a zombie company that is going to crash and burn. Ingenuity is not doing enough to price it as a tech company with exponential growth opportunity.

With retailers having a typical price to sales ratio of 0.5 - 1.0, then the group value is £1.5bn ish. Less net debt of £600m, we get around £900m. With the share float at 1.3bn, that prices it at around 70p, which is where we are now. If the high tech warehousing translates into high margins (and therefore free cashflow), then the group will be worth more. If Ingenuity takes off, then it's a different story.

Time will tell, but 70p looks about right for now. In the short term a takeover bid would be the main driver for a significant uplift.