|That would wreak havoc on a lot of balance sheets.
Personally I have written it off. It won't come in any time soon, probably, but it will be nice when it does.|
|Kimboy I think the accounting standards say if a debt has not been recovered with in a year then it must be provided for They might be able to put it into a contingent liability though Not sure how long this has been going on though it might just be 11 months by the end of June|
|A bad debt will not be in the next accounts because it isn't a bad debt unless RR go bust before June 30th.|
|In your profit estimates you should take account of f/x movements.|
|I presume a possible bad debt provision will go in the next accounts.|
|hysteresis - very good
We are never quite sure how much of the production is actually owned by GDP and how much is on some sort of contract and paid out at the prevailing rate when processed.
Even at Kili there is going to be a significant amount of bought in material.
I get the impression, and presumably the loan is indicative, that they want more purchased material as it gives greater security of production. As we have seen at Ghana there is a problem when you run out of supply.
They used to have a 6 year stockpile of wood chips. I suspect that they don't have that big a pile any more and indeed an incinerator was sent to Ghana, which was sourced within the company.
Hopefully they are nearly at the end of the formalities on the tailings. They did expect the paperwork to be done FY17, but we shall see.|
I think permitting will eventually be secured, despite the wheels turning slowly.
Goldplat, from memory, does price deals at the average gold price of the previous 30 days when structuring contracts. I did post a link showing this, although I cannot remember the name of the company that goldplat had the contract with, which demonstrated this.
Holding inventory is where the major exposure to the gold price is seen. When they buy feedstock, they assay a sample and then make an offer for the job lot based on it.
As this feedstock can be sat in the yard or simply piled up on the property for a period of time, adverse gold price moves obviously affect the return. This, I believe is why they terminated low grade contracts a while back. They always aim to pay cheap for the feedstock that they buy outright and some is acquired at nil cost, by goldplat sending people in to clear up the area on behalf of the mine/property owner.
As you say, it is a more stable business that traditional miners and goldplats ability to rotate grades to maintain the margin, is an enviable edge.|
|Although GDP aim for a nominal 20% margin independent of gold price I think that big moves in the gold price do impact those margins due to the need to hold inventory. Material will be priced roughly based on type, grade & current spot in most cases. The lag between purchase and processing gives rise to hysteresis in the margins.
This as you allude to is why 2014 was a bad year following the gold price drop in 2013. It seems to me that they have learnt some of the lessons of that period and have got better at sourcing but this hysteresis effect will never go away completely.
Of course this effect should even itself over time and therefore not impact the real business significantly. With Kili & Tailings GDP do have exposure to the Gold price but it is much less than a straight miner. They also vary the grade according to the gold price. In reality I think they are a much more stable business than the market gives them credit for but the gold price movements have a big impact on market sentiment.
The lack of sourcing & transport costs is why the tailings re-processing is such good business despite the relatively low grade. Let's hope they can get the permitting finally sorted soon.|
|Goldplats business model is aimed at a 20% margin. figures below include kili and everything else.
Figures in brackets are the margin for the recovery operations only.
Revenue minus cost of sales and admin costs give us;-
2010 margin achieved 19.31% (25.41%)
2011 margin achieved 15.57% (17.49%)
2012 margin achieved 17.26% (20.86%)
2013 margin achieved 9.13% (16.51%)
2014 margin achieved 0.73% (8.71%)
2015 margin achieved neg4.28% (5.18%)
2016 margin achieved 5.81% (11.55%)
Interims to dec 31st 2016 - margin achieved 7.00% (13.5%)
What the figures in brackets show us is that despite hitting a low of 5.18% margin at the recovery plants in the year to end june 2015, they have never made a loss in the 2010-2016 period covered.
With gold dropping in price in 2013, the overpriced contracts and stockpiles, the rand refinery issues, the loss of 90% of the business in Ghana (tolling, CIL), the care and maintenance of kili, the impact of the RGA process, the wasted cash on exploration projects and the board room bust ups, the recovery plants have never made a loss and are well on their way to returning to that 20% margin target.
This shows the durability of the business itself. It is a fundamentally strong business which has weathered all sorts of storms, remained profitable at the recovery plant level and now that the pressures are subsiding the increase in profitability is being seen as a result.|
|The numbers on production and profitability are;
Year PBT Production2010 1.943 21,4612011 3.428 28,1852012 5.24 31,3542013 2.57 35,0992014 -0.248 30,9742015 -0.796 30,5242016 1.942 37,666
Seen in this context the reasons for the losses are not immediately apparent.
I would say the major effect on the company was the loss of tolling, which earned between £1-2m for the company.
Also the rising gold price inflated profits and the falling gold price deflated them.
In addition the losses at Kili have been a significant drag.|
regarding treatment on minorities for EPS calcs
I have heard back from Gerard and he said that they have been approached on this issue and are checking with the auditors.|
|goldplat gets a mention in this article, nothing we didn't already know though..
|I am sure they are looking. IMV the most likely scenario is something Kenyan. In the 2016 AR they said;
...relationships with the Narok County Governor have been strengthened and new relationships developed with the Governor of the adjacent Migori County, which has significant potential for gold exploration, mining, sourcing and processing of tailings.
They have an advantage in Kenya completely disproportionate to their size, as they are the only gold producer in the country.
As for my estimates they are only guesses based on whatever information I can get hold of. The biggest threat is delay, as it is with all commodity companies, as things never seem to go to plan.
