Member Info for Wigwammer

Just to add - the company are likely to raise cash at some point, as they have stated repeatedly “To maintain this trajectory the Company will continue to explore additional funding options ..” when this will happen (they currently have £9m+) - what nature this takes - selling shares, cruk type funding etc - or what price any shares issued will be sold at - is uncertain. In the meantime, the share price wobbles around a bit on little volume - as you might expect a risky early stage biotech to do - and the long term potential remains what it has been regardless of the incremental buying/selling going on

As far as I can see, and happy to be corrected, the last two proactive forums that Scancell presented at were : July 2016 - with fund raising May 2017 ie 10 months later July 2017 - with fund raising April 2018 ie 9 months later.. Conclusion - the recent history of proactive presentations does not suggest that a cash raise is imminent Ps Just because one has the ability to understand an idea does not mean one has the ability to invent it

Am I right in believing the convertibles are a little different to vanilla convertibles? In the event the conversion right is exercised, pog can choose whether to pay off the debt or convert to shares as shown below. Seems quite a valuable additional option, in the (speculative) hope that the shares are considerably above the circa 8p conversion price at maturity. “The conversion option of the US$100 million Convertible Bonds represents the fair value of the embedded option for the bondholders to convert into the equity of the Company (the “Conversion Right”). As the Company can elect to pay the cash value in lieu of delivering the Ordinary Shares following the exercise of the Conversion Right, the conversion option is a derivative liability.”

KVZR - I agree shareholders are the last to be considered, but shareholders are ALWAYS the last to be considered. Dividends and equity growth are owed after salaries, wages, debt payments etc. True for all companies. Thankfully, shares still tend to go up over time though!

Fair points, kvzr. Alternative view would be - they wouldn’t be doing it if they didn’t see the need for additional capacity, or if they were acutely concerned about their capacity to pay down the debt.

KVZR - I agree the number is higher than expected, but perhaps they are increasing capacity because they anticipate growth. More than half of Russia’s gold reserves are refracted - that puts pox in quite a pleasant position. Not sure I quite understand the disappointment here. The positive case is based on pox building on improved economics on the non refracted side. The report suggests pox is developing to plan, and an expected TCC of $675oz suggests the economics of non refracted will improve substantially (contrary to what some thought - 1h18 tcc=$900!) There is little point producing lots of ounces if you are losing money in the process. Bottom line - they will be generating $250m+ ebitda if they hit target - easily enough to support their debt load and pay it down :)

Kenj - I also predicted management would “kitchen sink” estimates - I was right. At 500k+ oz production I would estimate $250m+ ebitda and $100m+ debt repayment pa. After today’s upward revision to estimates, which were made only a short time ago, it is clear management are targeting lowering the expectation bar and beating it. The usual EOS economics will kick in as production increases. If the 500k estimate doesn’t excite you - sell your shares. I couldn’t give two hoots! You don’t appear very clued in to why you bought them in the first place, so perhaps for the best. Hope that helps:)

I’m very happy with the update - they are clearly not intending an extended period of “kitchen sinking”, which I had feared. The difference this time - the pox hub is due to come into production imminently - the culmination of a 10 year+ investment program. It appears that a few people are understandably sceptical, but that’s great because for the shares to go up we need incremental buyers. Roll on 2019/20 :)

One positive. The cash position and burn looks better than I expected. £4.9m at end of half to £10.3m at end of year, which includes a £7m cash raise means £1.6m was used in the half or circa £260k per month. This included the milestone paid to ichor. So annualised around £3m pa or sub 10% of the market cap. While I am sure there are emotional effects of delays (if they happen) the company remains well funded to complete the objectives set out in the cash raise docs. The £10.3m cash was supplemented in May with a further net £1.1m from shareholders.

They have now cleared the runway for 2019/20. Either pog/pox deliver or it doesn’t. If it does and ebitda rises to $300m+ pa then the risk evaporates and we see a very rapid and leveraged rerating. If it doesn’t, then more can kicking and possible dilution. But I’m positioned for the former and keeping fingers crossed :)

One thing that concerns me about the adjuvant is that they are using it as a reason to massively reduce the dose by 10-100 fold. In the Calculus presentation, LD states that the intermediate human dose of modi1 applied in the trial will be the “actual” dose they used in mice, despite the obvious difference in body mass and body surface area. Sounds nuts, but that’s what happened in the Imm/lupuzor trial - despite the input of the prestigious CNRS - they went with the same dose in humans as they administered in mice. The company has now conceded - post trial, though they were obviously aware well before - that the moa they identified in mice could not possibly occur in humans because of the lower dose - the drug would never collect where it is most effective, in the spleen. Can someone reassure me that the same thing is not going to happen here? Ie the dose is going to be so low that it cannot collect in the area or at a concentration that will be effective, so the moa witnessed in mice models will not be reflective of the human trials? Cheers, ww

They’re amusing images, BR. Thanks. I suspect true of half the boards of ftse250 companies though. If there is a positive to be taken from it, they wouldn’t be hanging around if they didn’t see the gravy train moving onward and upward.

Kenj If they meet the repayment schedule arranged in 2016 then happy days - the debt is paid off! I couldn’t give two hoots if they pay $20m extra interest charges under the new arrangement. As stated previously, they do not need to pay off all the debt by 2022 because, unlike in 2015, they will be generating high levels of free cash generation and will likely be able to revolve the remainder. So you own the shares but believe 2018 is going to be representative of core performance going forward. With all due respect, are you mad? If not, please explain why you own the shares?

