Shanta Gold Share Discussion Threads

[redhill] 21/4/2019 09:55

AG

Well you would wouldn't you !

You have always maintained their cash position falls in the first week of every quarter but you have no evidence to back that claim up.

[redhill] 21/4/2019 07:51

Redtrend

Regarding this $1.5 M that can't be accounted for,bearing in mind you seem to have a better handle on the accounts than others here,do you think it would be worthwhile e-mailing Luke Leslie for his off line answer ?
In all honesty he can't really not supply this as he has informed the analyst.

More positive words regarding VAT refunds in the interviews and i feel something will start to move soon.

[redtrend] 21/4/2019 05:16

In terms of why I’m underwhelmed, it comes down to what Redhill, JC and Ag are querying on the financials, which also has me concerned:

- New Luika (NL): Gold Sales of 21,190 Oz x ($1,304 gold price minus AISC of $701) = $12.8M NL margin

- SHG EBITDA is $11.4M, so there is a circa $1.4M differential between NL margin and SHG EBITDA. I was expecting some costs outside of the NL AISC (Corp G&A linked to Singida and other non-sustaining exploration), but not $1.4M per Q.

- You then have the difference between EBITDA $11.4M and Net Debt position improving by only $1.2M ($10.2M differential). Of this $10.2M differential, $6.5M is easily explained from the report ($4M Capex + $2.5M Working Capital). With $40M gross debt and based on previous accounts you could assume Interest on Loans may be $1.2M. As per 2018 Accounts they had an Income Tax bill of $1M which also may have been paid in this Q. But that still leaves $1.5M I can’t account for – I’m assuming it will be non-sustaining exploration and the like, although wouldn’t expect it to be that high. An analyst raised this very question in the call and whilst it may feel “we’re into the weeds”, this question for me is so important, so should not be taken offline.

- With Net Debt of $30M, if they were to really be Net Cash by “mid-2020̶1; (let’s say end of Q3 2020 – so late-mid 2020), they would need to improve Net Debt per quarter by $5M.

- Even with Capex reducing and interest payments on loans reducing (as both confirmed in call), I can’t see how they will achieve Net Cash by mid-2020. At best I could see them achieve $3-4M per quarter improvement to Net Debt with gold over $1,300+ and gold sales of 21,500+, but not consistently hit $5M in 2019 Qs. I could see SHG hit $5M+ in 2020 once debt is behind us (not paying interest anymore) and Capex is low, but not in 2019. And not now gold is $1,275.

- Another trailing negative is all the 45,000 gold hedges were rolled over. Yes they can continue to be rolled over, but at some point they will have to be closed out. Maybe now with gold at $1,275 and the opportunity cost of only $40 per Oz, they may start to unwind a few?

- I had already said if they didn’t receive new loan or VAT rebates, in my opinion only they would require a placing to pay next April 2020 Loan Notes (i.e. Nov/ Dec to ensure not left to last moment). However based on this quarter, unless Q2 2019 shows a marked improvement (Net Debt improvement of at least $3-4M), my view is beginning to partly converge with Ag – a loan, VAT rebate or placing may be required sooner than I originally anticipated.

- On the positive, they seem to have an extremely good relationship with Exim. I could see Exim providing them a further loan facility which hopefully would provide more time for VAT rebates to be forthcoming. Also post April 2020, it’s a different game for SHG with little to no high interest debt. A placing would not be end of the world and they could perform a share buyback back end of 2020 (if you think, straight off the bat with no debt they are saving $5M p.a. that was previously going on debt interest alone). It is extremely unlikely a placing would occur at the level Ag predicted of 3.5p and I for one if given the chance would probably participate. I expect most of the main IIs + management who hold 50% of stock would too. Problem with Placing is politically it sends the wrong message. What is the incentive for Tanz Gov to pay out VAT rebates if international companies just increase loans or hit up international investors for more money.

[redtrend] 21/4/2019 05:13

After reading the Q report, presentation, listening to analyst call and the short pro-active interview, I have to admit I’m underwhelmed by this quarter.

In terms of the good

- SHG have USD 13.4m of liquidity (including gold bullion of $2.5m).

- Gold production of 22,374 and sales of 21,190. So this 1,184 Oz differential will roll-over into next quarter and with continuing positive BC and Ilunga g/t, SHG should again hit gold sales of circa 21,000, even if production is say 20,000.

- From the short pro-active interview (on their website in the Twitter feed), there appears to be some exciting BC extension drilling results on the horizon in May. Eric Z confirmed Drill Rig started in March and already hit High grade mineralisation BELOW reserves at BC, thereby will extend Life of Mine. This is likely only the start of all the extensions below and sideways to significantly extend NL mine life.

- The Ilunga g/t appears to be even better than BC (which in itself was very good at 5+ g/t), mining at 6 g/t (both better than reserves assumptions). This is then blended with the lower grade Run of Mine (ROM) stockpile to hit a steady mid 4.5 g/t (again the higher underground grades than anticipated should extend mine life by mixing it with open pit lower grade stockpiles). The decrease in ROM stockpiles was always planned - no open pit mining was carried out in Q1 in line with the Company’s mine plan.

- As already assumed by Redhill, the Loan Notes payment in May appears to be merely a technicality. As confirmed in the analyst call, this is now with 3rd Party Computershare to do the necessary payments to loan note holders. SHG do not pay each and every holder directly themselves. From the call it appears payment has been made to Computershare and it’s now over to them.

- Long-term I’m still positive, but I do have concerns for the next 12 months period and can’t see how SHG will be net cash by mid 2020 (excl VAT rebates) as they state in report and call.

[redhill] 19/4/2019 18:14

Obviously these quarterly updates don't show the whole picture. It is what it says it is . A production & operational update.

[redhill] 19/4/2019 18:13

When Eric said we were throwing off cash unfortunately nobody bothered to catch it !

[tsmith2] 19/4/2019 09:34

It was probably down to price the seller wanted and the MMs margin

[letmepass] 19/4/2019 08:36

Sold some and added to MXO. Will add again at 6p

[jc2706] 19/4/2019 08:28

Meanwhile, in the real world.

[jc2706] 18/4/2019 22:17

I don't think that trade has been hanging around for that long and it was cleared first thing and yet the price continued to fall somewhat on the back of further sells. Actually the price held up pretty well considering which may indicate a buy that we haven't seen yet.

[redhill] 18/4/2019 21:14

Well buy some more then !

[redhill] 18/4/2019 20:56

Well whatever has happened its given the MM's more liquidity.

[tsmith2] 18/4/2019 20:15

Guys you've got it all wrong. That's Augustgloop's buy, just look at the numbers

[jasper2712] 18/4/2019 20:07

I don't think this is the case as it was very difficult to buy any quantity over the last 2 weeks but I could have sold all of my holding easily.

[redhill] 18/4/2019 18:22

I think they have been working this one through for weeks so i'm expecting an improvement now but who knows.

[qs99] 18/4/2019 17:53

Is it one big seller continuing to offload? Just seems to hit a wall every time it starts to move!

[redhill] 18/4/2019 17:23

Now we see the 1.9million sale that has been holding the price back over the last few days which the MM's have been working through.

[jc2706] 18/4/2019 17:13

I knew that would be your response AG. Redhill's answer is sufficient I believe.