Let's remember the guidance for 2020 is actually the range of 110,000-125,000ozs, so 110k is the lower end. The AISC is then range of $850-895/oz AISC.
The production guidance is is the gross amount and as some allude to below 10% of Yanfolila Mine is owned by Mali Government, with another 10% due to them once paid CFA 6,624,517,000 ($10.9m). In the 2018 Accounts it was stated "The Group remains in discussions with the Government of Mali as to the timing and mechanism of payment of this consideration [by Government to HUM]. The relevant shares will not be issued until the payment mechanism has been agreed". I assume easiest option for all Parties is for this $10.9m sum to be offset against Taxes when due.
I also assume the 90-10 (or 80-20 once above is resolved) of Yanfolila earnings split would not come into effect until HUM recover all its Capex, but perhaps someone else with more knowledge can comment on this.
Easily explained by the 2,614oz delta last Q, across the quarters it averages itself out.
There are various reasons for the gold inventory deltas/ increases across quarters (inventory which includes gold sales/ receivables), which if you pick up the phone or drop them an email, I'm sure they will happily answer. The major reason is inventory excludes any movements relating to HUM Single Mine Origin (SMO) gold stocks which can cause fluctuation. They sell gold dore to the refiners who mint the SMO coins and HUM then buy the coins back, so from an accounting perspective causes variations depending on where in the supply chain the SMO allocated gold is.
The SMO coins are in high demand it appears...
Bunker Hill is still a great project technically and legally - simply mishandled financially by previous BH directors. It's clear HUM's monies and loans are being paid back or could be converted to more equity, despite some on here claiming the money had gone walkies or could never be recovered.
Bunker Hill is huge and I honestly don’t think people fully understand why it closed in 1981 or the legalities regarding BH Mining being fully indemnified in a tri-party agreement with the EPA and Dept. of Justice. With both the EPA and DoJ involved, it will be very hard to overturn, but not impossible. BH is a blight on the landscape and continues to pollute the environment - they need more money for a proper clean up and a modern up to date mine would help with this, with monies earmarked for clean up.
It was 1st and foremost a Lead mine and zinc was merely a by-product. Zinc rich grades low in lead were largely ignored and included in the SEC proven reserves. Some zones are 20% zinc. Going forward it will be predominantly a zinc play. For $90m Capex (fraction of Dugbe's):
a) 8yrs+ LoM w/ huge amount of potential to extend this further and high grade drilling intercepts of >20% zinc.
b) 1,500tpd processed or 547,500 tonnes per year est. commence Q1 2020. At 5.08% zinc, 2.35% Pb and 1.29 Oz Ag per ton: That's:
- Zinc: 27,813 tonnes p.a., 55.6million revenue (using $2,000 per ton)
- Lead: 12,866 tonnes p.a., 21.8million revenue (using $,2000 per ton)
- Silver: 706,275Oz p.a., 11million revenue (using $14.5 per Oz)
TOTAL: $88.4million revenue
Potential to double throughput to 3,000tpd, equating to $177million revenue compared to Yanfollila’s $200million odd (dependant on gold price of course). That's at the significantly depressed Zinc, Lead and Silver prices of today. If we had a moderate 10-20% bounce in spot prices, you're looking at revenues of over $200m.
An incredibly strong Q1 2020, far better than I anticipated. They may of course be having some issue with exporting gold (delays only at this stage, or perhaps further down supply chain with refiner), just as all miners are having (AAZ raised this in their Q1 2020 yesterday too).
If you take the cash + liquid assets (gold receivables) of $25m minus Debt of $34m we're now at only Net Debt of $9m. That is phenomenal when Net Debt Q4 2020 was $31m. This was at avg gold price of $1,568 and no doubt we should hopefully have avg of $1,650+ in Q2 2020.
With gold now
Personally I prefer buybacks. If gold stays over $1,650, they should be instigating buy backs in 2H 2020 to cover the options and then some.
Then 1H 2021, we should have a bumper maiden dividend equivalent to at least 10% at this share price. If HUM deliver on Q1 results, cant see being in the 20ps much longer
They also have a very low population density and the HUM operations are remote in the south. If COVID-19 did become an issue in Bamako, they could easily ring fence the gold miners in the south, stop any internal migration from both the mines and local villages where the mine labourers live.
