Hambledon Mining Share Discussion Threads

[goatherd] 09/12/2013 11:05

Kazakhstan gold royalties are 5%, and although Kazakhstan corporation tax is 15% I think it is prudent to calculate of the UK 20%. So that would reduce the $74m p.a. Chip mentions above to $55m.

HBF say they expect to get to 100koz/year by 2018. IF they were to do that by 2016 [and they have all the process plant, and a decline, and some mining plant] then 3 x 55m would self finance the whole $130. The new shafts are not needed for the 100k pa, all of which could be served by the decline.

Could we be looking at a mining company which under-promises and over-achieves? It would be a novel experience!

[phillis] 09/12/2013 11:04

so what as long as they pay the appropriate price

[king suarez] 09/12/2013 10:55

Sounds v interesting, but any thoughts on:

1) How the $130m capex is likely to be financed?
2) What happens after conversion of the loan notes?

The majority shareholders will own something like 80% of the company - is there a risk of this then being taken private?

[chipperfrd] 07/12/2013 15:21

goatherd,

We just don't have enough details!

If it was just 100koz pa for 22 years then they would only be expecting to mine 2.2Moz from the U/G at Seki, not the 6m reported.

If one assumes PoG at $1300/oz (they may be using a lower figure) and LoM production costs of $560/oz then OP margin would be c. 74m pa or $1.628B over the 22 years.

However, there would be taxes and possibly royalties to come out of that. Also they are estimating $1B Free Cash Flow, ie after inward investment and financing. We already know that LoM development is estimated at $130m, so the $1.628B above would reduce to $1.5B, and there are bound to be further costs eating into FCF. So $1B FCF does look reasonable on the bare details supplied.
Chip

[chipperfrd] 07/12/2013 14:58

Yes, it is interesting that they are estimating a mine life of 22 years.

At 100koz pa it looks too short so their longer-term plan would appear to involve considerably more processing throughput - especially with the potential being offered by the neighbouring Kara ore fields (although they first need to secure licenses to operate there).

The record of the new management so far has been pretty good.

The tailings dam fine issues that crippled the previous management appear to have been resolved. Underground mining has been resumed and clearly they have continued with an extensive U/G drilling campaign.

They also appear to have resolved the Akmola deal with at least some of the cash being returned shortly.

Then there is the big surprise of the neighbouring deposit which might well turn out to be a company maker if it gets the State go-ahead for exploitation and has anything close to the reported 9m oz at 3g/t estimated.

Thus far, it is the new majority owners who have put up all the cash (£12m for the partial T/O and $27.5m for the Kara ore field) - so they do appear pretty confident about the risk to their own cash. So I will just continue to tag along for the ride. Things certainly look a lot brighter than they did a year ago.
Chip

[goatherd] 07/12/2013 14:41

One rather odd discrepancy -

HMB say "22 year Life of Mine ("LOM") with robust economics and projected to generate in the region of US$1 billion in free cash flow, according to management estimates" which would earn around $5 per share.

But my back of an envelope calculation comes out much more like $10b.

[goatherd] 07/12/2013 14:29

That Proactive Investor article sounds to me as if the writer was a bit peeved that RMB would not give him all the information he wanted?

Sort of sour grapes perhaps?

[dofmeister] 07/12/2013 14:23

It wouldn't make much difference anyway if they were 50% off and the resource was 4m oz !! Plus the new licence adjacent for another 9m oz !!

I recall that with the 7th leach tank added the plant is capable of processing in excess of 1m tonnes per annum of ore, so the 100,000 oz per annum should be easily achieved and its that we should be focused,together with cash costs. The resource at in excess of 2m oz is significant enough on its own.

[chipperfrd] 07/12/2013 12:09

It was quite clear in the RNS and presentation that these were internally generated estimates and that an independent CPR would be released early in 2014. So, of course, such figures cannot be used with confidence until the CPR is available.

