Capital Share Discussion Threads

[adamb1978] 24/7/2024 14:22

Agree about the frustration with this. I'm up 36% having bought on 5 different occassions in 2020/1 (though top sliced just over 100p earlier this year which put this into the smaller half of my holdings).

So my IRR here (c.10%) is weak/average considering the small-cap premium which you want to make and if you consider 7% as the long-term return on FTSE large caps.

I think there's very good potential here, but whilst the board/management have managed the operational side of the business very well, they've operated the capital structure and governance decisions very poorly. There's obviously no way of proving it but I believe my returns could have been at least 2x had they managed that side well.

The NAV underpins the price but I dont have much hope that the above issues get fixed so am now more hoping that upcoming interest rate cuts helps the gold price (easier to hold a zero yield commodity when the cost of cash is lower) which improves sentiment to the sector and also makes CAPD's debt cheaper. Also lower borrowing costs might help fuel more sector consolidation which both makes CAPD a target and/or potentially some of the illiquid assets could be turned to cash to if those cos get taken out.

Their NED appointment earlier this year looks like a puppet, rather than someone who naturally complement the existing board, so to me it showed that the CEO didnt have the intention to run the company in the best way possible, but more wanted to run it the way which he wants to run it without the challenges which a NED should bring.

[gleach23] 24/7/2024 08:12

I often think that too fozzie but I was surprised to notice the other day that it's my 4th best performer ever (I've been invested here on and off since 2011).

Currently my 3rd largest holding and considering a top up around this 90p level.

[fozzie] 24/7/2024 07:59

I've said it many times over the last three years but this continues to be the most frustrating share I have ever held.

[allstar_07] 19/7/2024 17:55

I thought richard Staveley in the rockwood strategic pres on investormeetcompany made reference to them monetising the investments but I'm not 100% he did. Would be good if they could exert a little influence.As has been said the market isn't liking taking on more debt all the time and the portfolio doesn't seem to be valued at all by the market.What ever happened to the strategic investment in the eco offgrid power startup thing, ive never seen ref to it after. For a 7mill investment I'd also like more details!

[cp42kx07] 19/7/2024 16:29

Sadly it seems unlikely. I feel sure that the market would respond very positively to a gradual reduction in listed investments and the use of the proceeds to reduce debt and buy back shares.Management should re-visit their previous decisions in the light of the market's clear underwhelmed response to the recent (good) quarterly results.I support the Eco Detection move as forward looking (likewise MSALABS) but would prefer to make my own listed mining investments rather than have them as unappreciated add-ons to my CAPD holding.Come on CAPD BoD, Focus!

[adamb1978] 19/7/2024 07:02

Been suggested to them many many Robsy....

[robsy2] 19/7/2024 06:25

Maybe the company should just cash in some of their side investments and start the share buy back programmme?

[hpcg] 18/7/2024 21:31

Adam - I completely agree about being on the bid to a small amount every day, forever. I do believe that London market participants are coming around to this as well, just the 30 years behind New York, 60 if Buffett is the model.

I still however back the investment in Eco-Detection. It will need money, and real life installations, and case studies. It looks like a classic win-win. The non-mining sector is orders of magnitude bigger than the mining sector, but the miners have a much stronger commercial imperative and the money.

[adamb1978] 18/7/2024 16:43

Hi tightfist - I take a different view. How about investing the $7m in shares of a very, very adjacent company called Capital Limited instead?!? Those shares are trading below NAV so extremely attractively valued and the buying would push the share price up! In my mind, getting debt down or a buyback would be of far greater value to shareholders.

Average daily volume here is c.£130k so if CAPD bought back 10% of that each day then the $7m would fund a buyback for a bit over 400 trading days. That relentless buying would push the price up. A great example of this is TIG. They bought back shares day after day after day for about a year and the share price is now up 70%+ compared to pre buyback. In my mind, that would produce better value for shareholders than an illiquid stake in a start-up which could be years from turning into cash. If the CAPD price wasn't below NAV (and they had lower debt) it could be a different decision
Cheers.

[tightfist] 18/7/2024 15:49

Hi Adam, if you believe you are going to add substantial Value to a nascent company, then taking a meaningful stake makes sense..The water distribution/stake seems sensible. I understand your reservations nowadays about continued holding of the investments - but IMHO Eco-D is in a different business sphere. Cheers, tightfist

[davebowler] 18/7/2024 15:10

Plus according to Stockopedia it's trading at 5% below its NAV.

