Anglo Asian Mining Share Discussion Threads

[callmebwana] 03/7/2020 18:29

Hi guys, INDV is looking interesting to me. I did make profit from it a while back. Nice trend set in so far. Could be profit in making a trade there.
NAI and please DYOR.
ATB.

[wanobi] 03/7/2020 17:12

CNG - very pleased they've admitted their RNS error,,, rather important to do so!!

Cheers
Wan :-)

03/07/2020 4:28pm
UK Regulatory (RNS & others)

China Nonferrous Gold (LSE:CNG)
Intraday Stock Chart

Friday 3 July 2020

Click Here for more China Nonferrous Gold Charts.TIDMCNG


The following amendments have been made to the 'Update on Reporting Timetable' announcement released on 29/06/2020 at 11:28am.


"The Company's loans remain in excess of US$109 million" has been replaced, for clarification purposes, with the following: "At the current time, loans drawn down by the Company amount to c. USD$341 million, this includes US$104m of banking facilities (unaudited)."

[wanobi] 03/7/2020 17:12

AVCT, yes, very interesting that dd :-) Cheers Wan :-)

[droyden] 03/7/2020 16:31

Small spike on avct within the last 10min

[onedayrodders] 03/7/2020 16:05

Brasso .. yep ECR could be the play of the week next week

Newmont and others confirmed by CEO circling for deals in a highly prospective safe region

excellent

[wanobi] 03/7/2020 15:15

yep, falling asleep here, so off for the weekend early :-) LOL,,, long walk to the fridge, cold beer and a quiet sit in the garden for me.... wishing you all great weekends and many thanx for all your posts, suggestions, support, idea's, shared experiences this week... much appreciated by me and many others of that I'm sure,,, cheers Wan :-)

[11_percent] 03/7/2020 15:12

"may as well be a global holiday"

Indeed......nothing happening.

Do wonder about PUR though.

On Monday…..as few buys and it went mad...…...today, we get the buys = nothing.

[brasso3] 03/7/2020 14:22

ECR ticking up again. I can see that hitting 1.5p with the expectation of a JV in the coming weeks.

[katsy] 03/7/2020 14:22

I'm not sure a virgin always knows what they want!!

I'm surprised this hasn't appreciated at all for the whole of 2020 despite the gold price climbing substantially and oil costs dropping. When the rush for gold from the herd really starts then I suspect this will begin to motor again like last year.

[onedayrodders] 03/7/2020 14:18

Friday + US holiday = DULL

may as well be a global holiday

yawwwwwnn

[gold finger 1] 03/7/2020 14:14

Its good to see that the seller and the buyer have ramped things up a lot over the last week or so.
They are like a couple of virgins, both know what they want and will get there in the end.
I wonder if they know we are watching from the sidelines?

[cinoib] 03/7/2020 13:20

dp, don't forget the Irish, the germans and the Japanese for good messure.

[gold finger 1] 03/7/2020 12:10

Brass

I believe that like that reporter says, the market is waiting for conformation of those exploration results.

Also the change of hands for all these shares that are being sold and bought is not helping. But our time will come.

[brasso3] 03/7/2020 11:55

HUM and SHG are breaking out and TSG looks like it will follow soon. AAZ still sleeping. :(

[spidertricks] 03/7/2020 11:23

Golfinger1 you're right that was an interesting watch. Coincidentally, his penultimate cup and handle prediction tied in within $100 of Mattjos fantastic posts on EW theory last weekend. As for his last post when measuring the cup over decades ....it could be huge

[sportbilly1976] 03/7/2020 11:14

Hmmm...just when you thought COVID has done irreparable damage to the UK economy

[wanobi] 03/7/2020 10:48

Cheers
Wan :-)

[gold finger 1] 03/7/2020 10:42

this is a interesting watch.

[gold finger 1] 03/7/2020 10:29

Anglo Asian Metals (LON:AAZ)
Share price: 141.2p
Market cap: £156m
Forecast revenue: $106m / £86m
Production ounces: 81,399
All-in sustaining cost: $591
(I hold)

AAZ is a highly cash-generative gold miner with four mines in Azerbaijan. Here are the bull points:

A low all-in sustaining cost makes for high levels of cash generation,
This cash generation has allowed AAZ to build a strong, debt-free balance sheet,
It is piling up cash and paying strong dividends,
It is well placed for acquisitions or new discoveries at existing sites, and
It appears to be cheap according to cash flow, earnings, and dividend metrics
As a relative gold novice, I hold AAZ because of its obviously attractive mining economics, safe balance sheet, dividend payments, and cash generation potential. It’s a fairly straightforward pitch.

