Bisichi Share Discussion Threads

[tim000] 17/6/2022 23:30

Bisiboy, you’re welcome. I imagine from your name that you’re a long-term holder (30 years??!) so you deserve a handsome reward for your patience. I think that’s about to happen - more than you could ever have imagined. Combining LAS and BISI makes perfect sense, the amount of overhead taken out of the combined business would be substantial. It would also simplify decision making for JV property projects. Much depends on how the family wants to proceed, especially Andrew Heller. I guess Stonehage Fleming would willingly accept a fair offer.

[tim000] 17/6/2022 23:18

Turning to Transnet, if I recall correctly total rail freight tonnage was 58 mn tonnes in 2021, a 30% drop from normal levels and the lowest figure since 1996. Issues with shortages of spare parts, copper cable theft, etc seem to be abating and the company is targeting a strong recovery in freight tonnage in the second half of the calendar year, back towards its normal run rate of about 70 mn tonnes pa. I’ve requested more information from the BISI management about constraints on export volumes. But if Transnet issues are resolved, or at least much improved, then given the enormous prospective EU demand for South African thermal coal starting in August, and the effect this will have on pricing, one can see the enormous short-term potential of the business. Remember the mkt cap of BISI per tonne of coal produced is but a small fraction of that for TGA.

[bisiboy] 17/6/2022 23:12

Tim thank you for your posts. Point about las is well made I had pondered that myself I own both. Bisi for 30 years having ridden the wave from 30p to over 400 it would be nice to get back up there again.

[tim000] 17/6/2022 22:41

This point may be obvious. Some companies looking for bank finance to create a very large mining operation spend many millions (and many years) drilling, and on consultants, to produce a JORC compliant resource. That is necessary to get the funding. BISI has a long life mine, but it has no need to prove this by spending millions upfront on drilling out the resource. So it appears the resource has a short life. The truth seems to be however that the mine has still many years of operation ahead of it, and through necessity the local mine manager (a member of the Board but not present at the AGM) has created a very lean production line.

Barring some black swan event, the company looks like it's going to generate enormous amounts of cash this year and next, with no need for any investment in the mine. I imagine the special dividends will be substantial! If a lot of cash remains on the balance sheet, LAS (who own 41% of the business already) might consider a formal offer for the remaining shares, and pay for that with BISI's own cash! (Yancoal on the ASX is in exactly the same position.)

[tim000] 17/6/2022 22:22

Glad to help. I doubt the research being sold was very good. I've accumulated about 168k shares this year; I'm fully incentivised to get the Directors onside to make the company more amenable to PIs generally. While not a "significant" shareholder, my holding is more than sufficient to worry the executive Directors who have options to cash in, should they run the business as a personal fiefdom. Executive bonuses have formal limits (see pages 35 and 38 of the AR), which means it is not possible for the executive Directors to benefit unduly from the elevated coal price, and Christopher Joll (who is one of two NEDs on the remuneration committee) is a good and principled chap - he will act independently of the executive Directors and in the interests of all shareholders.

If you'd like to meet up in London to discuss the company more, I'd be happy to do so.

[8gggggggg] 17/6/2022 21:44

Tim000, yes !! I was about to pay many £.000,s for research into BISI , you have made this unnecessary! Thanks. 8g.

[tim000] 17/6/2022 21:31

Notwithstanding the woes of the global stock markets, coal is almost completely unaffected. Futures markets are currently pricing RBCT ABI-4 @ US$272/t average for 2022 and US$214/t in 2023. At these prices, the forward p/e is almost certainly <1 for 2022 earnings, and about 1 for 2023.

[8gggggggg] 17/6/2022 10:30

Thanks so much for that invaluable info . If you are ever in central London , I will be delighted to buy you lunch , venue of your choice . SMSGeoff. 07710616734.Dakas

[tim000] 17/6/2022 08:45

The company reported that domestic prices had started to pick up, this article confirms that. It mentions figures of ZAR3000/t for exports and up to ZAR1500/t for domestic sales. Respective BISI figures for 2021 were ZAR1129/t and ZAR470/t. My guesstimates for 2022H1 are ZAR3114/t and ZAR500/t. With domestic sales much higher than exports, the upside news on domestic prices is very favourable; I will amend my forecasts.

[tim000] 17/6/2022 07:00

Safer than most! I’ve made a couple of posts now on lse as well. One other point that arose was that no broker will write any research notes on the company because clients wouldn’t be able to buy any shares! So the company will remain under the radar. But share prices ultimately always reflect their fundamental value, especially when that is transparent because of a progressive dividend policy. How much the Board decides to distribute in its Interim Results will be interesting to see.

[e43] 17/6/2022 06:54

Thankyou for the reports Tim,looks like a good place to park some money this year.

