Metals Exploration Share Discussion Threads

[marmalade44] 31/3/2024 13:50

RR - Here is a brief precis.

Gold blah blah blah. Bitcoin blah blah blah. Gold blah blah blah. Price could go up or down.

[rolls razor] 31/3/2024 08:00

Farnes I didn't quite catch all of your last thread .
Can you repeat it ?

[farnesbarnes] 29/3/2024 17:38

Sharescope 28.3.24

The gold price has been perking up in recent weeks – is now the time to be looking at the wide array of gold-based funds, especially in this era of monetary inflation powered by big government? This month David also looks at whether the private equity market is improving, plus he shines the spotlight again on London’s very successful handful of Georgian-based investments.


Gold ETFs and Funds
Gold as an asset class is always a divisive subject. There are many, many gold bears – for much of the last decade I was probably in that camp – alongside a growing, young army of Bitcoin enthusiasts who deride the shiny precious metal as “so old school”. And it’s true that on the bitcoin argument if we superimpose the bitcoin price since Covid against gold, then the cryptocurrency has shot the lights out (with much higher volatility).

I also can’t help but think there is a generational shift at work. Many younger investors simply can’t see the appeal of gold and are opting for Bitcoin and its peers as a classic hedge against risk. Amongst the wider bears, there’s also a sense of quiet disappointment. We’ve just emerged on the other side of a sustained inflationary surge and yet gold is only up 11% over the last two years and 26% over the last three years. Those positive returns aren’t to be sniffed at but they are hardly the gains promised by some gold bugs.

And yet gold has also remained remarkably stable in price and has only broken past $2100 an ounce in the last few weeks. Over the medium term, it is one of the most stable asset classes of the recent past although it is worth noting that over the last few months, the FTSE ALL share index has actually displayed lower levels of volatility. It’s also worth noting that this price rise has happened despite evidence of significant outflows at the fund levels. Ever since the SEC legalised bitcoin tracker structures, there have been very heavy flows into bitcoin ETFs, whereas for gold funds it’s the reverse. According to the World Gold Council (WGC) at the beginning of March, there had been significant outflows of assets in gold funds, a trend that’s been true for the last nine months.

By contrast gold purchases by central banks have remained impressive. The WGC reported at the end of January that “Central bank demand, a key driver of gold in recent years, maintained its momentum in Q4 as a further 229t was added to global official gold reserves. This lifted annual (net) demand to 1,037t, just short of the record set in 2022 of 1,082t. Global official sector gold reserves are now estimated to total 36,700t. Two successive years of over 1,000t of buying is a testament to the recent strength in central bank demand for gold. Central banks have been consistent net buyers on an annual basis since 2010”.

So, the report card for gold is, I would suggest, mixed. Gold has lost some of its popularity to bitcoin and private investors are less than enthusiastic at the funds flow level. But pricing has remained stable and the price has been breaking through key support levels, helped along by strong institutional buying of the precious metal, especially by central banks.

What might happen next? On one level, the prognosis isn’t positive. Bitcoin continues to grab popular attention, and inflation rates are ebbing away again, removing some support for gold. Equity volatility is also reasonably low, and there’s no sign of an imminent recession. Crucially the dollar remains strong, based on a basket of trade-weighted currencies, which is usually a headwind for gold.

On the positive side, lower interest rates might be helpful to gold – gold tends to underperform in environments where interest rates are rising. There’s also the ever-present chance that geopolitics and especially the US General Election might trip up the equity bulls and push up volatility. I would add another crucial, possible driver – monetary inflation propelled by burgeoning government deficits. It seems to me – and many other observers, including The Economist magazine – that one of the big stories of the coming decade is the problematic fiscal position of governments in the US and the UK.

Debt levels are already high, deficits wide, and demands for more government spending insatiable. As I’ve frequently mentioned, even those of us who hold Keynes in high regard are slightly troubled by this development. Deficit spending makes sense in a downturn, but running a massive deficit even during a strong economy is not something the much-lauded Cambridge economist would have approved.

Yet that’s what we have in much of the Western world – and if we must build up our defence capability, that deficit could go even higher while an ageing population will also intensify the pressure to spend more. I’m not one minute making the argument that this means we will trip into a crisis because, if nothing else, the example of Japan shows us that you can run a massive deficit and still boast a stable fiscal position – it just forces central banks to get ever more involved with buying their own government’s bonds. However, that also implies that increasing monetary inflation and the asset class implications of this shift are worth considering.