The Ranks love it as well, classing it as a Super Stock based on its attractive spread of Quality, Value and Momentum:

BNhhqVXqsnUgihtygSn-8XptZhHNdwE89b-O_frYJL2-HKXV2SjO7hOeRwVAeIOBDKHM-Nu_7LdGS4KS6TW93aaZllXNRFXxg0_SRkhvXzeslP27DPMoolNBvkBcDJcqdjRWQl_6

What AAZ needs is to prove more resources. The group is dutifully doing so and the body language is positive, but I will believe it once I see confirmation. Until then, possible disappointment on this front remains a risk.

Exploration opportunities at AAZ’s sites are ongoing and the signals are positive. The group’s recent updates suggest upgrades in the near future. On top of that, AAZ has five “fast-track221; production targets at Gedabek and the Ordubad Contract Area.

There is always a risk these do not materialise, but the work sounds promising so far.

Regardless of what happens here, if gold prices hold steady, at its current valuation AAZ could rack up cumulative free cash flow in excess of its market cap in under a decade.

AISC, cash generation, and financial health

The group’s open pit mining sites place it firmly in the lowest-cost quartile, with an all-in sustaining cost of just $591, making for a highly cash generative miner. See the free cash flow yields below.

AAZ

2014

2015

2016

2017

2018

2019

Operating cash flow per share

13.3

20.5

26.3

26.3

41.3

25.9

Capex per share

15.1

13.1

9.83

9.24

16

8.04

Free cash flow per share

-1.8

7.4

16.47

17.06

25.3

17.86

Share price

137

137

137

137

137

137

Free cash flow yield

-1.31%

5.40%

12.02%

12.45%

18.47%

13.04%

This has enabled AAZ to power its balance sheet from a net debt position of $52.4m in 2014 to a net cash position of $21.2m at end-December 2019. This will likely continue to grow even after dividend payments and capital expenditures over the next few years.

m36E2-J6DKQtQnJ--KBfpk80DVsHoY5m67eZ0WYAuS1-UP3k0KYRW10h1nK4zsubcQLiSHmv6sdPniAWlbuOj8SNA0N9WcPXEHiCnyyuRXngHlhtZvLz1z082qqeFP6Oi1UEERid

Trading and outlook
AAZ has quoted a combined mine life to at least 2024 - a bit close for comfort. The miner has already identified mineable extensions to existing sites though. This is how management sees that timetable over the next few years:

Oe4zf3bx_CU_g4rMq8dZw5-Uh9l8RQHKuxISwd_AAhwj2HZyJqwzcbNCJVZFIb0pcPK3Lpnqbro9BGn9Nxb5L4bw-z6Xjb8CUx6R7foHuO-su1X__sJWTivTLrw5I4UzrKAp94tG

It sounds like the Gedabek and Ordubad Contract Areas have bigger “system” potential as well, although the scale of this has yet to be confirmed.

In addition, there are five fast track exploration targets:

Avshancli 1 and Avshancli 3 (Gedabek Contract Area);
Gilar – (Gedabek Contract Area);
Zefer Cell 9 – (Gedabek); and
Ugur Deeps – (Ugur open pit mine).
This fast-track plan sees Avshancli 1 and 3 potentially coming onstream in the second half of 2022 with the last one, Zefer, potentially onstream by the beginning of 2025.

EJ8lfFEo1dAECwjUfkiNAiDupAyha_PBgeraD0j4hFHG4xA8aP8GWXV4QUopVOzeRKHERzjzIoK7Yzd5JHUCxct2bV0F155zt-Q377mmwBRh7eio8w6MkXt-F_fbOn3mebJ12Xzq

Red flags
AAZ operates under a Production Sharing Agreement (PSA) with the government of Azerbaijan, which it periodically has to renegotiate. Similar contracts have been used in the development of Azerbaijan’s oil sector in cooperation with oil majors, such as BP.

Anglo Asian finances the operations and the government receives cash payments after certain expenses. AAZ is entitled to a maximum of 75% of sales proceeds. Thereafter, the remaining proceeds are allocated 51% to MENR and 49% to Anglo Asian. I think regulatory risk is a concern.

