Base Resources Share Discussion Threads

[dangersimpson2] 01/9/2021 16:08

You may be right. As investors, we like to think of ourselves as independent rational thinkers. However, too often we let the market reaction speak louder than our own analysis.

We look at a company on a P/E of 40 and think "that must be a quality company if it is on that rating" or a company on a P/E of 8 and think "there must be something wrong with it". All the evidence points to both earnings growth and ROIC being highly mean-reverting. So sooner or later both the "quality company" and the "dog" end up on the same rating. Except the quality company has halved and the "dog" has doubled.

The moral of the story is that if you believe the market to be inefficient then you have to form your own opinion and ignore the market's short-term opinion, which is often wrong. And if you don't believe that there are market inefficiencies...buy a tracker.

[brownmruk] 01/9/2021 15:18

The other simplistic issue is that some investors are put off by high yields just because they are anomalous.

[dangersimpson2] 01/9/2021 14:45

It's just boring, that's why it is the price that it is. Kwale looks unexciting due to the low LoM and Toliara is too far away for the myopia of most invetsors. Also, HMS is a sector many mining investors don't follow or understand so it gets overlooked.

It is fairly easy to model the cash flow. Mid case of FY22 production guidance is 430.5kt. They got $497/t in 21Q4 and we know the markets are tight going into FY22 so let's say $520/t for FY22 as a whole.

Operating costs, let's say $150/t vs $148/t for 21Q4. Royalties are 7%, corporate, community & selling costs we can assume similar levels to FY21. Financing will be lower with the RCF repaid. Tax should be around 15% with the 10yr agreement still in place. Capex for Kwale is $15.8m as given on yesterday's conference call.

So we end up with $114m FCF from Kwale, which reduces to c.$100m once you pay unallocated corporate costs and some tax on repatriation of funds out of Kenya.

FY23 we can assume is similar if not higher due to market tightness.

FY24 will be lower due to mining out the South Dune and move to Bumamani. so Let's say $50m FCF for then.

So $250m+ FCF in 3 years vs $280m market cap.

Of course, you have to NPV that cash and if the HMS market tanks then this won't be achieved but all the current signs point to upside risk to the pricing at the moment, not the downside.

On top of this, you have Toliara which they paid $100m for and have invested c$50m to get to DFS. With a strong HMS pricing environment, I reckon they could sell this for $250m today if they wanted to and has an NPV of $500m+. If it cant be developed then it is, of course, worthless. However, you have to take a stochastic approach on this - I reckon there is at least an 80% chance that this gets the go-ahead in the next year. So the risked NPV is c$400m for Toliara.

So to reiterate, the issue isn't that the value isn't there, it is that investors aren't willing to do even the basic work above to understand or view it as too risky to invest in at any price. Perhaps the only thing that will change their mind is continuous cash dividends. But if the perception changes, perhaps due to Toliara approval or simply that new production from Toliara or wider resources in the Kwale area finally arrives, then the re-rating to match the cash flow could be rapid and material.

[marktime1231] 31/8/2021 14:51

You might be right, but it all depends how much life you believe is left in Kwale at what volumes and costs and prices? I like your projection that we get our money back anyway, but I don't think everyone sees it like that otherwise we wouldn't be here.

So yes that is exactly the risk-reward. A 50% chance of doubling up or halving. And that is what is reflected in the share price.

[dangersimpson2] 31/8/2021 11:26

I disagree that this reflects the risk-reward balance. If Toliara never gets going then you will effectively get your money back in dividends paid from Kwale cash flow over the next few years.

If Toliara gets through FID you have the experienced team that delivered Kwale on time and on budget delivering the best HMS resource out there at the moment with a NPV of $500m+. So the upside is more than 2x if Toliara is successfully delivered.

If someone said you could flip a coin and get either get 2-3x your money if it lands Heads or your money back paid over 3/4 years if it comes up Tails, would you take this bet? That is what you are being offered here.

