Medusa Share Discussion Threads

[chipperfrd] 05/3/2016 22:07

Oz Stock comparisons

As of 31/12/15.
..... . ..... . .......... . .... .. ... .... Net . ....... .. US$ ......... Net
Stock . PE(x) . Cash ratio . ROCE .. ROE . Margin . EBIT/Ev .. AIC . Debt/Equity . Magic
BDR ... -8.0 ......... 0.1 . -21% . -22% ... -14% .... -12% . 1226 ........ 60% .. -33%
EVN ... 18.3 ......... 0.2 ... 3% ... 5% .... 12% ...... 5% . 2340 ........ 29% .... 8%
KCN .. -11.7 ......... 0.4 .. -5% .. -1% .... -5% .... -21% .. 911 ........ 27% .. -25%
MML .... 1.8 ......... 0.6 .. 14% .. 14% .... 45% ..... 28% .. 928 ........ -1% ... 42%
NCM ... 60.6 ......... 0.2 ... 1% ... 1% ..... 5% ...... 2% .. 802 ........ 39% .... 3%
NST ... 10.1 ......... 1.4 .. 18% .. 17% .... 15% ..... 16% .. 925 ....... -50% ... 34%
OGC ... 32.1 ......... 1.4 ... 4% ... 5% .... 10% ...... 6% .. 863 ......... 1% ... 10%
PRU .... 8.4 ......... 2.0 ... 2% ... 2% ..... 8% ..... 26% . 1412 ....... -16% ... 28%
RRL ... 14.7 ......... 1.4 .. 13% .. 11% .... 19% ..... 10% .. 882 ....... -13% ... 23%
RSG .... 2.1 ......... 0.0 .. 20% .. 42% .... 38% ..... 25% .. 787 ........ 42% ... 45%
SBM .... 6.5 ......... 1.3 .. 20% .. 38% .... 25% ..... 17% .. 658 ........ 95% ... 36%
SLR .. 470.2 ......... 0.7 ... 0% ... 0% ..... 0% ...... 0% . 1029 ........ -9% .... 0%
TRY .. -12.0 ......... 0.3 .. -3% .. -4% ... -10% ..... -6% . 1738 ........ 27% ... -9%

Notes:
PE is according to current prices at close on 4th March and annualised
Cash rato is Cash/Current Liabilities on 31st December
ROCE is Return on Capital Employed
ROE is Return on Equity
Net Margin is Net Profit After Tax divided by Revenue
EBIT is Earnings Before Interest & Tax divided by Enterprise Value (Ev) where Ev is MktCap + Debt - Cash
AIC is All In Costs which include all Investment outflows and not just Sustaining Capex
Net Debt/Equity is the ratio of Cash - Debt divided by Equity. If a stock has Net Cash it is shown as a negative (-) value
Magic is using the formula created by Joel Greenblatt. It is really a screening function to find good value stocks. More positive is better!
TRY figures have been adjusted for impairment (ie impairment has been added back)

Chip

[roguetreader] 05/3/2016 21:42

Chip / Tightfist / Justin

Interesting posts as always

As its the weekend a couple of links that may be of interest.

The first is an interview with James Grant discussing Gold and Central Banking. I always find him an interesting listen, so others may also if you have the time.




The second is a bit more off topic but IMO highly entertaining as Dave Stockman drives a truck through the BLS jobs numbers, then reverses over them before driving over them again to finish off.




RT

[deka1] 05/3/2016 21:13

Are MML still on a five day week.

[chipperfrd] 05/3/2016 19:56

Tightfist,

I have historically generated earnings models, normally based on mining plans deep in the heart of technical reports generated for PFS/DFS purposes. These coupled with NPV/IRR valuations generated by the companies have helped to confirm cash flows from my generated earnings models, etc.

That was all fine until the sharp drop in gold from September 2012 (when QE3 was launched). By the time we had the major take-down in April 2013 it was clear that trying to use ANY future value of gold in a forward model was not possible and hence made all earnings models useless without some reasonable revenues assumptions.