SP Angel were displaced as advisor/broker a year ago and may well be proved right or wrong - who knows!

But as for the probability or not of such an improvement in the Seki UG resources neither share price Angel or the market can really know the outcome of the ongoing drilling programme.

The last drilling report was 12th Dec 2012 with this summary of significant intersections:

The results from the programme up to 9th December 2012 are set out below:

Since the last update in June 2012, 6,343metres of drilling have been completed;
One hundred and seventy two holes drilled to date;
Total of 21,249 metres drilled since programme started;
The main intersections since the last update include:
- Hole D125 – 2.4m at 22.77g/t Au and 5m at 6.25g/t,
- Hole D127 – 14m at 7.04g/t Au,
- Hole D134 – 9m at 10.57g/t Au and 13m at 3.55g/t Au,
- Hole D141 – 10m at 3.69g/t Au,
- Hole D146 – 13m at 4.85g/t Au,
- Hole D149 – 22m at 9.23g/t Au,
- Hole D153 – 17m at 6.07g/t Au,
- Hole D154 – 24m at 6.94g/t Au,
- Hole D166 – 7.7m at 5.22g/t Au,
- Hole D168 – 4.7m at 4.22g/t Au and 16m at 8g/t Au.

172 drill holes have been completed in the upper levels of the underground ore zones and the results are consistent and in many areas exceed the previous geological and mineral resource modelling previously carried out.

Actually, they are pretty good long high grade intercepts from that 6.3km of drilling!

The prior drilling results were reported in June:

The results from the programme up to 12th June 2012 are set out below:

126 holes drilled to date, totalling 14,906 metres,

· The main intersections since the last update include:
· Hole D116 - 3m at 5.08g/t Au and 2m at 6.55g/t Au,
· Hole D117 - 2m at 9.88g/t Au and 4m at 6.46g/t Au,
· Hole D118 - 12m at 16.68g/t Au,
· Hole D119 - 2m at 4.55g/t Au,
· Hole D120 - 10m at 3.68g/t Au.

So, over the last 12 months they have continued the drilling campaign from 21.2km to the current 53km (ie they have added another 31.5km of U/G drilling).

What none of us know (including share price Angel) is just how good or bad that has gone.

The resource was clearly going to be increased significantly, just from the results achieved up to 9/12/12, so it is not completely improbable that after another 30km of drilling they have the confidence to make their own estimate of an additional 4moz or so to the U/G resource.

The last resource statement was in Dec 2010. At that time the CPR quoted:
Indicated, 2.65mt @ 5.2g/t for 443Koz at 2g/t cutoff
Inferred, 7.22mt @ 5.2g/t for 1,207koz at 2g/t cutoff
there was also another 5.97mt at marginal grade for 145koz.

The internal estimate uses a higher cutoff (3g/t instead of 2g/t) presumably to reflect the lower gold price and would therefore exclude the marginal material.

The grade quoted at 5.34g/t for the updated deposit would therefore appear reasonable at the higher cutoff.

And frankly, finding another 4m oz after 31km of drilling also looks quite feasible to me.

Simple answer for those who doubt the internal estimate is to wait for the CPR.
Chip

[chestnuts] 07/12/2013 09:33

Infernoe posted this on the other hmb thread.


Proactive's take on today's story:

www.proactiveinvestors.co.uk/columns/sp-angel/14841/todays-market-view-including-hambledon-mining-14841.html

Hambledon Mining (LON:HMB) – Lack of published data cast doubt over management estimates

Avoid

• Hambledon Mining have announced a strategic review of its underground mining operation.

• The company have also reported an increase in 'management's estimate of underground resources from 1.8moz to approximately 6moz of gold with average grade of 5.34g/t. This revised estimate results is apparently from an extensive underground drilling programme of over 53,000 metres.'

• Our view is that these figures may represent a significant overestimate and are possibly misguided in their formulation.

