Landore Resources Share Discussion Threads

[source] 19/10/2020 12:51

Wow, Tadpole Tech! That's a real blast from the past!!!Go well Lombiff. Regards

[lombiff] 19/10/2020 09:45

Thanks Source - I've had plenty of disasters (too many to name but Tadpole Technology and Regency Mines spring to mind, along with the LND/PGD story). You're right that timing is everything, but my biggest lessons learned were not to double-down on big losers (it's usually sending good money after bad), and to sit tight when things are difficult (rather than trying to day-trade through the bad times). I've also learned to let your winners run - I held about 250K Ashtead shares at a 6p average after the accounting crisis, and sold tranches of them all the way up to about 50p - I felt good at the time but, if I'd kept them all, they'd be worth around £6m today!

I built my portfolio of gold explorers between 2008-2012 and was spread-betting on the gold price (not for the faint-hearted but I grew my account from £10k to £60k in a few months!) - the portfolio grew nicely until gold collapsed in 2012 (wiping out my spread-betting account and giving me 90%-95% book losses on most of my holdings). I just sat tight through the "dark ages" of 2012-2019 and, in my mind, had written off the portfolio, although I kept all of the shares, really as a hedge against another financial crisis. I thought the levels of national and consumer debt was becoming unsustainable and would cause a fiat collapse at some point - didn't see Covid coming! - afaic, the full effect of all this printing is still to come.

I'm fortunate that, despite all my losers over the last 20+ years, I've made enough with GGP to offset all those previous losses. I don't think I'll get back above water here, but will be happy if we get to £1. Until then, I'll be sitting quietly at the back.

Good luck to patient longs!

[source] 19/10/2020 08:12

Thanks for your helpful history story Lombiff. Timing in these things seems a key lesson. Well done on your GGP though!Regards

[chutes01] 17/10/2020 11:56

we will see updates this week, looking better for recovery now

[lombiff] 16/10/2020 17:47

Good post richgit - thanks!

Imperial - you're further underwater than me then - sorry to hear that - I breakeven at £2 and I'll still retire when they hit £20 . . . but I'll probably be 94 at the time!

Good weekend all

[imperial3] 16/10/2020 15:54

robers 98

Sure thing.This just emphasises how much the long term investor has been wiped out.

[robers98] 16/10/2020 15:45

Imperial exactly a long way to go, 1.4p in old money around this level.

[imperial3] 16/10/2020 14:16

Taking into account the consolidation,just to recover the original funds I put in,these shares would have to reach £3! Such is my loss here.

[richgit] 16/10/2020 13:09

As I have said - I followed Eric Sprott after doing a lot of research.

The strong possibility that they may have the extra Gold that Mr Sprott believes (and others) could certainly propel this stock many times beyond its current Petty Cash Market Cap.

2 Men a shovel and a mere hoped Gold project will (in the months to come)be valued far more than this



Mining Bug has summed it up quite succinctly...

A low grade, low cost, simple open pit prospect. To date Landore has defined a NI43-101 compliant 1.015 million ounce gold resource within the Archean Greenbelt they are exploring. The grade is low; indicated resource is 747,000 contained gold at 1.06 g/t, and inferred resource is 268,000 at 0.91 g/t. But economics matter, and mineralisation is shallow, the metal is cheap to extract, with very strong metal recovery rates, limited reagent consumption, a simple processing path, and low capex and opex metallurgical results. This all favours a simple open pit mining operation akin to two other major producing 1 g/t projects in other parts of Ontario.

The project has strong economics at $1400 gold and above. Gold today is $1900, but the project on the extended case of operation looks to get to a 30% IRR at about $1400 gold. The resource looks very likely to be big enough to support this. That is before the (fingers crossed) bigger resource and improved economics from the upcoming autumn/winter drilling campaign. The study from February 2019 showed the following at $1500 gold. A 39% post-tax IRR, a $203m post-tax NPV, on $94m of initial capex. At $1900 gold, the economics are magnified. An unquantified IRR (but I would guess 60%), and a post-tax NPV of $370m. This has been missed by external investors as it was shoved into a drilling programme RNS on September 1st.

CEO: “in a position to push the resource towards a multi-million ounce gold resource..” Because Landore has been often cash strapped in the past, the Junior Lake property is not even close to being fully explored. The management team see a pathway towards doubling (or more) the gold resource base, making it ‘district scale’. There is upscaling potential from more exploration around the known resource…..

