Goldplat Share Discussion Threads

[wigwammer] 30/9/2016 14:51

The vsa note is full of errors.Any idea how the free cash flow chart on page 3 can tally with the cash flow forecasts on page 14?Pretty amateur stuff.

[sea7] 30/9/2016 09:55

Tks for that analysis kb.

Gerard stated that with gold where it is, it allows GDP to self fund most things, so we should not have to concern ourselves about the ability of the company to deliver on its stated goals.

The margins are pretty thin and plenty of scope for increases.

After admin and cost of sales are removed, we are left with about $40 oz profit overall, from a group perspective, before finance income/taxation etc.

Plenty of opportunity to increase this figure and then we have the expected increases to come from expansion and upgrades.

End of Q1 today, so we shouldn't have to wait too long for some numbers.

[kimboy2] 30/9/2016 09:30

A few interesting snippets from VSA. I still think they are hopelessly conservative, but then I would wouldn't I.

For Kili they are expecting production to be 4.5kozs this year. Presumably that is 2kozs from the existing plant and 2.5kozs from 6 months of the new CIL.

That would put full year capacity at 5kozs and at 80tpd the grade of material would be 5.5g/t. Clearly all of that isn't coming out of their own mine.

If they could get the profit per oz up to $4-500/oz then we are looking at something producing a £2m profit rather than a £600k loss pa. You can see why it may be the major catalyst of share price changes.

Talking of margins;

SA Q1/16 Q2/16 Q3/16 Q4/16Prod 6,141 5,690 4,864 12,083Profit 0.415 0.275 0.845 0.57 Profit/oz 67 48 173 47 Ghana Prod 2797 1897 1885 304Profit 0.156 0.146 0.156 -0.021 Profit/oz 55 76 82 0 Kili Prod 643 289 503 570Profit -0.115 -0.217 -0.169 -0.21 Profit/oz -178 -75 -33 -36



These seem to me pretty thin margins and I would have thought that there was scope for an expansion of these.

VSA are also forecasting that SA will do 23kozs next year. Well they apparently did 12kozs in Q4/16 and only 3kozs of that was the RR deal. We will no doubt get a better clue in a months time.

There are also clearly plans to double Ghana production this year. A combination of more material and better grades. I would be expecting £1m+ from Ghana this year.

Anyway VSA are forecasting an operating profit of £1.9m for this year. They were out by a factor of 3 last year let's hope for the same this year.

[sea7] 29/9/2016 14:45

I see in the production forecasts on page 6, VSA are forecasting 23k ozs of production from Kili and 4.5k oz from south africa. Guess they got the typing the wrong way round, along with their forecasts for subsequent years.

They reckon that production will "normalise" at South africa, around 23k per year.
I think they are way out with that.

[sea7] 29/9/2016 14:21

I see they have labelled it as full year results! tks KB

[kimboy2] 29/9/2016 14:09

The VSA note is on the website;

[dangersimpson2] 28/9/2016 23:11

My reading is the 1.3m late trade early on 27/9 was a buy and balanced all the sells that happened on results day 26/9 - the multitude of sells could have been Nick G, which would explain why someone/people kept selling on good results but the 1.3m prob wasn't. The 2x1.3m late today probably a transfer between holders. Given the same number could be the same block and be a transfer from broker to client for example, or two other holders and the 1.3m matching the late trade might have just been a coincidence. Not sure we will ever know since 1.3m on it's own is not notifiable especially if it was one block reported multiple times.

[sea7] 28/9/2016 18:26

Couple of fairly large 1.3m share trades have shown up as late trades from the 26th Sept. They look like sells, based on the prices at the time.

Could be Nick selling down further.

[sea7] 27/9/2016 19:41

I am looking forward to who the brazilian business partner is. Whilst Gerard did allude to leveraging off existing relationships with anglogold ashanti, I would have expected them to have spoken with the likes of serabi gold, who operate mines in brazil as well. There should be a fair bit of feedstock around for goldplat to acquire from these two players alone.

[sea7] 27/9/2016 14:47

That sounds about right to me KB.

[kimboy2] 27/9/2016 14:07

I think he said it wasn't sustaiable at the 12kozs per quarter but the figure given was 36-40kozs pa IIRC.

