Bisichi Share Discussion Threads

[tim000] 26/6/2022 05:08

e43, congratulations to you on holding TGA, a great investment! I’m hopeful for we BISI shareholders, and it’s good that our investments are already backed by quite a lot of cash. But nothing is certain. However, the EU would be mad to backtrack on Russia, and due to its climate change obsession, it has discouraged any investment in new sources of fossil fuels. The madman Mark Carney was very keen at preaching to institutional investors not to touch fossil fuels, we now have to live with the consequences….one of which is resurgent nationalism and empire building in Russia and China.

[tim000] 26/6/2022 04:59

If I recall correctly, the seller of the coal reserves is entitled to an offtake agreement, which no doubt could be very profitable. I imagine that, for the seller, the coal was a stranded asset (ie without access to plant and machinery to mine the coal). Looking backwards, I think BISI’s coal business has depended on its Sisonke processing operations to make money. So until very recently, one could argue that mining rights had very little value. My own view is that Russia has changed that fundamentally, and that the EU has had to confront the fact that its ideological commitment to globalisation (and dependency on Russia and China for most of its basic commodities) was a dreadful mistake. Not as if it hadn’t been told so, but its leaders are not very bright.

[e43] 25/6/2022 23:28

Thanks for the info on Vunani Tim,was curious how you can acquire 6m tonnes of reserves at zero cost.
Congratulations on getting 1.7% of the company,I was looking to buy around 1% last autumn,but when I couldn't get anyone at the company to talk to me settled for 2/3 ish of that and put the balance into TGA at around £4.
Get the feeling the number of available shares here is going to remain v tight now,as most investors who were waiting for a chance to get out will already have sold.

[tim000] 25/6/2022 18:19

Vunani, mostly a (JSE listed) financial services company, has a mkt cap of ca £25 mn. So the potential rewards from its BW coal operations are very important to the business and its Directors. I hope the BISI Board are already in discussions with Vunani about next steps.

[tim000] 25/6/2022 17:38

The Annual Report mentions that Vunani (the BEE minority partner) acquired 6mn tonnes of reserves for Black Wattle at zero cost. As reward, Vunani has been awarded a 50% profit share for those reserves, plus a further 2 mn tonnes it had acquired for BW previously. These reserves were acquired when coal seemingly had no long-term future in South Africa. What is the value to BISI of those 8 mn tonnes? Let's assume margins of US$50/t, annual production of 1 mn tonnes, and an annual discount rate of 10%. On those assumptions, these reserves have a NPV of at least £100 mn to BISI, and the same again for Vunani, whose business model is to acquire reserves for BISI to mine, process and distribute. As a black-owned and managed business, Vunani has opportunities probably not available to some of its competitors. If you're willing to stay the course, the BISI/Vunani partnership could have a tremendous future. And the market is not even properly valuing BISI's current operations, as I show above. The market cap is currently just 25% of the NPV of the 8 mn tonnes reserves, let alone the rest of the coal reserves of the business and the current windfall cashflow.

[tim000] 24/6/2022 06:03

I wondered that too, though Sir Michael has very modest pay; all the money goes to Andrew. No idea what he does with the money.

[e43] 23/6/2022 23:22

Tim,I've always felt the philanthropic endeavour's of the senior Heller's has played apart in the over generous renumeration policy i.e always needed plenty of additional funds for the charities they support .
As you have reported they are all decent well qualified people, and generally accountants are safe pairs of hands to be running businesses.
UK property likely to be difficult going forward so hope not too much extra capital in that direction,I would favour sensible investment back into the coal business ,and of course much larger dividends.

[tim000] 23/6/2022 19:44

I'm pretty sure the Board were going to discuss capital management after the AGM concluded. The Board should be well prepared by the time the interims are published to set out what they plan to do given coal prices are likely to stay high for some time. Whatever one thinks of the remuneration policy, seeing the Board in persons gave me the impression that most are very competent and are unlikely to do something out of left field.

[tim000] 23/6/2022 19:25

I agree a £40m+ mkt cap is undemanding. But I think a lot will depend on the company's strategy to manage surplus capital. Holding back some of the capital as a buffer against future coal price volatility etc is reasonable, but that shouldn't require much - and will be a one-off. I assume, given the cash on the balance sheet, they won't delay the interim dividend until next Feb, which has been necessary in the past. I hope they'll bring that forward to Sept/Oct. The property market is hardly booming so I think it would be a mistake to allocate much to that side of the business. The likely Ealing development can be self-funded, but should entail some debt funding. I don't know why it has been so slow to progress, but if it is funding then there should be news around the time of the interims about the project proceeding. I wouldn't really approve of much cash being added to the equity fund: this is not a fund management business and I imagine the fund has been expanded to act as a cash buffer. So they won't need two buffers. Moreover, I think there are rules against trading businesses acting as fund managers. Bottom line is that there should be a substantial special dividend, which could make the company the highest dividend yielder on the LSE.