• They are not JORC or NI 43-101 resource estimates and should not be afforded this level of confidence.

• We are keen to see the new CPR being prepared by Venmyn Deloitte when it is published early in 2014.

• We have spoken to directors and consultants in the past, none of whom have ever suggested potential for an increase in grade and resource of this scale. We have not had sight of the data from the 53,000m of drilling so we are not able to give a more informed view.

• Previous management stopped the underground operations due to regulatory related issues and high capital costs for development.

• Capital costs: management estimates are for capital costs of $130m for capital and we can not see how this will be covered without the addition of significant further debt and equity raising.

• Previous management estimates had an initial capital cost of $60m, the statement does not say how this is going to be covered.

• The company reported cash costs of $1,055/oz in H1 2013 from the near-finished Seki open cast mine.

• Underground mine: the team have restarted the underground mine processed 5,000t of ore from the underground mine before June this year with a grade of around 4g/t.

• The new team plan to raise gold production to 100,000oz pa by 2017 rising from 27,500oz of gold production this year.

• The statement reckons the mine has potential to generate around $1 billion of free cash flow over its 22 year mine life on management estimates. We somehow suspect that a new JORC 2012 report might not support this view.

Conclusion: The comments in this piece represent our views on the company's published announcement. We have not had sight of the new data and it is our view that investors should treat these estimates with great caution till the data is published and a fully independent view confirms these numbers.

[1nf3rn0] 07/12/2013 00:27

Their words not mine. Interesting comments though aren't they. HMB always made big promises and told a good story. Trying to pump it up ready for a fund raising? We'll see.

I opened a position first thing this morning on the news as an announcement like that, inaccurate or not, was bound to cause a large spike for a highly speculative stock (luckily the market was asleep so it didnt open up straight away). I doubt I'll hold the position for long though as the rise is bound to get eroded away by doubt and mistrust.

[lfdkmp] 07/12/2013 00:12

Well, prepare to be jolly well self-satisfied.......or get a big cloth to wipe copious amounts of egg off face!

[1nf3rn0] 06/12/2013 23:59

Proactive's take on today's story:

www.proactiveinvestors.co.uk/columns/sp-angel/14841/todays-market-view-including-hambledon-mining-14841.html

Hambledon Mining (LON:HMB) – Lack of published data cast doubt over management estimates

Avoid

• Hambledon Mining have announced a strategic review of its underground mining operation.

• The company have also reported an increase in 'management's estimate of underground resources from 1.8moz to approximately 6moz of gold with average grade of 5.34g/t. This revised estimate results is apparently from an extensive underground drilling programme of over 53,000 metres.'

• Our view is that these figures may represent a significant overestimate and are possibly misguided in their formulation.

• They are not JORC or NI 43-101 resource estimates and should not be afforded this level of confidence.

• We are keen to see the new CPR being prepared by Venmyn Deloitte when it is published early in 2014.

• We have spoken to directors and consultants in the past, none of whom have ever suggested potential for an increase in grade and resource of this scale. We have not had sight of the data from the 53,000m of drilling so we are not able to give a more informed view.

• Previous management stopped the underground operations due to regulatory related issues and high capital costs for development.

• Capital costs: management estimates are for capital costs of $130m for capital and we can not see how this will be covered without the addition of significant further debt and equity raising.

• Previous management estimates had an initial capital cost of $60m, the statement does not say how this is going to be covered.

• The company reported cash costs of $1,055/oz in H1 2013 from the near-finished Seki open cast mine.

• Underground mine: the team have restarted the underground mine processed 5,000t of ore from the underground mine before June this year with a grade of around 4g/t.

• The new team plan to raise gold production to 100,000oz pa by 2017 rising from 27,500oz of gold production this year.

• The statement reckons the mine has potential to generate around $1 billion of free cash flow over its 22 year mine life on management estimates. We somehow suspect that a new JORC 2012 report might not support this view.