In the 2020 CEO Letter to Shareholders, it says:

...in August 2019 that the Government of Azerbaijan had announced it had appointed advisors with regard to a possible transaction with Anglo Asian Mining. There have been no significant subsequent events requiring further announcements by us. Nevertheless, I can assure shareholders that it is the Company's understanding that the Government of Azerbaijan has no intention to nationalise, purchase or otherwise take control of Anglo Asian Mining or its assets in Azerbaijan.
Everything I’ve read in trading updates and financial statements indicates AAZ has a strong relationship with the government, at least. Beyond that there’s not much I can add to the matter besides flagging it up for others to make a decision on.

As you might expect of a small cap Azerbaijani gold miner, the group’s Major Shareholders is populated by individual investors and slightly lacking in classy institutional names. Is this a corporate governance risk or an opportunity for nimble retail investors? I’d argue it’s a bit of both. Some shareholder churn at some point could act as a nice tailwind if there is institutional interest out there - perhaps in the event of confirmed new reserves.

But then of course, there is also the risk that new discoveries fail to materialise - in which case AAZ will be compelled to seek acquisitions.

A final point: AAZ qualifies for not one but two short screens:

if7xlUKqA0k7tJN7Gn_YpvuK8SFQcGyN6W0QOmjsZWbLZwdkGoSnTqHoo2AXdJhwzkERq1hd990GNYroMX7phi20EkDb3BwBGjnbiNunHfKEH62XpxaqckFn4dIbi5MHw7uZ9A-7

The most notable point flagged here that I can see is that receivables are increasing in proportion to sales. This is a fair comment - you can see the increasing receivables on AAZ’s balance sheet. It’s a big jump:

1FMxmgaxQQS7SJzFAFhU7ovhpNYXZKDWJ7tcxtb-aYIcIC8bmDM09Y5Y63zkAKIVBqNsDRuBupDiH3v985uGSw8kNwO5IroT-l83mMprF-Oxll_0cWcADMZV22qqkNXc90htLQi4

The bulk of this (c$18.5m) is gold held due to the government of Azerbaijan. An offsetting balance has been recorded under Trade Payables. I’d hope this unwinds, but again, another example of the government’s presence.

Conclusion and valuation
To recap the dangers, I see:

Regulatory risk,
Scope for mine exploration disappointment, and
A recent increase in receivables as a proportion of revenue
… But I also think there is a reasonable margin of safety built into the share price at 7.4 times forecast earnings.

An AISC of $591/oz puts the company in the lowest quartile of the gold mining industry’s cost curve. At its present rate of cash generation, I reckon AAZ will generate its current enterprise value in free cash flow over the next 10 years (although this assumes successful mine life extensions).

What we know for sure is that AAZ has a strong balance sheet and highly cash generative operating characteristics.

While we wait for announcements, the company has committed to pay out 25% of free cash flow to shareholders. Brokers aren’t making forecast dividend per share estimates right now, so this income potential might not be priced in. The FY19 dividend was 8c (around 5%) so it’s a useful amount.

There’s compelling valuation and margin of safety here in my view - the only question is if there’s an even better deal out there somewhere.

[goodgrief] 03/7/2020 10:18

... does it include dividend details!?

[gutterhead] 03/7/2020 09:54

Stockopedia have produced a positive article on AAZ today and have emailed it out to all of their audience. Too big to copy onto here. Should help

[skeptic1] 03/7/2020 09:24

Well I just took an additional 5k here, because I can still see the value. I’m a LTH of course, but agree entirely with the spread comments.

[2sporrans] 03/7/2020 09:21

i don't often comment upon the spread but, like now, knocking 6p, 4% + reasonable turnover ongoing does make one wonder if there is collusion among the brokers.

At times, the spread has narrowed to ~2p, even 1p on rare occasions.
Mostly knocking 4p or higher though.

Spreads of 4% must discourage traders and while they won't put off most 'committed' investors [those, having done research and looking to hold for years or at least willing to], the prospect of the broker trousering 4% of the ultimate turnover value [assuming the mid price for both buy and sale are each potentially 2% lower/higher respectively per investment] rather than say 1% [2*0.5%], this effective 3% tax may put off some would be investors from investigating AAZ for an investment in the first instance.