The latest Investing Matters Podcast episode featuring financial educator and author Jared Dillian has been released. Listen here.
It can’t be long now. The banks have 25 days to go until their year end. They will either have to write down the debt, if they have not already done so, or reach an agreement to know the value of the debt for their balance sheets. If they have written it down or written it off, then any agreement twelfths be a bonus for them. I know it’s small beer for them but not for the managers responsible for the debts.
Here’s hoping news soon.
jg, a very good post - I wish I had written it !!
With a 1p valuation, I guess we must all feel quite happy in this share, subject to resolving the debt matter, because it is a gold mining company and many of us might be overweight in it. If, and God forbid, we get a Corbyn government the stock market and £ will crash and we will have widespread despair, if today's Questor analysis in the Daily Telegraph is believed. The share price in this producing gold miner seems to me not only to have outstanding potential for going much higher but is also a good defensive stock against UK or World economic problems. Once the debt is resolved surely the market will realise this and wake up to Metals Exploration.
Roy, I did not mean to finish that way. The big question is whether the bank's and mezzanine debt is simply rescheduled or could it possibly be reduced (haircut) and rescheduled? This has happened in the past in other businesses where debt levels could not be sustained. (it's a little similar to a cva here in the UK where retailers have no longer been viable with debt and rental levels and they seek to reduce them) Clearly, banks will not agree to a loan "haircut" if they think the company is becoming viable with existing debt levels. Therefore, I would rather wait until this is resolved before looking at what the company's future could be.
lee, in the most friendly way may I suggest I think you have missed the point. Refinancing discussions are continuing and the big issue is will it be the simple rescheduling of debt that, I think, you assume or will the lenders have to take a haircut?
The key issue is what level of debt can the company sustain. History says it's much less than the debt outstanding currently. Therefore, I would not be surprised if a haircut is being discussed.
IMO there is no point in speculating about the future while the debt issue is outstanding. I say this because the lenders will obviously read the interim results, analyse them and draw conclusions just as you have. Perhaps they also read bulletin boards. Who knows.
I like good anlaysis and a positive or negative conclusions. Let it all come but after the refinancing is announced.
In this context, I would only say the company has been unable to sustain a lower level of debt than it has currently, that the gold price is an important variable, mined ore gold grades are lower than plan and that current cash costs/AISC are too high. I am not making these comments for discussion but will happily discuss once the refinancing has been completed.
I'm a shareholder.
Some very good progress as new management continue to sort out the inherited problems. Processing recoveries up to 77.6% from 67.1%. If they were at design of 90% this would have produced an additional 4,400oz gold! So we're on target for 90,000oz gold next year, after processing improvements kick in. Cash costs and ASIC will be lower by quite a bit.
Very pleased to see infill resource and mine plan drilling. Hopefully this will allow mining grades to be improved.
All we need now is news of a refinancing agreement.
Yes I agree we have waited a long for the finance negotiations to end. The share price is where it is for a reason. It has climbed recently because there have been buyers, who may be hoping for a successful outcome to the attempt to reschedule the loans that total around $105m, some of which carry an interest rate of 20%.
It's sometimes good to be optimistic about a share we hold. I share many of the views about management, the operations and the gold resource. Having been bitten by too much optimism in the past, I am always looking for the downside as well.
Searching for the downside here, or being pessimistic if you like, there is the possibility that agreement with the lenders may not be reached for some time yet. Too often in the past have delayed results from companies heralded bad news. I am not saying that this is the case here, and I don't expect bad news, but the unexpected has caught me out too often. On top of these issues there is another concern. Even if the debts are rescheduled and the interest rate reduced below 20% on the mezzanine finance, will the company be able to sustain borrowings at this level?
Lee, if the company did not have the debt problem, the history of production problems (that hopefully the new management is dealing with successfully) and a mine life left for 7 yers, I would agree with you about the company being undervalued. As these are outstanding issues or problems, they need to be resolved before such a valuation is justified. In the meantime, we might see a share price of 0.8p again unless good news emerges on the no small matter of the debt.
H5O, I don't think so. It's merely some PI's like myself and a few I know who have been buying. No entity is involved as far as I know.
Do agree there is a s;ight delay in news. Could be a variety of reasons. If a refiinancing is near, then would you wait to announce that before the interims. I think I would.
So many false facts posted here. Point one. The Woodford holding has not been sold but is now managed by Blackrock and Schroders. Point two. Invesco sold and Woodford previously worked for them, so they have simply decided to cut their losses and wash their hands of his past investments for Invesco. Point three. Has no one seen Dragons Den? Directors can only sell shares at the price investors are willing to pay. The directors did not decide to sell at 1p, they were forced into it. Otherwise they would not have got the cash and the company would have run out of money next January. Point four. You cannot blame the AIM market for all investor losses. Well you can but that woud be wrong. The facts were there: cash was running out, there was a Woodford overhang, a placing was planned and communicated and if a market crash comes it often comes in October - it didn't happen this time but it's not a good month to make a placing.
The fact is the company said it would need a placing late in 2019. If investors choose to hold or buy shares when they know a placing is coming that is their decision. Shares prices around a placing normally means cheaper. It's hard but its not always someone else's fault.
One of the mistakes the company made was to advertise the placing six or more months in advance. They have made the same mistake again for 2020. You make a placing when you don't need the money otherwise you get screwed. The Chariman has a background in Corporate Finance and he should go. Big question marks over the FD.
Where does the company go from here? It needs to insist on an upfront payment for any licensing agreement. This would produce extra cash. The technology is good and unique so this should be possible. One or two new licensing agreements in Eurpoe of for XFiltra and we could see some good share price action.
There is a possibility that shareholders might not approve the issue of new shares for the palcing, although I doubt it. If they did the remainaing institutional shareholders could push for a trade sale of the technology or the company. Over £100m has been spent getting the technology to this stage and I think it is worth much more than the current cap of £2.5m.
In December and the New Year we should see a more balanced valuation of the company IMO.
JMumbo, I suspect that a fire sale by Woodford would not easily find institutional buyers. There have been plenty of fire sales in other companies where the holder has decided to dump the shares in the market not having been able to find the institutions.
The problem here is that institutions took shares in the last placing and have seen the value of their investment s halve. They also know management has said that it want to raise £10m. Woodford holding is worth around £5m. £15m is a a lot of money for the market to put up for a company with Xerox’s track record and risks.
The dilemma is the company wants £10m and ata the same time Woodford wants £5m. Which will come first and at what price?
BNP lawyer was forced to leave over the weekend due his being an activist in the Hong Kong democracy protests. It cant be easy to deal with Banks in Hong Kong at this time. The frech have been back from their holidays for a month now. Surely they want debts like this to be resolved so that they can focus on the coming recession and Brexit. Or is Brexit just an illusion!
An interesting article in the Sunday Telegraph today. Hargreaves Landsdown are talking to Link Fund Solutions about how to cope with investors withdrawal demands from the Income Fund when the shutters are lifted later this year. Early Decemeber looks to be a key date, although the suspension could be rolled over on a 28-day basis.
In the worst case scenario in which redemption demands cannot be met, the fund might have tobe wound up and its assets offloaded in a fire sale. As far as I am aware the fund still holds Xeros and presumably the holding would be inluded in a fire sale of assets.