Conclusion: The comments in this piece represent our views on the company's published announcement. We have not had sight of the new data and it is our view that investors should treat these estimates with great caution till the data is published and a fully independent view confirms these numbers.

[chestnuts] 06/12/2013 17:09

Well what a review they have had, its a pity they never got a third party in to JORC, as i said in my last post is history going to repeat itself, and have a fund raising, now i cant see any fund managers buying with one party holding more than 60%, so maybe this will go upto above 75%, in the placing , right issue, and then taken private.

[tightfist] 06/12/2013 12:42

Whoops! Duplicate posting.....

[pro_better] 06/12/2013 11:46

too good to be true...i am suspicious here that they are going to raise some cash soon....$130m capital is needed...also the figures are not JORCed...so these are only estimates without any data being given to market...so third party independent report is needed to see if there is any credibility on those figures...

[chipperfrd] 06/12/2013 11:40

I had wondered why they let the Akmola acquisition go away without appearing to make a fight - but I think it is becoming clear that even Akmola was not offering the potential that Seki and Kara have.

My guess is that they already had eyes on the Kara ore field acquisition before making the bid for HMB.

The neighbouring location and availability of a relatively modern 850ktpa gold/silver plant at a fire-sale price just fell right into their lap.

It all seems to make perfect sense!
Chip

[aaaaar] 06/12/2013 11:21

As it was the first time round.....but this time we are 'connected'(we hope).

[chipperfrd] 06/12/2013 11:16

This new management are clearly working to a long term plan.

An updated CPR on the Seki UG resources/reserves will underscore that part of the expansion plan - so we will need to wait for a few more months to get their internally generated estimate of c. 6moz @ 5.34g/t confirmed.

The other highly interesting development is the prospective 9m oz @ 3g/t on the neighbouring Karasuyskoye ore field. A granting of licence for exploitation there should prompt another CPR on those deposits and really put HMB on the map with respect to a potentially huge resource for such a small company.

The question might then be: does the low pre-production Capex requirement for Kara push it to the forefront in terms of cash generation to fund the initial $100m needed to get the Seki UG developed?

Some quick & dirty calculations would indicate that the current plant (850,000tpa) could produce around 60-70koz from the Kara 3g/t ore assuming a recovery of c. 85%. Costs are, of course, unknown as yet. But if HMB are projecting c. $560/oz for the prospective UG operation at Seki then one can assume that a straight 'truck & shovel, haul' operation at Kara should be at a similar or lower operating cost.

In such an event the potential OPCF from Kara could be of the order of $40-50m per annum which could cover the next 3 years of CAPEX for Seki (at an assumed PoG of just $1300/oz).

Incidentally, again using rough & dirty calculations: the HMB estimate of 100koz pa from the expanded Seki UG does look feasible on their quoted ore grade. ie 850,000t at 5.34g/t = 145koz contained gold. Applying a dilution factor and recovery at 91% does lead to a potential level of production close to 100koz pa.

Still lots of 'boxes to be ticked' and best we don't get carried away in wild speculation until each stage gets confirmed - but it is a rather enticing prospect if it were all to work out.
Chip

[tightfist] 06/12/2013 11:15

If they can generate an average $45m pa free cash flow over 22 years, I think we can stand some dilution, as long as it is raised at a substantially higher share price (which it will be). Remember the market cap this minute is only £25m or $41m!

[lfdkmp] 06/12/2013 10:37

Phillis

If the share price (say) trebles, and I am diluted (say) 25% I won't be complaining.

Of course depends on the actual performance and the actual (if any) dilution.

[phillis] 06/12/2013 10:29

the actual and potential recovery % are impressive

[phillis] 06/12/2013 10:11

aaaarrggghhh!

dilution!

[aaaaar] 06/12/2013 10:10

Expect Nutty to pick up on the final word....

"The majority of this capex is forecast to be met through internally generated cash flow, with the balance to be funded through a combination of debt and, if appropriate, equity."