So I came up with another plan. I would build a workbook of producers which would map their actual operational results with their actual financial results. These then provided all the data I needed to generate any performance, value, etc, ratio. This has been a mainstay since mid-2013, great for picking out under-value (or over-valued) stocks in the sector, but has a limited ability to provide forward share price targets beyond c. 12 months.

But I am now beginning to dust-off all those earnings models and have already added a couple of new stocks to the collection. But so far, I have still not identified anything with the upside potential of MML based on the fundamentals out to 2019. All fine & dandy, but clearly that will only work if the market eventually falls into agreement with me :-)

So far that has not happened, but other (less worthy stocks IMO) on the ASX have made good gains. We shall see. But upside/downside probability looks heavily weighted to the upside, so as far as I am concerned it is just a matter of patience.
Chip

[tightfist] 05/3/2016 18:45

Hi Justin,

As you say we are lacking short term catalysts, apart from the CEO appointment (better be a well-known and respected industry figure). One gets the impression that no attention is now paid at MML to newsflow/IR management; GD used to issue “all clear” messages when significant projects had been completed on-time. Indeed, I am still concerned that we may strike a depth-charge in respect of this year’s guidance, and 2017 is uncommitted territory since the initial figure was swiftly taken off the table.

I think they were running the mill at about 75% capacity throughout 2015. I wonder if with the prospect of a higher PoG they will (sacrifice head grade and) take more low-grade ore from the upper levels in the next 16 months to fill the mill until the Service Shaft comes into operation. They must surely be healthy “profitable ounces” on a variable cost basis (but cash cost would suffer on a per Oz basis) and furthermore would prove the mill circuit at nameplate capacity before more high grade ore is hauled from Level 8.

The next production uplift is patiently awaited for Summer 2017. On the face of it there is 13% more haulage from Level 8, but given all the repeated warnings about current conflicting demands to haul development waste, etc I hope we can look for more ore than that.

Investment strategy across accounts and companies is interesting. I have gone the other way and stoked-up on Gold miners and GDXJ ETF in my ISA, leaving less certain but high potential non-gold stocks in my non-tax wrapper. With the recent outperformance I am now overall 50% in Gold miners; furthermore from an idealistic portfolio balance standpoint I am over committed to MML. On the other hand none of my other Gold miners (all UK listed) have the extreme fundamentals or momentum of MML.

I have seen your, Chip’s and others’ thoughts on alternative bargain-priced ASX gold stocks, which I really need to pursue to diversify away from MML. In the short term I have been buying GDXJ, which is up 51% in the last five weeks.


As ever, thanks for sharing your perspectives, tightfist

[tightfist] 05/3/2016 18:42

Hi Chip,

Thanks for your figures, they are the same ones I keep to hand from the Nov 2014 AGM presentation which provided a lot of insight into the mine operation, and puts things in context.

I hope that one day we will be provided with that information periodically, I thought it could/should form part of the annual resources/reserves update.


Cheers, tightfist

[chipperfrd] 04/3/2016 21:03

tightfist,

Over a year old, so probably not much use now:

Reserve (t) & Grade by level

Level 1: 55,320 @ 4.18
Level 2: 52,215 @ 3.61
Level 3: 70,275 @ 2.95
Level 4: 228,079 @ 7.68
Level 5: 292,067 @ 7.39
Level 6: 326,089 @ 6.42
Level 7: 254,467 @ 7.16
Level 8: 316,999 @ 9.28

Chip

[chipperfrd] 04/3/2016 16:06

tightfist,

I have a bit of data regarding levels, but it is about a year old now - and at home on my main PC. Will see what I can dig up when I get home again.

Chip

[tightfist] 04/3/2016 15:47

Hi Chip,

Good to see your interpretation of the deepening to L9 and L10. Accelerating reserves was a key emphasis 4 months ago to satisfy the market – how times change!

Investing in L9/10 stope development may also be associated with limitations on stope drawdown and haulage rate over the next 16 months, and part of the workforce can be temporarily redeployed from L8?

I hope the new operations review is made available this time. Last time (Nov 2015?) we were never told the strategy, just a drip feed of activities over the next few months. I noticed mention of the new haulage shaft only going to Level 12, and assumed it was a typo.