The obvious asset to consider is gold, a classic hedge against some forms of inflation. One of my favourite strategists Michael Howell at Cross Border Capital has run an analysis on this and come out strongly bullish for the shiny, precious metal, based on a global liquidity perspective. Here’s an executive summary from a recent report which I think sums it up nicely:

“The problem is debt. Higher gold and crypto prices may already be spelling out a warning. New debts must be financed, and old debts serviced and re-financed. Global Liquidity (a.k.a. monetary inflation) needs to keep pace. The US debt/ GDP ratio is slated to test 250% by 2050. Public debts can always be financed: the debate concerns at what price? Assuming Global Liquidity rises pari passu, the outlook for monetary inflation hedges looks compellingly attractive.”

I’ve listed his main points below, all of which seem eminently reasonable to this observer:

The trend rise in the future US public debt/ GDP ratio can be arithmetically justified. Assuming a starting point of 100% debt/ GDP ratio, future relative debt growth depends positively on the size of the primary fiscal deficit plus the average interest rate on debt and negatively on underlying GDP growth.· Fiscal deficits of a whopping 7-8% of GDP look set to rumble on over the 2025-34 period.
These deficits must be funded, by definition. They can be funded through issuing short-term government liabilities, such as Treasury bills and Fed debt purchases, or through longer-term coupon issuance. They can also be funded domestically or internationally.
Whereas the overall Fed balance sheet is slated to double in size over the next decade, the liquidity-creating components could actually triple. In other words, Fed liquidity, which currently fuels money markets to the tune of US$3 trillion annually, looks set to climb rapidly to US$9 trillion.
With something like US$350 trillion of debt outstanding Worldwide, an of average 5-year
maturity, around US$70 trillion must be rolled over each year. This requires balance sheet liquidity across the financial sector.
More financial sector liquidity whether provided directly by the Fed or indirectly via more Treasury bill issuance and bank loans are key sources of monetary inflation. Monetary inflation is not necessarily the same thing as high street inflation, but it is a component alongside cost inflation. Investors need to hedge against monetary inflation.
Historically, the best hedges have been gold, residential real estate and (assuming not too rapid inflation) equities. The worst hedge is bonds

My own sense is that if gold’s positive upward momentum continues, we could see $2500 tested at some point over the next 12 to 24 months, especially if there is an uptick in geopolitical uncertainty. A sudden unexpected economic slowdown in the US, by contrast, could unnerve investors, and push gold prices lower.

[1hercule] 28/3/2024 07:10

Yep and there are plenty of bargains in the junior mining space at present.

[leopoldalcox] 27/3/2024 23:04

Yeah, from the statement, quite clear. Accumulated capital will not be for divis but for capital projects

[johnyee 7] 27/3/2024 20:52

Rather have a larger company and they'll have the cash for more acquisitions now

12th Jan this year,

[marmalade44] 27/3/2024 14:49

Holism - Last month you asked what the enterprise value would be when the debt would be repaid. It looks like the answer to that is £91m.

[gary hindsight] 27/3/2024 14:38

So fully debt free within 1st qtr and starting to build cashSeems only rhl holding out for the extra interest not candy. Not sure we want them out as that would be a significant block of stock to shift. As I commented before I don't see candy exiting nor do I see any upside in him doing so

[holism] 27/3/2024 11:36

The sooner we get rid of these greedy bar stewards the better.Remember they bought the bank debt at an attractive discount and have been repaid in full.

[sparki2] 27/3/2024 09:53

I'm expecting the funds to be applied to build the business in the Philippines and, then regionally, to create capital growth for shareholders. I am hoping for some very exciting days ahead of us as Darren implements his plans.GLA

[johnyee 7] 27/3/2024 08:35

What are they going to do with all the spare money they're going to have?

[jeanesy] 27/3/2024 08:22

so if its not agreed they may still have another 8% to pay ?
Plenty of buying though so all seems good

[marmalade44] 27/3/2024 08:07

The interest rate doesn't matter now that the debt has been repaid.

MTL has repaid what was agreed under the terms of the debt restructuring and they applied the 7% interest rate themselves.

[jeanesy] 27/3/2024 07:46

But they haven't agreed debt interest rate reduction yet ?

[sparki2] 27/3/2024 07:08

Great stuff from Daren and the Team - onwards and upwards into the expansion plans made possible by their excellent performance

[gary hindsight] 26/3/2024 04:13

Thanks marmalade.