[dangersimpson2] 27/9/2016 13:47

Should get Q1 figures end-Oct so hopefully will get a better feel going forward then.

[sea7] 27/9/2016 13:32

Gerard did state that the rate was not sustainable at those levels, so it will be good to see what the Q1 figures come out at.

[dangersimpson2] 27/9/2016 13:16

That's why I think the production increase is due to the RR silver material. Normally they would have been dropping the grade in the positive gold price/fx environment but instead they put through the RR material. I'm think this was a higher grade than they would normally process given the market conditions hence the production uplift and why management have said that production level is a little bit higher than the would look to maintain going forward.

[sea7] 27/9/2016 10:56

DS,

As you know, goldplat rotates the grades of material to maintain its margin, which usually means that its high grade stock piles are managed as follows:-

higher gold price - less high grade material
stronger rand - more high grade material
stronger dollar - less high grade material
supplier price hikes - more high grade material
operational challenges - more high grade material

If suppliers try to hike prices, then we have the flexibility to turn down the feedstock and process inventory.

As we know the gold price has moved up and the dollar is still strong, rand is weaker in gold terms, supplier costs have increased 10% against 21% increase in revenue and the operational challenges are abating.

All this adds up to a lot less high grade material being put through at this time.
The stockpiles of lower grade stuff will be taking centre stage at the moment.

They blend the mix to maintain the margins, so we will see high grade stuff going through, however, it will be a lower proportion of total throughput.

All IMO.

[dangersimpson2] 27/9/2016 10:35

My guess for the change in production profile is it's to do with taking the RR silver feedstock which is different material than they normally process, although when in the year that actually went in is not defined. The other factor that has a big impact is grade. With low grade resources the sheer volume of stuff you can put through the crusher, incinerator, shot blast facility is the bottle-neck. Increasing the input grade has a big impact on production when the process is primary stage limited.

In terms of going back to mining I think the key is that they have a competitive advantage. That could be process or metallurgy knowledge from the recovery ops or Kili. What I won't support is them going out of their core competency again purely to pursue growth. Often the best times to buy assets is at the end of the downside of the underlying commodity cycle - you have to be counter-cyclical tho and save enough cash in the good times to take advantage.

Also raising debt, even against a known production profile with hedged pricing, adds risk to the business. If GDP had debt when they had the RR issues they wouldn't have survived. So again I would would only support this if there was a very clear definition of the benefits from faster capex implementation.

[sea7] 27/9/2016 09:12

Ghana got its gold licence renewed, so we just need the EPA licences and some clarity over the timetable for the elution column.

[sea7] 27/9/2016 09:09

Over the next few months I am expecting the:-

NEC approval and appointment
announcement of S american partners
Kili moving into 1st stage production at new plant - milling before end december 2016,
then getting the crushing front end up and running early next year.
resolution with rand refinery.

The Q1 update in the next few weeks, should give us a much clearer picture of what we can expect as a normal run rate, without the rand contract clouding the view.

The one difference between Gerard and Demetri is that Gerard is expanding the recovery side as well as the mining side, however, I do not expect him to make the same mistakes.

I see that Ghana had £4.4m of precious metals purchases from GPL, which is a significant uplift from the £1.8m last year. These purchases are not shown in the
table of production.

The CIL plant, is shown as a sale to kili at £225k. It does say "sale of asset" so I presume they mean the CIL plant.

[kimboy2] 27/9/2016 08:50

I am finding GDP very difficult to predict. The virtual doubling of capacity at SA seems to have come out of nowhere (was anyone aware of this), yet despite production going up 2.5X in the last quarter SA profits fell 30%.

If production in SA is going to be 36-40kozs, which it is apparently, then a profit of $200/oz doesn't seem outrageous. Anyway only a month to wait till the next quarter which will give us a better idea.

The question of funding is interesting. Funds are basically either raised from debt or equity. He seems to have ruled out an equity raise at GDP level, though they have been trying to JV Kili.

I was surprised at the suggestion that the company should be looking to mine 40kozs pa. I thought we had been there. he did suggest that good opportunities were difficult to find so perhaps it won't happen.

The lesson of the Manolis years is to make sure that the bread and butter is bulletproof, and then gamble the profits on mining adventures if you have to.