This is very different scenario to SA where its particularly worrying and hard to contain now they reached 700+ cases
We already know the buyer of HUM's dore as per last Q report:
"All the gold dore produced from the Yanfolila mine is sold by the Company's subsidiary Societe Des Mines De Komana SA ("SMK") on an arms-length basis to Auramet International (https://auramet.com/), who manage the gold sales process. Sales prices are typically confirmed in advance of each regular shipment to reduce the exposure to short term volatility in the gold price. The gold dore is sold at a discount to the refined gold price which approximates to the refining and transport costs that are borne by Auramet International."
With both the oil price crash and the rouble devaluation, it's a double positive whammy for TSG. There is nothing stopping them achieving the lower $900 AISC guidance, perhaps even coming under.
With Russia as a whole acting quickly over COVID-19 and in addition TSG operations being so remote, there is very little risk of any direct impacts.
In a world of $1,500 gold, AISC $900, 42,000 Oz p.a. that's an EBITDA of $25.2m at a time TSG will be in Net Cash position. A $3m dividend equates to yield of 5.5%, but would assume over the year they could easily increase dividend to 8-9% region.
Even if gold bobbed around $1,400 - $1,550, would have thought long-term TSG should be double market cap.
I sold out of most of my shares few weeks back before the huge unwind, but the only 3 I kept was gold miners: TSG, HUM and ALTN (ALTN more speculative). On the major indiscriminate market weakness I've been adding to these 3, particularly TSG.
Not sure where you got those cash numbers from. SLP's cash end of calendar 2019 was $33.8m. By end calendar Q1 2020, assume they may be anywhere from $45-50m cash in bank. On top of this, they do have a large trade balance surplus with refiners. It's based on basket price at the time so fluctuates, but could be anywhere from $25-30m.
The current market cap is now £72m, or $84m (due to collapse of GBP). If SLP collapsed end of Q1 2020, the cash in bank + trade surplus owed to SLP would cover this amount which shows how absurd situation is!!! So it's clearly undervalued in long-term, however "markets can stay irrational longer than you can stay solvent" and there are some very real risks that look to be priced in, but there could yet be more fear:
a) COVID-19 in South Africa - there is now cases of human to human transmission, so there's huge amount of uncertainty as to which direction SA will go in. Fingers crossed they will avoid what we in Europe are going through.
b) COVID-19 in Europe & USA: it's going to get worse before it gets better. Looks like UK is on its way to lock down (Schools will close today, London soon to be on lock down, perhaps nationwide thereafter) and USA will escalate. This could cause another panic in global stock markets and as usual it is without discrimination no matter an individual companies fundamentals.
c) Chrome price is $127 per ton. Absolute disaster for the chrome industry. Not clear what Samancor and others will do, but there's no way round Samancor probably instigating the most extreme of their retrenchment scenarios.
The other risk is who knows which of the IIs invested in SLP could be distressed and forced sellers. We must be near the bottom, but it may be a time to drip feed buys rather than going all in. And particularly have cash on the sidelines just incase the corona situation doesn't resolve soon. We'll need some cash on the sides to keep panic buying at the supermarkets!
SLP can ride out this storm, others may not be so lucky. JLP have debts + capex to pay on Kabwe. Perhaps if this continues we may be acquiring their PGM assets at a discount. They could do their usual placing, but not sure how many takers there will be.
Stay safe everyone and all the best wherever you may be
Looks like oil could open $10 down when markets open. With that and the escalation of coronavirus in Italy and world as a whole, monday is not going to be pretty. Hard to know which way gold will go. Is it going to be such a bad day it could get hit with people covering marginal calls elsewhere or will it be the last safe haven standing and catch a bid?
Anglo American are on a pretty sticky wicket claiming FM for this. Could be some big lawsuits against them depending on the Contracts with their customers and whether any customer wanted to go down that route of course.
HUM use WGC AISC defintion and royalties are always included in AISC. Anything that is a direct tax on production (revenue), should always be included in AISC, which of course a royalty is.
Corp/Company Income Tax is outside AISC
Now if they've changed their defintion, we'll find out in next Accounts due soon but dont believe they would have on this particular item. The way they sell gold dore may require slight modification/note in the accounts.