We do however know that Kili stage 2 is performing to name plate, and the crusher should be completed next month. We also 'know' that the Ghana elution will be built this year, so that is something.
Against that the stock dam will be likely 2 years after originally forecast.
I think we are probably 50% undervalued on the basis of the current run rate, but that won't become evident till we get some figures (presuming it is true).|
|Kimboy - presumably the board have their eye on something and quite sensibly are keeping it under their caps? I agree that given no major bananas should be on the upside of 10p by the years end. I think that is fairly conservative based on your estimates.|
|On the eps issue it seems to have been done this way for a number of years. In the 2016 AR it says;
The calculation of basic earnings per share at 30 June 2016 was based on the profit attributable to ordinary shareholders of £1,408,000 (2015: loss £892,000), and a weighted average number of ordinary shares outstanding of 168,364,288 (2015: 168,441,000)
Doesn't seem right to me.
I think cameron identifies the main risks which are execution risk and Africa - not contracts, blood diamonds and whatever else gets brought up.
IMV GDP has a clear path to producing something like 5pps. The question is what is the execution risk of this strategy?
I don't think finance is a particular risk. If cash flow isn't as strong as I expect then the investments will be delayed rather than not happen.
If GDP are going to do a fund raising I think we will be well through 10p by the end of the year. The only problem is we don't have anything to spend any raised funds on, or at least nothing that can't be internally funded at present.|
|Perhaps Gerard would like to avoid the possibility of no conversions on CLS and would end up with a largish debt to pay back in the future, after paying out coupons along the way.
If the stock falls considerably for one reason or another, then conversion may not be attractive to CLS holders and therefore, the debt would become due at some point.
With this pre-export finance facility he gets the required finance and it is a revolving facility. They can keep this facility open for as long as required by mutual agreement and finance future projects without having to re-tap finance options.
For me to buy a CLS, the coupon would have to be attractive and whilst it would be sold forward at a strike price higher than the current price, I wouldn't want to be stuck in it for years, without the option to exit when necessary. I.e long lock in to begin with.|
|Floating an idea
Gerard has stated that he is not keen to issue shares in a rights issue at under 10p. I don't agree with that view but he must have good reasons for it e.g. underwriting costs etc.
Instead Goldplat could issue say a sterling 10% Convertible Loan Stock say for 10 years convertible at 10p into an ordinary Goldplat share. The company could say issue 1 unit of 10 pence loan stock for every 4 shares and raise approx £4m. Those stock units not taken up could be acquired or offered to existing shareholders - no need for underwriting or minimum subscription. Company gets what the shareholders or market is prepared to buy.
Gerard gets his 10pence a share
Investors get a good rate of interest at no real cost to the company as borrows at nearly 10% from bankers
Company gets working capital and money to invest rather than waiting for cashflow from profits
Big question - would you buy the Convertible Loan Stock??? I would - post your thoughts|
I have also sent an email to Gerard enquiring about the treatment of minorities regarding EPS calcs
Hopefully hear back soon.|
You appear to be reliable in your calculation, although tax at the low rates in Ghana and tax losses in Kenya may not have much impact.
At the current price of 7.5 we are on a prospective PE ratio of 3.44.
This is very low for a company that is expected to increase its profit over the next few years.
There are many risks with this company - execution, Africa, RR litigation etc. etc which have been well documented on this site.
Overall I personally feel this is too low and hope that a price of 10p can be reached well before the end of next year|
|Tks Cameron for your response.
This is why I indicated the part regarding the minorities.
I am no accountant either, however, I can see that IAS33 excludes NCI. So, thanks for this|
You are not quite correct
They have used the figure of £933k which includes the minority interest
If you check the accounting standards it states clearly that it should be the profit after tax attributable to the members of the parent company. In my opinion the figure used for the last 6 mths should be £742k and not £933k.
This will give a lower eps. This will feed through to Price Earnings ratios.
As I said earlier I have referred this to Visagie and the auditors for their comments
There appears a sort of consensus that the Company's reported figure is incorrect - I will advise of any response from Auditors or the company|
Re: 12 months production target. The last statement in the update was:
'I believe Goldplat is on track to meet planned targets for FY 2017 and look forward to keeping our shareholders updated with our continued progress.'
Given that this was an operational update I took it to mean that Kisbey-Green was speaking operationally not financially and that would include production.
Re: EPS I think you are right - under IAS33 they should be excluding minority interests.
Shares in issue: 167441000 EPSIncome incl. Exchange Translation £2,117,000 1.26Income incl. Exchange Translation - Owners £1,926,000 1.15Income excl. Exchange Translation £933,000 0.56Income excl. Exchange Translation - Owners £742,000 0.44Reported 0.56
Although I'm not an accountant so don't know if there is a technical reason why they don't.
Hopefully we get either a correction or an explanation of why it isn't right to exclude minority interests in this case.
The minority interest is related to SA only so as Kilimepesa & Ghana increase their share of group profitability the difference will become less.|
On the eps I will show you how I calculate it and you can see what you reckon.
I start with £742k attributable to GDP from the interims. Then I add £712k which was the loss on Kili which has been removed thanks to stage 1 at Kili.
That would give an attributable profit of £1.45m at the interims, or £2.9m annualised.
Then there is stage 2 of kili, which is virtually completed, which will add around £0.75m to annual profit for a total profit of £3.65m.
If divided by 167m shares this gives an eps of 2.18p.|
|More sells today in fact all trades were sell, ah well I guess people are getting wised up!|