[rivaldo] 18/7/2024 08:48

Tamesis Partners have reiterated their 160p target price. They note that the new Sukari contract will add $10m to H2 revenues - this alone will almost take CAPD to within the target range of $355m-$375m revenues if CAPD merely repeat H1's revenues with no growth whatsoever elsewhere - which we know will not be the case given the various contracts elsehwere ramoing up for this H2.

They forecast 16.7c EPS this year, rising to 20.2c EPS next year - that's around 15.5p EPS.

They summarise:

"Investment Case

We remain positive on the outlook for a strong operational performance through 2024. Key growth projects are ramping up well, and new projects continue to be won with high quality clients in diverse locations. This is resulting in increased ARPOR across a greater number of rigs. Meanwhile MSALABS is developing its own momentum, both at the NGM labs contract and their partnership with Barrick. The mining services business also has the potential for another big contract with Sukari rolling off. The company’s stock is trading on PE multiples for FY24 and FY25 of 7.6x and 6.3x respectively and EV/EBITDA multiples of 2.8x and 2.5x, while delivering a dividend yield of 3.1%. We remain comfortable with our 160p PT."

[adamb1978] 18/7/2024 08:14

hpcg

Glad we agree on teh miners. Regarding Eco-Detection, the stake and the distribution are quite different things.

Selling the product into the CAPD customer base makes sense and for Eco-Detection its a win given that its a market that they dont serve today. However to stick $7m into the company at the same time is unnecessary and just keeps the debt higher.

Many, many companies re-sell others products and a tiny percentage of those would involve taking a stake in the other company.

Adam

[hpcg] 18/7/2024 08:09

Adam - I can't agree with you at all on the stake in Eco-Detection and the exclusive use in mining. This seems like an absolutely ideal parallel investment and a service we can much more easily sell to our client base than Eco-Detection themselves. It looks to be another MSALAB, though with an unknown profit level. Look at it holistically if we could offer:

Muck moving
Training
Drilling
Environmental monitoring
Assay

So I see it as nothing at all like the investment in junior miners.

The earth moving extension at Sukari is a bonus - though it means capital return from that plant is delayed.

I do agree that the miner holdings are losing tangibility if they are never monitised.

[robsy2] 18/7/2024 08:09

Thanks Adam
I quite like the fact they have some holdings in relevent start-ups and small cap miners that they as insiders see as having some potential.
As Dean says,so far so good.

[deanowls] 18/7/2024 08:00

Tbf the chrysos tie up has gone very well so I’ll give the benefit of the doubt. They’ve also done very well on investments.

Be interesting to see the actual start up costs in Nevada as it can’t be cheap kitting all that out and hiring people before revenues come in stream.

Are Capd involved in the other centamin site that was rnsd this morning?

[adamb1978] 18/7/2024 07:23

I meant the 22% stake taken in the other start-up.

Some people on here, including myself, question the value of the investments. THey were initially a way of building relationships with customers and winning contracts so had a benefits in CAPD's early days but with CAPD's size now and dealing with larger customers makes them less relevant. Particularly holding stakes in listed companies - lots feel that they would be better selling those positions down and clearing the debt (or returning the cpaital to shareholders). Management have been pressed on this several times but won't do so as they're trying to ride a value increase in those listed stakes. There's also been zero evidence that the market gives them value for these positions in the share price.

They also formed another division a year or two ago to invest in adjacent start-ups. They seem to have burried that formal structure but the investment announced today shows if the structure is gone, the notion remains. Question comes back to the equity story - most invest in this company as an excellent operator. Few invested in this company bcause they want to be invested in an asset management company focussed on junior miners.

In my view, whilst they're cheap the share price could be a lot higher if they monetised their stakes where possible and run the capital structure decisions in a more conventional way

[robsy2] 18/7/2024 07:16

I am fairly new here but like what i am seeing and have topped up this morning.
Adam- what do you mean by Vanity Project?

[adamb1978] 18/7/2024 07:08

Decent figures. The slight negative is the H2 weighting and MSALABS ramp up being slower than expected bt still sharepad is saying that $345m is the market forecast for 2024, so that needs upgrading. $375m looks very achievable. Would have been nice to get an updated net debt figure, and 18 days after the period end, that should have been possible

I wont comment on the latest vanity project, sorry investment.