I took a look through last September’s Resources and Reserves releases (3) and could not find data for each level. Could you point me in the right direction?


Thanks, tightfist

[jimbo55] 04/3/2016 13:29

Yesterday's move in Gold was encouraging, and classical chartist Peter Brandt presents it far more eloquently than I can in the following chart:



Hopefully it can build on yesterday's pennant breakout. Fingers crossed the breakout is valid...

[polaris] 04/3/2016 12:17

Hi All,

Well i doubled up my holding last night on the back of the strong run in gold. As ever, it is a trading position but my target is north of 1.50 AUD, assuming gold stabilises in the $1250 region. I'd expect that figure to be reached before CYE2016 and hopefully around the FY2016 results announcement.

As a result you might see a little more of me on this thread in the coming months.

On my last post on a stealthy takeover, what does anyone know about the intentions of Ruffer in companies that they build stakes in?

regards,

Paul

[chipperfrd] 04/3/2016 11:01

tightfist,

They can only declare reserves after stope development and stope development has been out-running stope drawdown for many months/quarters.

All current reserves are within level 8 and above, so perhaps the speed with which they are accessing the levels below 8 are more to do with keeping the stope development running at full speed in order to build reserves and make investment in stope readiness whilst the gold price is low. It would certainly explain the late change to deepening the service shaft.

The new review may well explain their thinking/planning regarding the deeper levels. I was certainly surprised to read mention of the future haulage shaft only going to L12 - it was revised downwards to L16 quite a while ago so was this mention of L12 just a typo I wonder.
Chip

[chipperfrd] 04/3/2016 09:52

Justin,

Currently away from home child-minding, but planning to complete the 1H Financials for 13 ASX-listed gold stocks when I get back this weekend.

You asked me to comment on RSG & TRY some time ago so I am adding them to my balance sheet workbook, although I still need to work through the TRY report.

I am yet to decide which subset of financial ratios to highlight (due to restricted space on these BBs) so I still need to formulate the comparison table for the 13 stocks. Any requests will be given due consideration!

I like to do these sorts of comparisons and hopefully the results will be of interest.

Chip

[justinjjbuk] 04/3/2016 00:55

Cyber

Another aspect of TRY is that as gold pushes toward $1,300, suddenly their Casposo mine in Argentina (put under care and maintenance) may have considerable value (especially as Argentina seems to be taking a more flexible approach to foreign investors as expressed in their debt settlement a few days ago).

Such considerations don't really apply to MML as it didn't have to dispose of any assets in the downturn to raise cash. This contrasts with Silver Lake (SLR, which sold off Murchison and Great Southern) and Kingsgate (KCN, which sold off Challenger).

With gold hitting $1,150 in Q4 these sell-offs looked sensible in helping to reduce AISC and control debt. But with hindsight they could have sold at the bottom and the smart money was the one buying these assets.

I guess my point is that the market values things very differently in a bull market for gold.

Justin

[justinjjbuk] 03/3/2016 23:10

Cyber

TRY's current reserve and resource numbers are dated from June 2015, but the presentations suggest that both reconciliations between model and actual results together with drilling to date will give a significant uplift to these numbers.

The company has been quite clever dripping out good news into the market and I think that in the current gold environment the market will reward the 'exploration' aspect of TRY as well as the current production. This has certainly been the case to date as TRY has been my top performing name (together with MOY, which has also been feeding the market with a flow of positive news).

Justin

[cyberbub] 03/3/2016 22:51

Justin, do you not think that the problem with TRY is the short open pit life? Yes there should be more discoveries but it is still only 2-3 years or so 'at present' before big upfront costs to go underground.

[atlantic57] 03/3/2016 21:02

I guess it will put on 10 cents tonight!

