Serabi Gold Share Discussion Threads

[bsg] 23/1/2020 08:23

This will increase AISC in the short to medium term. Long term who knows. Lucky to get share price over £1 now.

[ironstorm] 23/1/2020 08:21

You both make good points.

They always miss deadlines. More projects = more deadlines. They do get there eventually but . . . .

I wonder why we did not go to Sprott?

[tightfist] 23/1/2020 08:14

Thanks. The key upside seems to be able to fund the simultaneous development of Coringa and Palito complex exploration - retaining the potential valuation upside, at least for the time being. Clearly there are high-hopes for exploration progress around SC..But I am concerned if they are getting over-committed resource-wise. MH made no bones yesterday that there is a lot going on - too much? How much is dependant upon MH, how strong is the team backing him up? One measure is that most things seem to slip time-wise.....Ore Sorter, Public Meeting, Funding Completion, etc.

[ppvn] 23/1/2020 08:08

Ditto Ironstorm. Looking at the numbers though, without the additional cash from the CBs, Serabi could pay off the final Coringa payment but then the Sprott loan could have become an issue when it falls due in June. Not to mention it would leave them with a very small amount of working capital which, should the POG fall, could compound their issues. Hopefully this has given confidence to potential lenders and they've got a decent deal on the remaining debt they hope to raise. We shall see.

[ironstorm] 23/1/2020 08:01

So I am still undecided on this.

The deal is very expensive - there are funding deals being put together for 7 or 8 over base without the conversion.

I am also concerned about the high % of equity these guys have. If they get in trouble elsewhere they can flip the shares and we would be sold down the river at a cheap price.

They have guarantees on Serabi’s assets so if we did default they can just lift the company from us if they have not converted.

They a PE firm after all.

It seems a cosy deal, with their man on the board and that.

Also revenues should start to move higher with the ore sorter in place - we could be throwing off over £1m per month which with a smaller debt deal should be easily financed.

However on the flip side we should be able to accelerate Coringa and Palito.

The question is whether this is worth the dilution. And I should therefore just hold my nose.

It has the makings of a bad deal. A lot depends on the character of Greenstone. I just don’t know.

[tightfist] 23/1/2020 07:39

Hi MF, Guernsey exchange just caught my eye (sensitised by being part of the Woodford tale). I was just thinking of it as a VERY unlikely buying opportunity..I am more than being heavily weighted towards SRB equity. IMO things would surely have to go badly off the rails for it not to be trading above 76p in 16 months time - thus spake an optimist! tightfist

[borisjohnsonshair] 23/1/2020 07:19

Yes de-risked to proceed. All good assuming it's best for the bond converted to shares and no significant shift in US$/£. Problem in 16 months if share lower than 76p. If all goes to plan with Coringa development and production starting plus Palito stable, a price of less than 76p is extremely crazy to be concerned about. Could have US$48M annual FCF with no further dilution (or debt) by then until conversation. In reality with only 59M shares the price could be 300p!

[mad foetus] 22/1/2020 21:16

I've got no position in SRB, but honestly this isn't something to worry about. The problem with Woodford was that he was treating equities as being listed (and hence having a clear market value) when they were only listed on the Guernsey exchange. Debt having a technical listing isn't an issue for shareholders of SRB, all that matters to them is the share price, which is on a proper exchange

[tightfist] 22/1/2020 21:10

Thanks for that MF, it may have some procedural/legal value but to the man-in-the-street it's essentially Unlisted - as Woodford's disciples found out to their acute cost........

[kennyp52] 22/1/2020 20:55

Boris .. give it to me straight please ... does this finance provide the company with the ability to increase gold production without increasing their base costs by too much and lowering overall AISC ? If so it is a necessary evil to make the next step ?

[mad foetus] 22/1/2020 19:31

Tightfist The Guernsey Stock Exchange is what is called a technical listing. In practice there is no freely tradeable market in these loan notes, but because they have a listing they get certain tax treatments. For shares, such a listing is a scam. For loan notes which are not plain vanilla (ie anything convertible or asset backed) it's totally standard. Anyone wanting to buy these specific loan notes would speak to the holder, not buy off the exchange

[borisjohnsonshair] 22/1/2020 19:26

Hear hear. Job done and game on. Expensive but in long run very affordable. Whether paid back or converted, hopefully Coringa producing at the maturity date.