HUM need to recover the Capex costs before any split happens. In any event Mali Governments % is 10% until they pay the 10m owed to HUM for the other remaining 10%. No doubt will be paid by offsetting corp taxes, but therefore no need to double dip in FCF calcs (and royalties incl in AISC).
Fair comment on interest on loans which is outside of AISC, however we're cutting through the gross debt fast and interest payments will be going down. Probably be 3m in interest or thereabouts in 2020, then negligible in 2021 when the loan is near paid off.
I very much doubt the rolling cost of an expansionary exploration programme is $10m each and every year and doubt the G&A costs not linked to Yanfolila are £5m. G&A costs to support Yanfolila are covered under AISC
Ragnar - SLP's 4E PGM of 75-80k p.a is the equivalent of 6E PGM of 100-110K 6E PGM. THS report on 6E basis and are at the 140K Oz p.a. ballpark. It's still not proven they will successfully increase to 160K 6E PGMs. Additionally as THS is classed as a miner falling under Mining Charter and BEE, the THS Minerals entity which the PGMs falls under is 74% THS only, with the remainder BEE.
On top of that their AIC is significantly more than SLP's, THS is $892 per Oz. This is in comparison to SLP's 6E which would be in region of only $500 AIC per Oz on 6E basis.
The most concerning thing about THS is not only the significant Capex costs for expansion outside of AIC, but the "Stay In Business" (SIB) Capex costs pushing their AIC right up and a recurring feature. SLP will make far more free cash because of their much larger margin, even with lower production. And that's even assuming THS can successfully expand to 160k 6E Oz.
I personally believe we're heading for a recession/ major slowdown even before corona hit and I don't see any major reprieve for chrome. The chrome side of the business could be a millstone round their necks for years to come. Spending $53m on a fine chrome project through debt and continuing loss making chrome business, SLP could end this calendar year with $70m Net Cash (not even incl. their trade surplus of $34m) and THS could end it Net Debt $30m+. If THS delay/ suspend the fine chrome project until conditions are better, I may change my opinion. But their SIB Capex and AIC is still very concerning, proving it's not Qty alone that matters. Of course if calendar Q1 20 report shows a 40K 6E PGM Oz meaning they're on track for 160k and increase should also reduce the AIC per Oz, could be a turning point.
SLP 4E PGM Basket is now at $2,875 per Oz based on:
a) Plat $980 (62.1%)
b) Pall $2,680 (25.2%)
c) Rh $12,700 (12.5%), remaining 0.2% gold
I know there can be a huge spread between Rh sell and buys, however its all on contract and quite opaque. Additionally when I worked out the SLP 4E PGM basket for calendar Q4 2019 based on the buy prices from Johnson Mattey (JM), I got to about $1,780, whereas SLP actually achieved $1,830 (because of 6E by-products and perhaps premium achieved on Rh prices). So there is no harm in using the Rh buy prices reported from JM and you're still probably under-estimating the actual SLP 4E PGM basket achieved.
Assuming a refiners fee of 23% (I've gone back to using the more conservative FYE June accounts, as believe it's more accurate, with quarterly and interim sales adjustments figures not distorting it), the revenue to SLP is $2,200 per 4E Oz.
74,000 Oz x ($2,200 per Oz minus SLP All-in Cost (AIC) of $629 per Oz (which includes all Capex, which is running at about $6m per yr, reducing further next year)) = $116m before 28% SA Corp Tax.
Assuming some D&A, after tax of $32m say, you're looking at Net Free Cashflow of $86m p.a.. If you work off a ratio of 5 (conservative considering mine life at steady state 70-80k is circa 7yrs, not including later expansions and 3rd pass material pushing it to 10yrs+ at steady state. Even if nothing changed which will not be the case, post 7yrs SLP still carries on at circa 35-40K p.a. with current arisings) = $430m + $33.8m cash + $34m trade balance owed to SLP = $497.8m (£388m based on 1.28 Forex). That's equivalent to £1.37 share price.
I don't expect these PGM prices to continue, so even if you assume a 20% correction across the board and using same method above, you're looking at 0.99p share price. If you back out the trade balance figure, you would get to Ragnar's 90p ish area.