[goldminer70] 03/3/2016 20:46

On Jan 1st the share price of MML was 35.5cents, today 72.5 cents ~ uo 104%. What will it be when a new CEO is announced?
Goldminer70

[tightfist] 03/3/2016 12:09

Hi Justin,

Thanks for your interpretation of the enlarged Service Shaft. Deepening the Service Shaft to L10 as a late-stage adjustment during the design & sourcing phase makes a lot of sense, offers a degree of future-proofing and implies confidence that L9/10 will become valuable sources of ore in due course. I also expect it will be relatively cheap, but we have no guidance.

My main point (#35971) was regarding the seemingly head-long rush to extend mine winzing and operations down to L9 & L10 (which will likely congest the bottom of L8 shaft, produce waste and compromise ore haulage, possibly impacting 2016 guidance).

Maybe they need to do that to combat LoM concerns in the investing community; GD alludes to that on slide 4 on 25/9/15; also the drilling from the enlarged chambers on Level 8 is now 5 months late getting underway.

This is certainly a speculation, but it was the proposed rapid move down to L9/10 coupled with the removal of the established stope inventory chart that has left me wondering if Level 8 mining operations are already faltering?

May I suggest you take a look back to the AGM presentation of 20/11/2014 (especially Slides 16-128) and you can see how little insight we are now being given.


Cheers, tightfist

[deka1] 03/3/2016 06:28

March 2, 2016 • Reprints

This is an exciting time for gold. After another annual loss in 2015, its fourth year in a row, the precious metal has plotted a new course, one that has ferried it to the lead position among all other major asset classes in 2016.



I already shared with you that on Friday, gold signaled a “golden cross,” a bullish indicator that occurs when the 50-day moving average crosses above the 200-day moving average. As of February 29, just a day after gold Oscar statuettes were handed out in Hollywood, gold bullion has gained close to a phenomenal 17 percent year-to-date.

What’s more, this past month was its most impressive February performance since futures trading data began in 1975.

[justinjjbuk] 03/3/2016 01:45

tightfist

Again all speculation, but they could have decided to extend the service shaft down because the better cash flow position allowed them to do this.

In the Dec-end quarterly report issued on 29th Jan we see this statement:

"In early January 2016, under recommendations from its consultants, the Board decided to revise the final depth of the Service Shaft from Level 8 to Level 10."

It doesn't really give a rationale for the extension but in the preamble just restates the general justification for the service shaft; that is, it frees up the L8 shaft for more skip ore hoisting time. So I guess what is true for a service shaft going down to Level 8 is also true for a service shaft going down to Level 10 as well.

And if they have the cash flow to take the service shaft down the extra two levels during the initial installation ongoing now, then this will be far more cost effective than doing some extension in a few years time as a separate engineering project.

When they initially made the service shaft decision, MML was still cash flow negative, which may have made them cautious. But with cash building nicely on the balance sheet as of the Dec quarter and the gold price behaving itself, such caution may have been deemed unwarranted.

Of course, if we had an MML executive periodically coming through London to do a road show and presentation as before, we could get to ask a question about the logic of the service shaft extension directly. Unfortunately, we are reduced to this kind of speculation!

Cheers, Justin

[deka1] 02/3/2016 19:03

Cheers guys all good stuff

[tightfist] 02/3/2016 18:07

deka,

Andrew Teo became a Director on 15th Feb 2010. Notably in the announcement by the MD (GD) the MD’s position was on the Board and it remained so until the resignation of PH-B in August 2014.


Justin,

Thanks for pointing out Hot Copper’s Weimann’s perception regarding AT, it’s certainly very different from mine. Whilst checking-out AT’s CV I noted that BGC Pty (where he is CFO and Company Secretary) is a private company (probably majority-owned by the Buckeridge family) – some while ago AT had 48 other directorships but it is uncertain that he has any prior experience of Public company Board operations, let alone one spanning three continents of shareholders (and listings).

RG’s 14 months role as consultant rapidly transitioning to COO was seen by me as an extended interview for the CEO role. The new recruitment/selection process will have to be extremely effective to surpass a 14 month interview; the raw material(candidates) will have to be markedly superior.

On a different theme, I am perplexed why relatively suddenly there is so much emphasis on getting down to Levels 9 & 10. Certainly it’s prudent to sink the Service Shaft to those levels, and the new winzes sunk in mid 2015 enabled more pilot development work, but more than that?