The BAM gold deposit is 3.7km in strike at present, but it is open down dip and along strike east to west. Soil sampling done last year found widespread gold mineralisation along strike to the west for a further 7km. And there is upscaling potential from depth drilling…..

Landore has only explored the depth down to a bit over 400 metres, and the PEA is only based on resource down to 230 metres. All of the main greenstone belts in North East Canada extend to depth. The road to materially increasing the resource is visible.

What about the other assets?

Nickel: The B4-7 deposit has 46,661 tonnes of contained Nickel equivalent. The VW Nickel-Copper deposit has an inferred 8,892 tonnes of Nickel equivalent. There is a broader aim to expanding this to over 100k tonnes but this is not the focus at the moment. But with Nickel, Copper and the PGM metals all enjoying a big price rebound, this could hold good value. I do not focus on this in my later valuation because it is early stage and it is not where money is being directed.
Nevada properties: 8 properties that have barely been touched and that Landore has scarcely talked about.

Strategy; Drill, Expand, Exit?

Once an asset is good enough from an economic view, it is important that management have a strategy that does not involve major dilution for shareholders. The plan here is looking more and more clear.

CEO Bill Humphries was MD at Brancote Holdings, a successful gold explorer that proved up a 3.8 million ounce gold resource, and flogged it on in a deal with Meridian gold after the turn of the century. The share price went up over 10 fold in this process. He also built up a resource at Patagonia Gold before becoming Landore CEO in 2015. He has been at the forefront of Landore’s gold discovery and progression.

But Humphries is about 80 years old, the CFO is in his early 60s. What is the phrase Humphries continues to use? The fundraising puts the Company in a position to push the resource towards a multi-million ounce gold resource, whilst continuing to explore potential corporate transactions with a view to maximising shareholder value.“ Bill owns ~6% of the company, and Sprott owns about 10%. J.W. Hudlestone is also a major shareholder and has backed many a placing over the past few years.

This ‘transaction’ message echoed by the recent Cenkos (broker) and Align (research) notes. All signs point towards an eventual corporate exit. My guess is that the road will be as follows, with a period of more and more newsflow and corporate promotion.

Autumn/winter drilling programme to kick off within 4 or so weeks. Will include 7.5km of infill and extension drilling, 3km for depth potential testing, and 3.5km for exploration targets. A 14km programme in total to complete March 2021. This should provide steady news flow
An updated resource estimate and PEA/scoping study economic framework following the drilling
Possible bulk sampling study to commence during 2021
Align has touted that a final investment decision could be taken in 2021

As Cenkos wrote, “So far Landore has shown it has a very low discovery cost per ounce (US$8.47 per ounce gold discovered) and a high drilling success rate (22.2 ounces of gold for every metre drilled on the BAM Zone) due to the consistency of the mineralisation and so we feel the chances for BAM to keep growing is good with possible further upside from additional targets on the structure. With such a solid growth potential and a significant land holding over 31km of greenstone belt Landore could be in a strong position to attract industry interest in the project and company overall.”

or as Align wrote, “A dramatic increase in resources at the BAM Gold Project looks to be on the cards as management attempt to grow shareholder value by teasing out the top take out price from pursuing a corporate transaction.”

Brokers do not write this stuff on the fly. This must be the loose messaging directly from the board. On the contingency that drilling results are good, the signs in my eyes point towards a corporate exit transaction in late 2021, aiming to maximise value a la the Brancote precedent.

That’s all great, but it does not matter if the stock isn’t cheap. Good news, nothing is priced in.

First let us nail down the valuation of the company right now. It is at a £16.9m market cap, with £2.6m net cash on hand from the last raise. That gives an enterprise value of £14.3m. However there are warrants outstanding from the Sprott placing, at 20p. We are below that level, but if one believes these will be exercised, then the true market cap today is £21.4m. But those warrants when exercised will bring in cash to the company. £4.9m to be precise. That is nice, as I consider the warrants as almost definite to be exercised. The existing £2.6m cash funds the drill campaign and takes us through to July 2021 according to the company. The warrants would bring in another £4.9m. So if the warrants were exercised today, the company would have £7.4m cash in hand and the enterprise value and true value of the company would still be £14m. So it is not very distortionary and Sprott is not the sort of investor to flip a placing.

