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Edit: Grasvally sale should net $4.2m (not £) or £3.3 (based on 1.28 Forex).

ZAR 115m x 74% SLP share x 72% (28% SA tax) / 14.6 (ZAR USD Forex) = $4.2m

Hi folks - I believe you hit the nail on the head it being an II selling. I'm on holiday travelling so couldn't look into it much yester, but guessed Majedie could be selling. The reason I thought this was I saw quite a few news articles and TR1s where they've been selling down some extractive industry companies (HUM, goldfields, Exxon and Oceaneering a few names) and rebalancing their portfolio into technology, bioscience and consumer focused companies.

Just now I checked the SLP website and Majedie are no longer listed at all, meaning they've sold their entire 5.77% holding (you can check their last position as per SLP Sept presentation also on website).

There seem to be quite a few changes in Majedie management and to me seems a bizarre rebalancing at this stage in the cycle where precious metals should remain strong. Perhaps they'll prove me wrong, but I'm sticking with SLP and gold miners.

It could be great time now to buy if they're sold out, but could be an overhang? It would also be a great time for SLP to do a buyback and put a rocket under the sp. To protect the sp and this ludicrious undervalued market cap, they really need to bump up the dividend(s). For this FY 2020, an interim and final dividend of at least 5% each at this sp would not go amiss and a drop in the ocean for SLP with all the cash sloshing about and the PGM basket at over $1,600 per oz. Also need to remember on top of this if Grasvally sale goes through with net proceeds after tax of circa £4m (depending on forex), it's all the more reason for a special or interim dividend in April 2020 time.

Bazza - I don't believe so, however there's a long delay between when SLP provide the PGM concentrates to the refiners, to when said refiners pays SLP (4 months). The more PGMs SLP produce, the higher Trade Receivables becomes (a good problem to have). When SLP have a 20,500 PGM per Quarter production rate, 4 months worth is around 27,300 PGMs of revenues owed to SLP from the refiner. I would hazard a guess though that this quarter 4 months may have extended partially and perhaps temporarily, as $9.7m is a very large increase indeed.

Ragnar may know who the "customers" (as the refiners are stated in the Accounts) are. SLP have 1 main refiner (not sure if it was Lonmin Refinery, which would now be Sibanye following acquisition). SLP have a 2nd Refiner/ Customer which appears to be legacy of the recent Phoenix/ Lesedi acquisition (Phoenix purchased from Pan African - PAF).

Amazing result. Beyond my expectations and wasn't expecting it out so soon!

Ragnar - looks like you were bang on the money on production, at 20,797. They're well on their way to achieving upper guidance of 76,000 and that's taking into account Eskom related challenges.

Cash has increased to $26.6m ($4.8m increase), however this masks the fact trade receivables due to SLP have increased by a whopping $9.7m! So after Capex + Share buybacks, the free cashflow was $14.5m for 1 quarter alone ($4.8m + 9.7m). I now estimate the Trade + Contract Receivables due to SLP is 34.5m.

They therefore have cash in bank + cash due to SLP of $61m, nearly 50% of market cap.

GB - I don't believe market has correctly priced in these results yet, it doesn't look like it's woken up or understands full scale of how good results are:

- At a $1,422 gold price, HUM produced $14m free cashflow in 1 quarter alone! That is in rainy season and when 2nd ball mill wasn't operational for the full 3 months. So you could easily pro-rata/ extrapolate this to a free cashflow figure of $60m+ per annum at $1,450 spot (2x market cap only, crazy).

- Net Debt of only $29m, which means by end of Q1 2020, if gold stays above $1,450+ HUM will be in a Net Cash position.

Based on this you could see organic growth/ acquisitions from cashflow, share buybacks (to cover options and prevent dilution) and dividends. However I prefer if 1st two items are acted upon first.

However I do feel it's a legitimate question to ask why gold price realised was only $1,422, when other miners were more like $1,475 (POG's below is $1,477 if you remove impact of hedge, SHG was $1,462, AAZ over $1,500 but then not sure if they had their silver + copper by-products to this, so POG is more accurate I would say). There could be number of reasons but worth clarification.

Edit: 3 shifts in Q4 I meant, not Q3

From a safety and operational perspective this is very concerning and even merits a RNS to clarify the situation:

1) Safety: after all the steps and approvals required to transport explosives in NI, including police escort, the site is seemingly left unattended with front gate to site not locked?
2) Operational: why during the day was no one there? If 2x shifts are working at site, that would imply 16hrs coverage no? And therefore only time no shift might be a night shift? Which in October was the plan not to have 3 shifts in Q3?

Officially until there is an update, Commercial Production was still earmarked as "late 2019". Really doesn't bode well based on that FB post of a "ghost town".

If they continuing delivering like this over the next 12-18 months, with a LoM increase and if gold can push through and maintain a $1,500+ level, that £1 party may not be as far off as we think...

Syd - the results are even better than you estimate. The Net Debt position has improved by some $14m in one quarter alone, with now only $29m Net Debt (16m cash, 45m gross debt).