If everything was going well on stoping Level 8 logically one would surely leave the sinking of the extra 7-8 winzes below Level 8 until AFTER the Service Shaft is commissioned and the extra L8 haulage capacity comes on-line?

Furthermore I note that the excellent Level 8 Stope Inventory and Grade Drawdown charts introduced by RG in the Q4, Q1 and AGM presentations have been dropped from the Q2 report. This information gave a useful insight into mine stope performance, even if there was insufficient haulage capacity in the short term to fill the mill.

That type of transparency is replaced by obscure references to “challenges associated with L8 shaft repairs” and the wooliness of the Production Guidance and future AISC at the bottom of Page 6. It’s reminiscent of the communication style adopted by PH-B. Weimann mentions future AISC of $825-$875 but I see no mention of those numbers in the hand of Mr Teo.


Paul,

In the unlikely event there is a bid and an acceptance recommendation by the Board, that could open the door for Ruffer, or Dimensional or Paradice plus the PI’s to come forward and vote for the BoD they deserve. Clouds and Silver Linings , me thinks!


Cheers, tightfist

[justinjjbuk] 02/3/2016 14:35

Paul

One thing going against your hypothesis is that it is difficult to build a position stealthily given the 5% rule. If someone does a sudden run at the stock, they would do so from the position of a very low holding. The holdings in MML are also so dispersed, with few major institutional holders, that it would require a huge premium on the current share price to win a bid.

Separately, I saw RG present twice in London and was impressed on both occasions. Accordingly, I would have loved to have seen a seamless transition from GD to RG as CEO. Obviously, this does not appear to have happened. But, as I have posted before, there could be a hundred and one reasons for RG not getting the top job: from MML being outbid by another outfit to something prosaic like health issues. I don't think we have enough information to question the ethics of the BoD at this stage. But, by this summer, we should have a better insight as to what has being going on with the top management of MML.

On a different note, over at the Hot Copper MML thread (I look at this occasionally to get a sense of the view of Aussie retail investors on their local miners) we have a very different take by one poster on Andrew Teo. I am in no way endorsing this view (I have no idea of how insightful this poster is). Also, I just don't know enough about Teo's background, but I am just putting this out there to show that there are a diversity of views over what is going on in terms of the CEO appointment and mining review.

This from poster Weimann01 on Hot Copper dated 01/03/16:

"After reading the 6-months report I noticed a few things which are important for the coming 2 years: Mr. Teo in my opinion is trying to bring MML to a higher standard. As a CEO of another big Australian company he is bringing in more "standard procedures" into the running of the company. First he is taking more time to select (at least it looks like it) a proper new CEO for MML. To my opinion this is only step one. When a new strong and skilled CEO is onboard there probably will enter new other people as well. So this will bring the management team to a level where it should be. Next to the management question you can see that he is working on the future as well. The decision to go not only to level 8 with the new shaft but two levels deeper is a rational decision because the time to make such a decision is now. I would only like to see some more quidance about the costs of this extra investment and the time it is going to take to get the AISC down to a level of US$ 825 - 875. Also you can see from the framework of the semi-annual report that it is a report which most people can read quite easily. also a development I like. The only thing I am really missing is a more in-depth part about the coming years and production levels, costs and life of mine. Those things. I got the feeling that this will come once the new CEO is onboard and working for some time. When this is reached then we really have a MML which operates on a higher level.

For the mean time what I see concerning the share price is that the " weak hands" have been chopped of by the rise in the POG. When the POG went through the US 1.200 level the stopped selling and the first buyers (the strong hands) came in. Where will this bring us. The first phase is the normalization of the valuation of the company and with it the share price In a few years time when the company is producing at a level of 140.000 to 175.000 OZ and with a AISc of around US 850,- and a POG above US 1.200 we all can do the maths and MML will produce much higher levels of FCF and will pay a dividend again (I personally back the policy of funding the current investments with own free cash-flow and not taking onboard new debt. this is exactly what MML is doing right now). By then the rough diamond has become a nicely cut diamond. Its value will then be on par with competitors."