[tim000] 16/6/2022 21:00

Andrew Heller reported that the EU has committed to end purchases of Russian coal by August 10, just after the Transnet annual maintenance period ends. It's already known that the EU is sourcing more coal from South Africa. Is this already priced into the RBCT coal futures prices quoted at barchart? Hard to know, but should there be a cold winter in Europe this year, Europe will be turning to coal for more power, so RBCT coal would be strongly in demand.

[tim000] 16/6/2022 20:53

I've put some effort into modelling the company's finances, commensurate to the size of my holding. The half-year is now pretty much up. The half-year average benchmark API-4 coal price is going to be about US$260-270/t, compared with US$125/t in 2021. Even on what I consider to be cautious assumptions about the realised prices in domestic and overseas markets, I still get total cashflow of about £12 mn in H1, equivalent to £1.12/share. The figures are guesswork of course.

[andydaf] 16/6/2022 19:37

First of all thanks to Tim for attending and reporting on the agm.It seems the coal price windfall has indeed come as a shock to the company.Interesting to find out of the companys origin.Fully expect interims to be storming and lets hope for a nice divi.At boom times like these 30% of fcf seems more than fair.As always GLA

[tim000] 16/6/2022 18:52

The senior NED is Christopher Joll. I hadn't realised what an amazing chap he is, his military history youtube videos on the Household Cavalry (which he was once a member of) are worth watching imho.

[tim000] 16/6/2022 15:49

The CEO gave a brief update. The update was mostly about geopolitical events and that, while the future was very uncertain, it looked like the coal price could stay higher for longer. We must remember that the Board has a duty of care for the company and is not going to be extravagant in its policies. But it is reasonable to conclude that, with no scope for a buyback policy, dividends are going to increase somewhat in future!!

[tim000] 16/6/2022 15:37

For those that didn't know (including me), the company's 110-year history dates back to owning a prospective tin mine in the town of Bisichi, Nigeria. Bisichi is pronounced bizeechee (ch as in choice, not school).

My impressions (not facts) are that the company's prolonged slumber - caused by a moribund coal price and illiquid market for its shares - has resulted in shareholder indifference and an undynamic Board, in terms of composition, remuneration, turnover etc. The typical Board member today has had a lifespan of decades. Reps of Stonehage Fleming and myself were the only shareholders to raise questions. (And yet the meeting was well attended, by family & friends??)
SF started off, saying that the Board needed to be refreshed, and that the remuneration policy was too opaque and not best practice. I then piped up supporting those comments, and adding that it was surely in the Board's and company's best interests to be more open and transparent wrt publishing regular updates, and having a more fit-for-purpose remuneration policy. I later got to speak to pretty much all the Board members and found them to be friendly, professional and open to change.
To be fair to the Board, the jump in the coal price has come out of the blue, and required completely different management skills, including managing growth and its shareholder communication policies if the company wishes to be taken seriously by PIs. (With no need to raise funds, it's very unlikely the company will ever develop a stable institutional shareholder base.)
We will have to wait and see what changes, but I'm hopeful that a more open PI communications strategy will emerge soon. I think the Board understands that it's in its own interests to do that.
One point on operations. One long-standing Board member commented that the company has always operated with a LOM of no more than about 6 years, and yet it has never looked like running out of coal or having to reduce output. So in practice, it appears that it will be producing coal for a very long time to come. And it follows there was no need to crimp on production for the home market to extend LOM. Domestic sales were still profitable and would always be needed as a backstop should exports dry up for whatever reason.

[e43] 16/6/2022 12:53

Thanks Tim,look forward to reading your report later.

[tim000] 16/6/2022 11:49

The AGM has concluded. There are a lot of positives to report, and the Board are amenable to a more transparent relationship with shareholders in future. I will report in more detail once I get home.

[tim000] 14/6/2022 07:00

I hadn't known about Transnet's annual maintenance shutdown in July. To the extent that BISI can control the timing of shipments of its coal at RBCT, I guess this incentivises the company to run down its coal inventory in June to maximise sales in June, prior to Transnet's shutdown. If so, that helps to boost the interim accounts. (Obviously RBCT and all its supplying miners have exactly the same incentives.) Maybe that's why Transnet shuts down in July, the first month after miners' interim accounts are closed and a summer month when power generators' demand for thermal coal will be seasonally low.

[tim000] 13/6/2022 21:47

Thanks, that’s encouraging. Was there anything more specific on domestic coal prices? For example, have they increased at all this year?

[robizm] 13/6/2022 21:01

I listened to the trading update call with TGA. The main problem with Transnet now was not cable theft but problems procuring spare parts. TGA said hopefully this has now been resolved and the service will improve in the second half (Transnet have a maintenance shutdowns in July).

Domestic coal price is still low due to export capacity reduced.