If production now increases past 30,500 Oz which it should do (outside rainy season + 2 ball mills running) we should be in Net Cash position by start of Q2 2020.

Phenomenal set of results

Would be more than happy with $28m too, so let's see where the chips fall!

Even crazier is that due to unique nature of SLP having to wait 4 months in payment from the PGM Refiner(s), a huge rolling Trade Receivables has built up, far larger than Trade Payables (for any other producer, it's of course normally the complete opposite). On top of the cash position, as of end June 2019 the Trade Balance in SLP's favour was just shy of $25m (Receivables (incl. contract assets which is just a subset) minus Payables).

So you're looking at 40% of market cap being backed by cash in bank + cash balance owed to SLP.

Hi Ragnar. There's lot of moving pieces hard to predict, but could see an increase in cash position of at least $8m. That's assuming deducting Capex of $2m and the 4.2m shares buyback of $1.7m. Due to 4-month delayed payments, last quarters 21,789 Oz will be hitting the balance sheet.

In terms of production for quarter just gone, I'd be happy with anything around 19k Oz to be on track for upper band of 74-76k Oz. 19k Oz coupled with current SLP PGM basket of $1,700 should equate to another $8m+ cash build for FY Q2 too.

This is why with these basket prices and Grasvally sale of $4.1m Net, I would like to see a special dividend in April/ May 2020. Thereafter would like to see 2x dividends per annum (interim + final) rather than just 1 dividend in November.

I think once we get confirmation of unconditional offer on grasvally chrome and see numbers from next q report (end of Oct), would hope to see the 40p+ realm again

Herts - it goes ex-div on 17 October, AGM on 22 Nov and Div paid 29 Nov

It's $1 div, so depending on Forex, around 2.5% yield at this sp. Next year should be when the divs really start to ramp up.

Think we have a few potential catalysts (no PGM pun intended):

1) FY Q1 2020 results (Jul-Sep Q, released 30th/31st October). Due to the 4month delay in SLP getting paid from refiners, last quarters bumper production should hit the bottom line, coupled with a much higher average PGM basket price. Hopefully production for this Q will also be on track.

2) closer to dividend date - I'm on mobile so not sure what ex-div date is off top of my head. Whilst a very modest div only, every little helps, particular when it is coupled with an undervalued sp.

3) Finalisation of Grasvally sale - although knowing how long from start to finish this can take (especially in SA), may not be until calender Q1 2020, with funds from sale early Q2 2020. This should spur a special dividend.

Thanks for link to article Rax. I used to read Dominic Frisby's articles on gold a lot and not sure why he dropped off my radar. Good to see he's still writing articles on precious metals.

Shareminator - translates into a SLP PGM basket high too. With Rh $5,400, Plat $950 and Pall $1,650, basket price is a couple dollars over $1,700 per Oz.

Have to admit I'm more conservative on what Q3 results may bring. They should be much better than Q3 2018 with all the Force Majeure impacts experienced (public bridge collapse and pit wall integrity requiring remediation works etc.) from the terrible rainy season worse than the usual rainy season norms.

But a "good" normal production level in rainy season I doubt will be anything compared to all other normal drier quarters of production, even with HUM mitigations of more stockpiles of dry ore etc. The wet ore will still be harder to process through the Plant, causing expected slow downs/ downtimes for that season.

I think the big jump may come after Q4 results when we've had a full quarter of normal production outside of wet season with 2 mills running. I'd be happy to achieve high 20s production for Q3 2019 (say 27k), whereas Q4 2019 maybe we could see 34-35k Oz.

This may be frustrating for us LT holders, but would continue to provide extra time for those still accumulating or on the fence. I still think HUM is significantly under-valued, but don't expect any major re-rate to materialise until (if) a good Q4 2019 results announced. I'd love to be proven wrong of course, as I've pretty much stopped accumulating, unless there is a pullback into high teens/ low 20s that I'm not anticipating.

Edit: meant FYE June 2020 in 1st sentence of 1st post

Some snippets from the Accounts to covering this year's dividend and share buy back:

"After careful consideration by your Board of Directors, and after taking the working capital requirements of the SDO and the need to purchase shares in the market (buy back) to satisfy current and future incentives for Senior Management and the Board into account, plus other applicable factors, I am pleased to advise that the Company has recommended the payment of a 1.00 US cent per share dividend, payable in November 2019. The combination of these dividend payments and planned share buybacks represent over 25% of the unrestricted cash balance of the Group

The Board remains committed to its strategy of creating and returning shareholder value through payment of dividends, share buybacks and cancellation or any other value-enhancing methods that may arise.

The Board has made a decision that, in order to fulfil the current shortfall in shares held in treasury to cover the bonus share awards of 4.2 million shares, which vest over the next five years, an offer to acquire 30% of all shares held by employees, excluding Directors, will be made at the 30-Day volume-weighted average price (VWAP). This would equate to approximately 1.1 million shares should all employees holding shares take up the offer. A further 3.1 million shares will be sought in the market."