[marktime1231] 31/8/2021 10:18

Probably right, the future of Base Resources is pivotal on extending its prospects especially the exciting venture in Madagascar which is still snagged in "fiscal" negotiations. If that does get the green light I can see why the analysts say this could double up, but in the meantime the share price is reflecting the risk-reward balance.

[janekane] 30/8/2021 15:30

Ime going to enjoy the ride ,over the next couple of years ime hopefully going to double my investment

[marktime1231] 30/8/2021 15:24

All sorts of ways to study the results here ...

hxxps://baseresources.com.au/investors/announcements/

The 4 cent divi is in AUD, so 2p ex-div 10 Sep payable 29 Sep. Need to study the report details especially outlook to judge whether this is worth a further add while still under 17p, or just sit back and enjoy the ride.

[janekane] 30/8/2021 08:43

It's up 6.9% in Australia yesterday and here’s why

Key points

Full-year dividend of AUD 4.0 cents per share (unfranked) determined.
Revenue of US$198.2m, EBITDA of US$94.6m and NPAT of US$11.0m. Net cash position at 30 June 2021 of US$64.9m.
Production of 73.2kt of rutile, 317.3kt of ilmenite and 27.1kt of zircon from Kwale Operations.
Continued strengthening of demand for all products with a 21% increase in ilmenite prices.
Kwale Operations mine life extension opportunities progressed with the Kwale South Dune Ore Reserves estimate updated and the Bumamani pre-feasibility study due for release in early September.
Additional prospecting licence applications lodged in Kenya and Tanzania, with three of the Tanzanian licences now granted.
Toliara Project engineering, supplier selection, systems development and funding components all advanced.
Lost Time Injury Frequency Rate of zero across the group, with there being no lost time due to injury since 2014.
US$3.7m invested in community programs, with an additional US$1.4m contribution to support vulnerable communities in Kenya and Madagascar to navigate the impacts of the COVID-19 pandemic.
It should open at 16 bid 17offer

[plasybryn] 29/8/2021 23:10

Base Resources Limited provides the following information about the full-year dividend of AUD 4.0 cents per share

[janekane] 27/8/2021 20:53

Big day Tuesday results and divi declaration

[janekane] 23/8/2021 10:43

More confidence with £5k buyer today

[janekane] 16/8/2021 15:37

Bet u wished it was
We are getting a market hopefully we should hit 16.5p before the news on the 31st of this month

[marktime1231] 14/8/2021 12:56

It wasn't me

[janekane] 14/8/2021 07:43

Found this on a Australian trade report
5 day trading volume

Avg
09
Aug
10
Aug
11
Aug
12
Aug
13
Aug
116.0K
611.9K
6.1M
226.4K
219.8K
2M
4M
6M
8M
IncomeNet p

[janekane] 14/8/2021 07:27

The problem ADVFN have with reporting BSE ASX is they don’t have a feature that takes you back to the previous day’s trading so any trades after the bell only show up once the other trade of 159203 shows on the London ex trade reporting see my previous post 24
The next report will be Tuesday 31st so hope for another big divi announcement

[marktime1231] 13/8/2021 14:56

Well those volumes of trade didn't show up on the london stock exchange site yesterday or today, so we will have to take your word for it.

Reported today that Canaccord Genuity has issued a Buy note with a 35p price tag, haven't seen the detail and as joint house broker they are paid to flog it so that may be a rosy view. Based on next year's outlook rather than this year's pandemic-hit financials presumably. About time the share price started to improve then.

Doubled up my holding at just under 15.5p this afternoon.

[janekane] 12/8/2021 05:53

Trade number 4 the large trade in Austraiia has now been deleted but went through after the close yesterday morning at 07.40 our time
To get the trades in Austraiia put BASE IRON in your search box. (BSE ASX)

[janekane] 12/8/2021 05:49

Trades (Java) Trades (HTML5) Trade Frequency
Base Resources Limited

Historical trades:
Base Resources (BSE)

