Oxus Gold Share Discussion Threads

[wilfy75] 09/10/2015 12:20

Gosh. Thanks Nick and Nicola - that's what I'm aiming for, so thank you.

[shaktinicola] 09/10/2015 12:14

Excellent balanced and measured posts wilfy :)

[nick2412] 09/10/2015 12:12

Thanks for an excellent summary of the arbitration awards report Wilfy.

[wilfy75] 09/10/2015 12:08

Very kind maytrees - thank you.

[maytrees] 09/10/2015 12:05

wilfy75
Another excellent post - tx

[wilfy75] 09/10/2015 12:03

DRH - not sure I agree. If you're an academic economist then you're spot on. Assume equality of information across the market and all markets are efficient. They're not. That's why people make money.

In our case, OXS isn't a hugely well-known name in the investment community (I don't think I've ever seen it mentioned in Shares magazine etc!) and so the pool of those able to invest is small. The market cap means that special situations funds aren't really able to come in and buy a meaningful piece (say £0.5 million?) without moving the market monumentally - we're simply too small fry. Add to that that those PIs who are in have limited financial resources and have to balance the binary nature of the outcome with the amount of cash we're each prepared to put at risk then there are a number of inefficiencies.

Each of us has our own view of what a sensible price at present would be. Mine is 5-7p. Logically that means I should buy up to that point but frankly I'm long enough on this stock already and won't be buying more unless something really weird happens and the price drops materially for no good reason.

The current price is rational, but only if you take all the factors (not one only) into account.

[deanroberthunt] 09/10/2015 11:54

If the outcome of such an event meant an share price of 18p and the outcome probabilty was certain i.e. 100%, then the share price would be 18p give or take.....

the probability defines the discount to the outcome event....it's simply algebra

[wilfy75] 09/10/2015 11:52

Thanks 99J - very interesting article which is an analysis of ICSID awards and worth a read. Some excepts / analysis / summary for the hard of reading:

"Of these 57 cases where liability was found, $4.5 billion in damages were awarded which represents 49% of the damages claimed ... When comparing the awards to the claimed amounts in those cases where liability was found, there are a number of observations that can be made. First, the smaller sized claims generally resulted in a higher recovery percentage. Second, a small percentage of the cases, approximately 9%, resulted in awards of 100% of the claimed amount. Third, no claim over $100 million has been awarded 100% of the claimed amount."

They then set out a chart suggesting that successful claims at our level create a payout on average of c. 30%. They also cite a $2.3bn claim (Occidental vs Ecuador) which realised 75% so the range is large!

They go on to discuss valuation methodologies:

"For cases in which the basis for the claim presented at the hearing was discussed, about a quarter of them reported using the discounted cash flow methodology as the basis. The basis for the damages awarded was discussed in a higher number of cases. The investment cost was the most prominently relied upon basis for the damages awarded. This is likely due to its more straightforward calculation and reasonable certainty of this method, as compared to other methodologies. The discounted cash flow valuation methodology and a summation of excess expenses were the second and third most relied upon bases for damages. These three bases account for almost half of the cases in which the basis for damages was discussed."

In my view the investment cost / loan value is not the appropriate measure in our claim as the upside from a loan is typically full repayment. An equity investment's upside is far different, as is the acquisition and ownership of an asset which is our situation.

The next point they consider is costs. This harks back to a post I made a year or more ago suggesting that our costs (now $6.15 million) were curiously low. A claim of our size would typically attract costs of US$15 million+. Average costs for a claim of $9 million are approximately $3 million. This suggests to me that merits are not in dispute, only quantum which is very positive.

There is a discussion on interest rates which may interest Stig. There is a discussion on the performance of individual arbitrators (and law firms and damages expert) which I do not have time to go into.

Good reading.

GLA. DYOR

[giant steps] 09/10/2015 11:50

Gibbons 42,092,132 shares

That's a great holding

[deanroberthunt] 09/10/2015 11:49

Dorset

stop the primary school antics, it's all to do with cause and effect, probabilty vs outcome

[dorset64] 09/10/2015 11:34

^^^^^ School's out again

[deanroberthunt] 09/10/2015 11:20

If it was such a cert as it appears by reading on here, then the share price would be nearer the figures indicated...

Langbar had $350m in the Banco do Brasil, but the market didn't believe them, before the truth came out, so it never traded anywhere near the value. Of course, this isn't Langbar, but only death and taxes are certain....everything else is probabilty

[sir andrew ffoulkes] 09/10/2015 11:14

It seems DCF is the preferred methodology in the largest awards.

[noirua] 09/10/2015 11:13

If the outcome is $360m plus costs; lower end but even EK thought close to this and he should not be ignored, save you are a better trader than him. After all costs, about £160 - £180m would be left equating to about 21p to 26p a share (18p to 36p as a probable range) and this could easily halve due to the Uzbek's unknown reaction and likelihood of paying up.
As the Uzbeks have already offered compensation they have accepted they must do so, albeit the offer was reported by the company to be derisory. The original agreement with the Chinese stamped a value on the assets of Oxus Gold that the Arbitration Commission is highly unlikely to ignore.

[99jeremiah] 09/10/2015 11:10

A read through this Tim Hart pdf will soon rein in a few of the frothier expectations :

hxxp://www.credibilityconsulting.com/wp-content/uploads/2014/06/Credibility-ICSID-Damages-Study-June-2014-1.pdf

So 10p-15p pre-award? Really? I might just snap your hand off...

[blueblood] 09/10/2015 10:59

Limit buys at 7.5p post award pmsl.....

[78steve] 09/10/2015 10:58

Agree this will be 10p at least prior to award as we've had 6p high previously with news being so far away so this time it should be higher than 6p due to news being imminent. imo dyor

[maytrees] 09/10/2015 10:56

Presumably the only reason that OXS share price is still under 5p is that there is still felt to be a good chance that the arbitration will be lost; or possibly it's felt to be far safer to wait on sidelines until the outcome and then buy. Even limit buys at say 7.5p could then be profitable and safer...

[sigora] 09/10/2015 10:54

well everything your charts have suggested stig have been spot on so far on a daily they are a very strong indicator to trade with

[the stigologist] 09/10/2015 10:47

Thanks sigora will do. It's all a bit of fun and an academic exercise as far as i am concerned obviously we all know ultimately the charts will be trumped by fundamentals. However even within that by charting history it gives us a better sense of where we could go and with all-time high share price of 70-80p it ties in very nicely with the top end of the 'fundamental' valuation arrived at by E&Y.

[sigora] 09/10/2015 10:42

stig keep posing your chats mate extremelly informative

[pug151] 09/10/2015 10:42

Sorry Davius That was balls to DDDT

[marmar80] 09/10/2015 10:41

Morning All.