I should add whilst 25% unrestricted cash makes sense this year (albeit arguably overly conservative in the context), this 25% would be purely an arbitrary figure if they applied this next year, due to my reasoning in previous post. With cash buffer in place and all other factors I mention below, there is no reason, for example, all cash over and above maintaining a cash buffer of say $25m could not be paid in dividends. A flexible "open" dividend policy should not just there to be overly conservative when required, but to provide the necessary flexibility to reward long-term shareholders and pay out all cash in dividends above a certain threshold, where there is no rhyme or reason not to. At current PGM basket and earnings, this could be a yield of at least 10% (in addition to special dividend from Grasvally sale - would be bitterly disappointed if they back-tracked on special dividend after confirming this previously. I was surprised they did not allude to a special dividend post sale in Accounts considering there were clear statements on Grasvally).

They also need to move to an interim and final dividend breakdown to "smooth out" the profile and reduce sp volatility that would come with only 1 dividend per year when they become more substantial.

Hi Ragnar – I would find a doubling of dividend pretty derisory for FYE June 2021 if the SLP PGM Basket managed to maintain a level of over $1,400, particularly considering we’re at $1,600+. Let’s remember that the avg. basket was $1,277 per Oz for FYE Jun 2019 and in context of: a) earlier in Capex profile (Project Echo now 3/4 complete, reducing spend and execution risk); b) buy-backs and future buy-backs; and c) increasing cash position/ buffer to over $20m.

At $1,277 per Oz, SLP managed to increase their cash position by $8.8m, even after $1.3m dividend pay-out, buy-back of near 3m shares and $4.7m increase in SLP’s trade balance in their favour.

The upcoming $2.9m dividend pay-out in Nov 2019 is in context of all the above in 1st para, plus fact they will embark on a further buy-back of 4.2m shares – 3.1m from open market (1.1m from employees, although assume if they decline the offer, these 2 would need to be bought on market).

This time next year future capex will be negligible, buy-backs to cover current/ future incentives completed – with cash buffer of $25m, anything over and above this should be paid in dividends or share buy-backs for cancellation if sp is depressed and represents "better value" than dividends. However the sp may only be depressed if market does not deem dividends sufficient, so it's bit of a circular reference.

A relatively short period of correction and Rh already back at $5,000. SLP PGM Basket back to record highs of $1,640.

Based on the Accounts and guidance of 76,000 Oz, I re-did my numbers and get target price of 61p (previous assumption was 70p based on 80,000 Oz and I had assumed a lower refining fee due to some of the quarterly reports):

1) SLP PGM Basket: $1,640 normalising for by-products revenues minus refining fees = circa $1,257 to SLP (from Accounts diff between: a) PGM Basket price x production Oz versus actual revenues is circa 23% less)

2) AISC $604 (presentation with Accounts showed forecast increase in cash cost of ZAR 8,165 (makes sense after electricity increases in SA and other pressures). Last FY 2019 AISC was ZAR 653 more than cash cost, so a AISC ZAR of 8,818 or $604 at ZAR 14.6)

3) Total = ($1,257 - $604) x 76,000 Oz = $49.6m per annum (before Capex & Tax)
Minus Capex = $41.6m ($8m est. Capex FYE Jun 2020 (as per presentation w/ Accounts - drops to only $5m and $3.5m respectively for 2021 and 2022 forecasts).
Minus Tax = $31.6m free cash per annum (SA tax 28% and assume $6m D&A as per previous years which reduces Accounting profit and thereby tax on the stated profit).

4) On a free cashflow to earnings ratio of 5:
- $31.6m x 5 = $158m.
- Normalising for liquid/ current “Net Cash” position $46.6m (Cash of $21.8m + $24.8m trade balance owed to SLP) = $204.6m.
- However we also have upcoming sale of Grasvally which should Net $4.2m after tax (ZAR 115m, 74% SLP share of asset, 28% tax (unless asset sales are taxed diff?))
- With last FY 2019 Q4 being a bumper production of 21,789 Oz this will only filter into the cash position this financial quarter Q1 2020 (due to 4-month delay from SLP production/ delivery to refiner, to payment from refiner). I’m relatively confident even after dividend pay-out of $2.9m, cash position could increase by $3-4m.
- Added together $212.8m (GBP 174.4m). Which equates to 61p share price.

I still think ratio of 5 is too conservative when profitable operational life is at least 10-15yrs and sure there is room for expansion to keep current levels of production throughout this period or even increase much later on (chrome would need to recover I expect for Samancor to consider mine expansions that SLP could plug in to). If they started paying a more commensurate dividend next year in line with risk profile, cash position, with Echo near complete now and de-risking operations and cashflow, it would demand a higher ratio. Increasing my above ratio to 6 would equate to 70p.

SLP publicly stated in past, asset sales like Grasvally would be paid out to shareholders via a special dividend ($4.2m at current MC would equate to nearly 3% yield). Be good post sale (which can of course take time), we see a special dividend Q1/Q2 2020?