There are many different valuation approaches to employ for an exploration company, but when existing economic studies are in place, life is made easier. The challenge becomes less about extrapolating grades, resource size, and location (guessing infrastructure costs et cetera), and it is more about scrutinising the economic studies. What does the NPV look like, what is the assumed metal price, what is the discount rate, how much capex, what are the contingencies et cetera. What I want to see is a reasonable metal/mineral price assumption, at least a 25% IRR (but normally 30%+), hopefully a capex tag that is not too big, and a big post-tax NPV compared to the market capitalisation.

A liquid metal/mineral small cap comparison. I utilise my own approach this time around to compare economic study data against other small cap UK miners. I discount companies operating with metals and minerals with low liquidity (like Lithium or Vanadium) as projects can often alter global supply/demand dynamics and therefore pricing. All said and done, I am looking at Enterprise Value/Net present value, accounting for the IRRs and metal price assumptions. I recommend you zoom in on the table underneath.
MiningBug analysis. UK listed miner project economics. Landore stands out

At spot prices, Landore trades at only 5% of its extended case NPV. There are a couple of other projects with this same ratio, but their IRRs are more marginal, and rely on metal/mineral prices above spot levels. More important than they, they are huge projects with massive capex price tags, that will rely a big funding package. Landore’s study uses a 5% discount rate; I wouldn’t want to go lower but this is typical of Canadian projects and for this purpose it is fine as most Africa projects in this list are at 8-10%. A 5 point differential is what I want to use for jurisdictional comparison. For a low capex project with a strong IRR, Landore’s 5% ratio is very low compared to most others let alone a Canadian project. If you are less bullish than me on the gold price and think it will fall back it is important you can be comfortable at a lower metal price. If you assume a $1500 gold price, the ratio is still only 9%.

Reversing the equation, a ratio of 20% EV/NPV implies investors are only discounting a NPV on the project of $93m (vs. $370m at spot gold, extended case), and that is before the new drilling campaign kicks off. If I apply different higher ratios than 20% the implied target share price levels are as underneath, and yes, they are much higher valuations. I prefer to be cautious in my assumptions and pin my target valuation off a 20% ratio, or 66p a share. That is still over 250% upside.

Does that make sense? With miners, I always prefer to strike valuation targets off real market valuations. I square my own valuation method to a variety of other pre-production mining valuation methods used by Cenkos and Align.

Cenkos illustrate several valuation methods. Of the ones they use, the approach I think is rigorous is their analysis of 100 global junior pre-reserve gold miners. They calculated the average $ value per total gold resource ounces, and also calculated the $ value per measured or indicated (M&I) ounce. They found that the valuation ratios are $75/ total resource ounce, and $161 per total M&I ounce. Applying the total resource method to Landore ironically gets to a 65p valuation, very similar to my own. A whole range of valuation methods are shown underneath.

There is no right approach to valuing pre-production miners, but when a variety of market based methods imply major upside, that gives me additional comfort in what I am independently calculating.

SUMMARY: In a world where gold is above $1400 (and especially at $1900), Landore’s asset is transformed. Landore already has a 1 million ounce resource at Junior Lake, and the low cost extraction lends the asset to an open pit mining style. The company is valued at 5% of the extended case post-tax NPV at spot gold, a fraction of most junior miners, despite operating in one of the best mining jurisdictions, with significant resource expansion potential at depth and along strike. With the financial backing of Sprott, and talk of evaluating corporate transactions to maximise shareholder value, I expect the rest of 2020 and 2021 to be very interesting for investors. Cheap, and long ignored, Canadian gold, that I think will be firmly on investors map before long.




IMHO

[lombiff] 16/10/2020 10:51

Thanks lochlea - I'd be quite happy with £1 - I was hovering over the sell button a couple of weeks ago when we spiked, but may hang on now to see how it plays out . . .

[tizzer] 16/10/2020 10:18

It's been a while since we were on the Toplist.....and Twitter is on fire ?

[lochlea] 16/10/2020 10:14

Lombiff - for me I think £1 is a reasonable/achievable target. Especially if there is an end game soonish for LND. If it does then I will be well happy and it'll make all the years holding worth it.