[e43] 23/6/2022 14:12

Looks like a few new buyers,and so far few seller's.£40m + Mkt cap shouldn't be over challenging at half year results when the scale of cash generation becomes apparent.

[tim000] 23/6/2022 13:28

Highest price since Sept 2008, I believe. New ATH soon?

[andydaf] 22/6/2022 20:38

First of all thanks to Tim for his knowledge of the ASX market.I see there is renewed interest here as people do their sums on what the interims will be.I have done my own sums and unless coal collapses which in my view is unlikely Bisichi is trading on a p/e of less than one.Time will tell and when the interims come out in august i am sure a higher market cap beckons.Europe is rushing to reactivate its coal plants and a hard winter could see coal higher than it is now.125 a ton is boom time for bisichi 340 a ton is bonanza.As always GLA

[r9505571] 22/6/2022 16:31

https://www.axios.com/2022/06/20/germany-coal-plant-increase-russia-cuts-gas-supply#:~:text=Germany%20has%20to%20cut%20natural,Minister%20Robert%20Habeck%20announced%20Sunday.

[tim000] 22/6/2022 16:09

We probably need a new thread.......with a chart

[cottlet] 22/6/2022 15:57

groan..............no chart!!

[e43] 22/6/2022 11:55

Thanks Tim.Hopefully should be worth a considerable re-rate even in a v poor general stock market environment.

[tim000] 22/6/2022 08:34

Fwiw I currently have bottom-line BISI net cashflow from operations (net of interest & taxation) of £14mn in H1 and £20mn in H2, total £34mn (£3.18 per share).

[tim000] 22/6/2022 07:31

Perhaps because the war in Ukraine is expected to continue for longer, futures prices for thermal coal have continued to rise. RBCT prices are now expected to rise from US$270/t in 2022 H1 to US$323/t in H2, and average US$245/t in 2023. But the 2023 futures prices may well increase as the year approaches. BW cashflow at prices of ca US$320/t is obviously going to be unprecedented for BISI.

[tim000] 20/6/2022 20:19

Very strong rise in RBCT futures prices today. Averages for 2022 and 2023 are now resp US$282/t and US$232/t.

google richards bay barchart

[tim000] 19/6/2022 16:14

A good question. The exec Directors who will know said very little really. I think they were nervous of providing market sensitive info. I’ve sent the CEO and CFO a list of questions, and that is one of them. I’m not certain how many will be answered.

[e43] 19/6/2022 14:33

Tim,if the export transport situation improves later this year did you get the impression from the director's at the AGM that BISI has spare export quota too export a higher % of production.

[tim000] 19/6/2022 09:33

One thing that has not been discussed much, if at all, is the company's fund management activities. At end-2020, its equity investments were worth £2579k. In the following 12 months, the company invested net funds of £925k and made net profits of £812k, taking the value of its funds at end-year to £4316k. So its profits of £812k represented a return of 812/(2579+925) = 23% RoCE. The AR says nothing about these activities. I wonder whether the new NED John Wong (who has a fund management background) offered any advice on investment strategy. I know he is long energy. And I wonder what the company has been up to this year?

[tim000] 19/6/2022 07:33

Andy, on the ASX, CKA and AHQ have most long-term upside, the former starts mining in Indonesia in Aug/Sep, the latter started mining (in the US) and sales late last year. Both mine met coal. Both are fully funded now. Share prices have suffered from the general mkt malaise and are incredibly cheap. Much larger entities that pay large dividends are WHC and YAL. YAL is majority owned by a Chinese conglomerate which will almost certainly buy out minority shareholders, including Glencore! Another Chinese shareholder of YAL is selling its large holding to keep a lid on the share price, making the shares a real bargain. But I doubt Glencore will accept much less than twice the current share price, and the majority holder needs to act quickly - the Q2 results will be published in July and the interims in August. Like BISI, the results should be astonishing, and will add to the takeover price. Easy money as far as I can see. (A silly offer has already been made and rejected, another offer can’t be too far away.)

[andydaf] 19/6/2022 06:55

Tim any ideas are always welcome and as a private investor i also believe we should be helping each other on these boards.Too many boards on ADFVN have become slanging matches.Back to coal i can only use my own life experience that tells me when industries start to wind down and people lose interest in them is exactly the time when most money is made.Although not a trader and i couldnt tell anyone where the share price will be in three weeks i try to buy undervalued shares and recoup my purchase price through dividends.In my own opinion Bisichi is cheap,well run and should fit the bill .As always GLA and lets hope at the interims Bisichi shocks a few

[tim000] 18/6/2022 09:49

We agree, Andy. I've rapidly moved 25% of my portfolio into coal; I was always a heavy O&G investor. If you can, you should seriously look at some ASX listed coal miners; most have mines in Australia (zero geopolitical risk), their share prices are incredibly cheap and their dividend policies are "progressive". Their new Labor government is very sympathetic towards coal mining. If anyone is interested, I can offer a variety of excellent companies.