Kenj - I am not disputing that they will kitchen sink 2018, as I have repeatedly stated in my posts. If you hold these shares and believe 2018 is representative of core performance going forward then apologies, but your position doesn’t make sense. The only way of squaring it is to believe you have sold your position, and it worries you. For those who continue to hold - the recent refinancing on terms easier for pog suggests the credit markets remain onside, looking at 2018 net profit is a red herring, kenj has probably recently sold his position.

Around 20m shares have been traded on the way down from the 6.5 level, or around 0.6% off the shares in issue - ie very low. It is quite possible that the fall has simply been caused by a handful of largish private investors getting scared and jumping ship. Anyway, appears to weaken toward the close each day so will be interesting to see if that pattern repeats. gla

Kenj - I will try and ignore the more emotional aspects to your post, and answer the points 1) the 5 year plan will have been put together by the finance team using a detailed knowledge of pit economics and pox capability. It was then signed off by Deloitte. If it must be described as “tosh” then surely it is less tosh than finger in the air guesstimates made by individuals with next to zero knowledge on an internet chat forum 2) I don’t mind too much where they store the cash - but if that represents their biggest challenge it is a nice one to have 3) the very point they could refinance on better terms signals that the credit market DOES take the 5 year plan seriously.. Even without the forecast guidance, we don’t have to extrapolate a great deal from the historic figures to identify a company capable of borrowing and paying back $800m. During the transitional years of 2016 and 2017, the company generated ebitda of circa $200m pa, and while i am sure management will do their best to kitchen sink 2018, there is little reason to believe ebitda of $200m or above cannot he generated from the core in 2019 and beyond. The forecast for pox is 250k oz pa at @$500 margin an oz, adding another circa $125m to the ebitda, bringing the group total to $325m pa. A net debt:ebitda number of 2.5x is barely stretching under any circumstances, but given capex will dropping to 50% of depreciation and they have a resource life likely spanning several decades, even less so. Of course, all of this is assuming they even NEED to pay back the entire $600-800m within 5 years to be deemed creditworthy. Of course they don’t - if they can achieve even half of that repayment there will be a queue of willing lenders ready to revolve the debt and at a lower rate.

5 year forecast from the annual report 2017 = full debt repayment by end 2022. Admittedly, pog is lower now but they claim to include slack in the forecast. A company that can pay off $600m net debt in 5 years will have no problems raising another $200m. Can they convince a lender of this? Quite possibly. “The key assumptions that are included in the five year forecast are that the Group will be able to: i) Complete the construction of the POX Hub out of free cash flow for commissioning Q4 2018, with ramp up to full commercial production throughout 2019; ii) Achieve the Group’s production profile, cash generation and adhere to the Capital Expenditure◆ plans detailed in the LTP; iii)Repay the US$100m Petropavlovsk 2010 Limited 9% Convertible Bonds due 2020 (the ‘2020 Bonds’) from cash generated from the Group’s operation on the assumption that they have not been converted into equity; and iv) Repay the US$500m 8.125% Guaranteed Notes issued in November 2017, when they become repayable in November 2022 from cash generated from the Group’s operations.“

RB - I agree with pretty much everything you say, but I do not believe ICBC hold all the aces. The IRC loan has been a dud investment, earning them a low return, and if I was a Chinese banker with a $200m asset where the backstop involves liquidating a major Russian enterprise and seizing its assets, I would have a few sleepless nights. It is in ALL of their interests to find an amicable solution to this - which is why I think they will. The ace that pog has is that once it is through this, there is a highly cash generative prize on the other side. See the 5 year debt repayment forecast in the 2017 accounts. If ICBC are clever and want to earn a decent return at minimal fuss/risk - they will aim to assume pog as a client, not undermine them. IMO

Pos - there’s a long list of things that could be worrying a large holder, or encouraging a shorter 1) fear about what the results will show 2) risk of credit downgrades and impact on future financing costs 3) the irc guarantee and potential cross default risk affecting the rest of their debt commitments 4) general concern about Russian investments currently given political environment 5) enduring pog weakness..... BUT to my mind it is everyone’s interests to resolve the credit aspect/guarantee and beyond this pog appears to have a bright future ahead. It’s a highly leveraged investment so expect turbulence. AAZ was similar near the bottom, I recall a large individual seller, but a penny here or there back then becomes fairly meaningless with the benefit of hindsight. It moved between 3p and 7p for a very long time, before 10 bagging in 3 years. Best wishes :)

The following is taken from the notes of the 2017 report and highlights the phenomenal asset remaining IF they can get past the IRC commitment. This is THEIR forecast - the entire current $600m net debt repaid within 5 years out of internal cash flow ie $120m pa in free cash generation. I mentioned to kenj that typically a company should not desire to pay back ALL its debt because that may not represent the optimal capital structure - but that appears precisely what pog intend to do. With that level of free cash generation and the prospect of $600m being paid back in 5 years, it seems very odd they are having difficulty refinancing IRC, and I can only assume they are playing hardball and waiting to see who blinks first. That’s the hope anyway! GLA The key assumptions that are included in the five year forecast are that the Group will be able to: i) Complete the construction of the POX Hub out of free cash flow for commissioning Q4 2018, with ramp up to full commercial production throughout 2019; ii) Achieve the Group’s production profile, cash generation and adhere to the Capital Expenditure◆ plans detailed in the LTP; iii)Repay the US$100m Petropavlovsk 2010 Limited 9% Convertible Bonds due 2020 (the ‘2020 Bonds’) from cash generated from the Group’s operation on the assumption that they have not been converted into equity; and iv) Repay the US$500m 8.125% Guaranteed Notes issued in November 2017, when they become repayable in November 2022 from cash generated from the Group’s operations.