[lombiff] 16/10/2020 10:09

Hi Lochlea - it certainly feels a lifetime ago to me! At my "peak", I held 1.4m of these in a nominee account and another 1.2m in my SIPP - that was in the good old days when there were just about 180m shares in circulation so I suppose I held about 1.5% of the company. Market cap is about the same today but I've been diluted by a factor of 20.

We were trading at between 8p and 15p then (160p and 300p in today's prices), and I did sell about 400k shares in 2011 and 2012 (21p was my best sell).

I held on to the rest through the dark ages as I felt they weren't worth selling. So, my current holding has a book value of around £100k and I need £2 per share to get back above water. I'll be delighted if that ever happens but am not optimistic. LND and PGD have been a disaster for me, but it's all part of the game. For me, LND will be a convenient capital loss to offset some of my gain on GGP (I had 5m of those at one point but have been slicing all the way up from 2p - hindsight is a wonderful thing, eh?).

Best of luck with your holdings, and good luck to all patient longs.

[sportbilly1976] 16/10/2020 09:02

some nice buying so far this morning...hopefully a bit of blue to come soon...a block to clear at 23p, discount still being given?

[lochlea] 16/10/2020 08:56

Lombiff - I remember you posting on here what seems like a lifetime ago. I think you were claiming in the early days to almost be a major shareholder in LND.
This has been one long sad tale over 15+ years but looking very hopeful now for a happy ending. Given his age BH surely must be desperate for an exit & end game?

[lombiff] 15/10/2020 20:00

I'm with you, Imperial - have been in big here since 2006, after being tipped by a mate who had made big money from Brancote. I amassed a million shares at an average of 10p and told my kids I would retire when they reached £1.

Still have all of them so now, post consolidation, I will retire when they reach £20, which will be . . . . . never!

I also followed BH into PGD and lost a pile there too!

Might as well hang around here for another year or so to see what happens, but at least I could realise a nice big capital loss on my LND to offset my gains elsewhere!

All the best

[imperial3] 15/10/2020 19:30

Long term holders have all but been wiped out.There is absolutely no chance here of recovering your losses,as I well know to my cost.However for new investors these are worth a punt.

[robers98] 15/10/2020 19:02

Trust they on site & making progress.

"Drilling and exploration is planned to commence in October 2020 to further extend the known BAM Gold Zone to the east and west and to test any potential mineralisation identified in the recently completed soil sampling exploration program (as reported 9th December 2019). In addition, deep holes are planned to test the continuity of high grade mineralisation below the existing BAM Gold Deposit."

[sportbilly1976] 15/10/2020 16:03

MiningBug
@TheMiningBug
Scouting for new ideas over the last week has uncovered 2 ideas I can turn into blogs soon if the prices are right. One thing that sticks out is Landore Resources £LND #LND is at completely the wrong valuation and my 66p fair value in this mining market could be lowballed Pick

[chutes01] 12/10/2020 13:23

gold rising into year end, combined with upgrades to resource,bode well for gains here

[richgit] 09/10/2020 12:38

Lochlea.


William Humphries Chief Executive Officer.

This will be Brancote MK11 for Me.


It seems the exit strategy here is what made me a fortune with Brancote Mk1 as I always believed they would move it on without actually Mining.

Of course it is possible they do actually mine-and that the exit value will potentially be even greater

Either way my own (current )target is £400 Million and time/drilling results will guide that assessment .




I believe it will happen.



IMHO

[goodgrief] 09/10/2020 12:23

Recent investment by Eric Sprott lends credibility.

[lochlea] 09/10/2020 11:17

craig9550 - yes, there's still value in Lamaune Iron for the LTH. But any potential value down the track was I believe significantly diluted several years back with a deal done between LND & Lamaune.

richgit - LND is NOT a "Brancote Mk2". That title goes to Patagonia Gold which turned out to be a bit of a major disaster with the share price going from 70p to under a 1p. And BH & RP headed for the exit door no longer to be involved. RP has also called it a day here.

[richgit] 09/10/2020 10:40

Quite obviously- When the drilling commences the excitement begins for quite some
time.

As the stock rises - more Pi`s that wrote this off will start to believe that
Landore`s time has finally arrived to potentially become Brancote MK11 and beyond.

With already targets of 80+p as a base case this could easily become a serious multi-bagger over time

There could become quite a fight for stock between new investors and those that see a solid reason to reduce their averages.





Patience.



IMHO