[jeanesy] 25/3/2024 13:15

Nice 509k buy :)

[marmalade44] 25/3/2024 09:56

An additional $334k was allocated in the 2022 results towards paying the additional interest for the period 3rd November 2022 to 31st December 2022. We will find out how much extra was paid in interest when the 2023 results are released.

The terms of the agreement stated that when the Senior Debt is repaid then the interest rate on the Mezzanine Debt facility will drop from 15% to 7%.

The company had left approx $1200 of the Senior Debt unpaid. This nominal amount was left in place to ensure various securities remained in place until the Mezzanine loans were elevated to the status of secured borrowing. As far as I am aware the process has not yet been completed.

RHL may be arguing that as the Senior Debt has not been fully repaid then the interest rate remains at 15% but they have also been accepting the Mezzanine Debt repayments which, according to the agreement, cannot be made until the Senior Debt is repaid.

In a matter of weeks the Mezzanine Debt will have been repaid and the Senior Debt can be fully repaid as there will be no need for the aforementioned securities to remain in place.

Your understanding is correct in that MTL Luxembourg, who own 70.7% of the Mezzanine Debt, have confirmed in writing that, subject to completion of the Elevation documents within a reasonable period (expected to be before the end of Q3 2023), the interest rate on its portion of the Mezzanine Debt will reduce to 7% per annum from 15% per annum from 3 November 2022 (being the date that the Company could have fully repaid the Senior Facility, but for the requirements of the elevation).

There is a possibility that the Mezzanine Debt is fully repaid before the documentation is complete which could provide the lenders with a get out clause on the interest rate reduction. We will have to wait and see.

[gary hindsight] 25/3/2024 05:29

As a question, my understanding is that the current debt is being repaid at the original high interest rate but there was discussions for many months and still ongoing about reducing the rate of interest on the last tranche of debt, this was accepted by candy but not the other debt provider. If that is correct then if there ever is agreement of reduced rate then my assumption is we would get a rebate back for the excess interest paid. Is that others understanding or am I missing something?Of course there is not a huge incentive to those parties to still agree to a lower rate if they have already got the money.

[johnybigarms] 23/3/2024 16:24

We have our Q1 results to review in few weeks, Gold average will be a good $90 dollars above the last results, at 19k to 20k ounces average production we should have generated well over $40 million income, we could actually be debt free at the end of this quarter, but if not it should be only a week or two additional mining to actually achieve the debt free milestone.
At current gold prices we should be producing $80 million free flow cash per year, our tax free period will come to an end but I’m hoping we will have a few quarters free of tax using tax losses from previous years.
Should just $12 million of that $80 million be paid as a dividend, that’s 0.5p dividend per share or a 12.5% dividend yield at our current share-price, but I feel the share price would be nearer 10p at that point, a £200 million market cap paying a 5% dividend.
Our market cap is £85 million today and we will generate £60 million free flow cash before tax in 2024, with 2025 2026 and 2027 set to repeat those incomes, this is without the Abra tenement income that could be worked creating cash with a small scale low cost set up, online in just a year or two, giving us multiple incomes.
Long term we have decided to close the current mine in 2028 and move the infrastructure to the Abra tenement to carry on with a large scale production over another decade or so with luck, results on gold and copper stocks pending but Darren Bowden hasn’t decided to purchase this tenement blind, I’m confident he knows it’s a viable project already, after all the sample drill rig is on site, it’s likely it’s been working and loose results are already in those with the know.
Hope that helps those looking in and wondering should they invest.

[ih_845578] 22/3/2024 17:33

Have been buying Mtl since June 2022. 12250000 at weighted average price of 1.67 pence.

First dividend will be 0.5 pence when Mtl are trading at about 10 to 12 pence IMHO.

VGLA

[johnybigarms] 22/3/2024 17:18

Azza, IG trading charge £8 a trade, £3 if you trade a lot, £24 a quarter if you don’t trade, 3 x trades per quarter means no other charges and if you have £15k worth of cash, stock or stock and cash in the account you have no £24 charge per quarter.
MTL are a bargain, I have 6.3 million and still collecting at 4p area, massively undervalued and no downside at this price.
Debt free in weeks and I expect a re-rate once that news hits the tipsters.

[azza987] 22/3/2024 16:11

Im quite new to this and using Hargreaves Lansdown which is working out pretty expensive at £12 a buy, Where else can i trade that doesnt charge? I think MTL is a good choice what do you guys think?

[ih_845578] 22/3/2024 15:46

Mtl must soon be trading at 5 pence

[baddeal] 21/3/2024 16:57

Christ I hope not.