I see that SA also had a funding agreement similar to Ghana earlier. I think that once they get the stock dam is going they could in effect mortgage that income to raise a cash sum if they wanted. £5m would take 3 -4 years to pay back.

What I am hoping for this year in terms of profits is;
SA £6m
Ghana £1m
Kili £0

That would work out at an eps 2p per share.

[sea7] 27/9/2016 07:48

With all the work going on at kili, the new mining bill in place and the amount of equity to cede to the government entity known, the attractiveness of the kili project will have become far more appealing to other players in the sector. The likelyhood of a j/v will get more of a boost when the project arrives at operational profitability.

I knew from the moment the kenyan authorities announced their initial plan to make foreign companies cede 35% of equity to locals back in October 2012 that the project was effectively "dead in the water" until some clarity over goldplats position regarding kili was known.

We are four years down the line from this and still some way off making the project work, although it does seem like we are closer than before.

Gerard is keen to explore other mining opportunities as well as additional recovery plans, which is in line with goldplats stated strategy in the listing document.

Based on the new teams track record to date, I am fairly confident of the correct funding solutions being presented.

[dangersimpson2] 26/9/2016 23:56

Kilimepesa has been a bit of a millstone tbh. It's been important to get it to a state where it is cashflow positive so that it isn't a risk to the group if the gold price turns down at any point. But it isn't necessarily the capex that generates the highest return or shortest payback. So I can sense a bit of frustration that they haven't been able to spend as much as they would have liked on the recovery operations. But we are where we are and successful investments are never made by dwelling on the past.

Given the comments about not being willing to raise equity anywhere near the current price but a desire to bolster the balance sheet to invest more heavily in the quick pay-back recovery operations I think they view an equity investment in the Kilimepesa subsidiary as the preferred option. The deal with Ashanti shows there are companies out there that may be willing to do a deal on explo/early production assets.

The other option would be debt/convertible/preferred stock but all of those have a downside whereas diluting the Kilimepesa interest only limits the upside form a successful turnaround. It may be wishful thinking and in reality they may have to move more slowly with capex purely from internal generated cashflow. The good news is that we know there is more to come operationally from the recovery operations and TSF when that capital is available to be directed that way.

[discodave4] 26/9/2016 20:33

Thanks S7, only listened to the stocktube interview (cannot recall payables).Mixed messages though S7, with reference to POG:"We don't need it to stay where it is. At the beginning of the year [the price] was a lot lower than it is now, and we were making money," He also said:"It'd be very nice if it stays where it is because it allows us to finance our projects internally".DD

[sea7] 26/9/2016 20:24

Gerard mentions in the interviews that the net cash position at year end does contain a lot of payables, meaning a lot of it has been paid out since.

The current cash generation is being spent on non cash generative capex in kenya and he feels that this is the wrong way round. So it seems to me that they want to bolster the balance sheet to use for such capex and retain most of the cash generated for other things.

This does indicate that kili may end up being a go it alone venture for the foreseeable future, the TSF project, the 2nd elution column and expansion in ghana, the third elution column in SA and the possible south american plant all need funding. If they can bolster the balance sheet one way or another, then a lot of this capex could be brought forward and the balance sheet would not be under so much pressure all the time.

[discodave4] 26/9/2016 20:12

Thanks S7,Just wondering why they feel that they need additional capital funding (debt) when they have generated at least £3.3m internally and only spent c £1.3m. Looks like a lot more is going to be spent on Kili, and / or an acquisition perhaps in Brazil?.Net off bad debt (RR) and poor sterling and pbt would have been only £500k..........just saying!.KB2,Can you explain why the RR dispute was not contractual (your point 9).DD

[sea7] 26/9/2016 19:31

In both the interviews Gerard alludes to the capital structure of the group and the fact that cash generation is primarily in South Africa, which is funding kili. He indicates that the capital structure needs looking at and they may look to strengthen the group through some sort of financing. He did say that at this share price they would not look at equity issue, so other options are being investigated.

He said that he would like to reward the shareholders that bought in at 10p-12p in the same way that those of us who bought in at 1.8p have been. He would be happier then.

It will be interesting to see what they decide to do on this point