Looks very cheap still, probably not on a PE of more than 5x and less than book value

[rivaldo] 18/7/2024 06:57

Looks like an excellent Q2, with Q2 revenues up 17% from last year and up 11% on Q1.

Drilling, mining and Labs are all well up on last year and also on Q1 (except for Mining understandably).

Given contracts coming on stream CAPD unsurprisingly reiterate they'll meet the range of expectations for the year. Plus there's news today of a new contract win with Barrick in Zambia, and of an extension at Sukari.

Both fleet utilisation and ARPOR are very nicely up on Q1.

All in all very positive vibes:

[rivaldo] 28/6/2024 08:20

PDI's share price has dipped recently, but rose almost 10% last night on good drilling results from Bankan in Guinea.

More importantly, CAPD are the drilling contractor and there's lots going on and to look forward to:



"Managing Director Andrew Pardey, said:

“With PDI’s PFS outlining attractive optimisation opportunities from further resource development work, we have renewed our focus on this as we move forward with the early stages of our DFS field work.”

“The initial results at BC are very encouraging and confirm there is potential to upgrade Inferred Mineral Resources just below the PFS pit designs, which could ultimately lead to an increase in the current 207Koz BC Ore Reserve.1

Encouragingly, drilling also encountered positive intercepts outside the overall Mineral Resource estimate.”

“We are also pleased to advance the 800W and SB targets from exploration to resource development drilling.”

Also FYI, CAPD have around a £1.8m investment in Firefinch. Firefinch are to be delisted from the ASX due to the shares having been suspended from quotation for 2 years due to the difficulties with its resource in Mali.

Counter-intuitively, this situation looks good for CAPD, as Firefinch's assets of the Morila mine and its 17.6% stake in Leo Lithium are being sold/distributed and should result in a decent payout for CAPD:

[rivaldo] 19/6/2024 06:33

Rockwood Strategic PLC announced their full year results this morning. In it they disclose that CAPD was one of the new additions to their portfolio, and they summarise:

"Capital Limited 3.2% NAV, Market capitalisation £174m

The company's two key founders remain heavily involved and invested in the business they have successfully created over the last 15 years. The company started out providing drilling services to small African based mining companies and, having developed a reputation of best in class health and safety, service levels and efficiency, has gradually built a diversified client base including a number of world's major mining companies. The rig fleet is now deployed across several continents and is complimented by other services, the most important for our thesis being the 'laboratory services' division which is providing leading edge, environmentally friendly assays and sample testing to its clients.

Capital's strong margins, and attractive returns on capital will be enhanced by the strong growth of this division, competitors are valued very highly. Whilst Capital has activities across a number of metals, it still retains a bias to Gold.

We expect further growth in its key projects, realisations from its strategic equity stakes in early-stage clients and an eventual realisation of value in the laboratories business.

The valuation looks anomalous given the ROCE and growth record, its asset base and prospects."

[rivaldo] 12/6/2024 08:10

PDI announced "encouraging" drilling results last night from Bankan (where CAPD are the drilling contractors), with lots more drilling to come:



"Encouraging results have also been received from several new areas such as Sanifolon North and Sanikourou. Drilling at Argo will continue to follow-up the best results at depth and along strike, and expand early-stage
drilling to untested areas with good potential.”

“The exploration program at Argo is advancing to the next phase, and we are excited to have commenced transitioning the Fouwagbe and Sounsoun targets into resource definition drilling programs with the resource development team. We believe this will ultimately deliver the first Mineral Resource estimates outside the NEB and BC area, highlighting the multi-deposit potential of the Bankan Gold Project.”

“PDI’s regional exploration strategy is to maintain a steady flow of targets moving through the exploration pipeline and, in line with this strategy, the regional exploration team is extending its efforts beyond the Argo permit. Drilling is underway on the Bokoro permit, initially targeting prospective geochemistry anomalies and artisanal workings. We look forward to receiving the first results from these new areas."

[rivaldo] 10/6/2024 07:03

Encouraging to see a 107,458 share buy at the full 103p offer right on the bell on a Monday morning. And the bid price is now up to 102.5p.

[adamb1978] 05/6/2024 11:50

Thanks for the update hpcg. I'll try to have a listen later. Really hope that they are waking up to buybacks given where the share price is