Following BSE [ADVERT]
Real-Time
Level 3 Montage
Base Resources Limited (…
▼
Num Exch. Price Size Type C T Bid Offer Time Buy Sell ? Buy Ind. Buy Vol. Sell Vol. ? Vol.
4 LSE 15.70 159,203 O 15.00 15.50 16:07:55 0 0 159,203 16,129 1,681 0.00
3 LSE 15.425 2,515 O 15.00 15.50 13:35:04 2,515 0 0 16,129 1,681 0.00
2 LSE 15.425 13,614 O 15.00 15.50 12:06:20 13,614 0 0 13,614 1,681 0.00
1 LSE 15.10 1,681 O 15.00 15.50 11:07:11 0 1,681 0 0.00 1,681 0.00
Trade definitions are based on the mid-price and are indicative only

[marktime1231] 11/8/2021 18:05

Can't see those large late trades listed. An LSE trade at 15.7p and AUD0.29 is about 15.4p ...

My feeling is that FY financials will have been depressed by the hard impact of covid, the recovery thanks to higher prices was strong but not quite enough to replicate previous year eps. As you say, at this rate current year outlook should be phenomenal.

[janekane] 11/8/2021 17:32

159203 buy (£25000.00)after the bell in the UK that’s a massive show of interest
Results out on the 31st day after August bank Holliday Monday
Looking good for tomorrow’s opening SP
And a late trade reported after the bell in Australia
5,814,075 @$0.29 =$1686081thats one million six hundred eighty six thousand Dollars
Roll on tomorrow

[dangersimpson2] 11/8/2021 12:38

We'll get results probably on 31st August based on previous year.

The consensus seems to be for c£30m EBIT for FY21 which looks about right, however, based on what we know about current pricing and the new production estimates for FY22 the £37m consensus looks quite light to me and £40m+ is very possible.

Of course given the level of depreciation far exceeds capex at this point in the mine life the free cash flow will far exceed earnings.

FY22 could see above £80m FCF, which considering we are at only around £120m Enterprise Value seems a daft valuation, despite the low life of mine at Kwale and delays to Toliara.

[janekane] 11/8/2021 11:29

Dipped my toe in again today should get news very soon

[marktime1231] 05/8/2021 12:57

Last week's quarterly update confirms FY21 targets were met ...

hxxps://wcsecure.weblink.com.au/pdf/BSE/02400364.pdf

and some positive messages on prices, costs also rising, but we have to wait until 30 Aug for hard financials and the divi annoucement. About $65M cash still and widening receivables. No resolution to its c. $20M VAT reclaim in Kenya. I am guessing there is enough in that news to expect another 3-4c dividend will be covered by cash flow, but probably no more than that, so that is my expectation. Unless it wants to throw off its surplus cash?

Life-of-mine in Kenya operations remains a worry, Tanzania and Madagascar are the opportunities.

Outlook for FY22 is more of the same.

[marktime1231] 10/7/2021 12:01

BSE year end was 30 June so I think we are waiting for a quarterly trading update later this month followed by 2021 final report late August or early September?

The Spring update was positive, production and prices recovering strongly, should be back to pre-covid levels now which makes the outlook attractive. What is even more encouraging is that the business has paid down all borrowings and credit facility, so it is now debt free and sat with about $70M net cash in March, and cash flow is instead being directed towards dividends.

What's the betting on another 3c dividend? An annual yield of about 25% while the share price is pegged around 15p? No wonder broker Berenberg tipped BSE as a Buy this week, but it seems no-one was listening.

What are the concerns ... the limited reserves of open cast dune mining which can be commercially developed in Kenya, uncertain prospects for other mining targets in Kenya, difficulty over a large VAT reclaim, uncertain prospects for a new project in Madagascar. How many years worth of known reserves in the active deposit in Kenya ... five or ten or more ... but I think they need to negotiate renewing the tenure on their mining license first?

The upside is reported by specialist commodity analysts Roskil saying strong demand for ferro-titanium as with all industrial metals from China and elsewhere pushing commodity prices to highs, and forecasting average sold prices could be up to 50% stronger in 2021-22 compared to the doldrums of 2020-2021. Somewhat linked to the resurgence in aircraft manufacturing. That price outlook trumps all the concerns.

Looking at this with a view to adding some more BSE to my small speculative stake before the good news is published.