[tightfist] 22/1/2020 17:15

Hi HBR,In response to another good Crux interview, (although the interviewer was not as sharp as previously?): . MH came over as sincere and on-top of the detail as ever, I will remain confident of delivery but always now be sceptical of stated timelines - add 40%? . It was not the financing solution I was expecting - dilution (although it is not immediate) was ruled out previously, more than once . Serabi is my biggest holding - full stop. So it is my chosen junior GoldieBut it's NOT taken us to a poorer, its just a different position, with lots of upside potential before the debt positioning/negotiation in the Autumn. That cash requirement could still be funded by a Major farm-in Development?Cheers, tightfist

[seemore] 22/1/2020 17:02

Hi Bomber,

I entirely endorse your post.

Not long since 20m shares at 50p fundraising would not have surprised some.

Now, as you say, SRB has cleared the way towards 100k at $950 AISC and on terms, I suggest, that will look very advantageous in the rear view mirror.

To a finance house, SRB is a high risk minnow. High street rates just aren't achievable for such companies. The best value deals are always going to come from those who know the company well, as here. Any financing from a new name would be on much harsher terms and would not bring the added value that Greenstone does.

I expect the value in this situation to become more apparent to the market as each milestone is ticked off over the next year.

Personally, I am very pleased that Mike Hodgson and co have passed go.

[bomber13] 22/1/2020 16:31

I would make the following points on today's news -

1) This fundraising is instead of an equity fundraising as per the CEO interview on Youtube , which would have been substantially more dilutive .

2) Although the coupon on the loan notes is LIBOR plus 13% , the notes will be redeemed by Serabi after only 16 months providing Greenstone has not exercised conversion into equity at the equivalent of 76p per share .

3) Conversion at current rates of $/£ exchange would make Greenstone Serabi's largest shareholder at 38% of the equity . Given Greenstone's long-term partnership approach to maximising the capital in the ground in its investments , its interests are very much aligned with ALL shareholders .

4) Serabi plans to use project finance to fulfil the balance of funding needed for Coringa .

5) If one adds the convertible funding of US$12m to Serabi's cash at end December of US$14.3m , and takes off the US$12m final payment for Coringa , the outstanding Sprott debt of US$6.9m and the US$25m required to construct Coringa , the shortfall amounts to US$17.6m .

6) Serabi has guided to 45/- to 46/- oz of gold production in 2020 . Taking the lower figure , a conservative AISC of US$1050 , and the current gold price of US$1550 , Serabi should generate free cash flow of around US$22.5m this year .

7) Assuming that Coringa's production is running at around 40/- oz pa by the end of 2021 , and some further organic growth from the ore sorter and exploration success around Sao Chico , Serabi should be doing around 100/- oz of production in 2022 at AISC below US$950 , which would mean possible free cash flow of some US$60m at current gold prices .

As per the above , the convertible issue , and any subsequent project finance , gives Serabi a certainty of its path towards 100/- oz of gold production pa that wasn't there yesterday , whilst its cash flow should ensure that any debt burden is removed pretty quickly . I very much see Greenstone as a guarantor of this growth , ultimately giving us all an exit at considerably higher share prices .

[cotton4] 22/1/2020 15:27

Looks like they want your shares. Just sold 30,000 at 77p

[homebrewruss] 22/1/2020 14:43

New interview with Mike Hodgson


beneath the video:
'What did you make of Michael Hodgson? Is this the debt solution you were expecting? Is Serabi the gold junior for you? Comment below and we will ask your questions.'

[tightfist] 22/1/2020 13:53

Hmmm.... not exactly what I was looking for, considerable prospective dilution. Maybe the BoD don't own sufficient shares/Skin in the Game to be concerned?.However, it seems as though they could not settle Coringa payment for cash without compromising the terms of the outstanding loan to Sprott. I was anticipating they may have an option to go-slow on Coringa Development but the additional simultaneous cash demands of exploration around the "Palito Complex" (includes SC) to support their growth ambitions were too much to bear..So they are taking the option to wipe the board clean and proceeding debt-free until later in the year, when renewed debt will be negotiated, but in the context of PoG, Coringa permitting (de-risking), Ore Sorter performance and further interim exploration completion and results announcements..Looking on the bright side at least we have a convertible price higher than paid 20 months ago and if GBP slumps vs USD; in any event it only will become painful below GBP/USD at parity. Whilst upon GBP weakness the shares issued will increase, the PoG expressed in GBP may provide some protection to the share price - no guessing where the BRL will head!.This doesn't help a jot with Additional liquidity. I'll plan on attending the General Meeting on 26 Feb. tightfist

[loganair] 22/1/2020 13:12

Want to make money in 2020? Gold and silver are looking like a good bet:

If you want to make money from investing, says Dominic Frisby, it’s simple: find a bull market and go long. And in 2020 gold and silver are in a bull market.


moneyweek.com/investments/commodities/gold/600686/gold-and-silver-bull-market-2020?utm_campaign=money-morning-newsletter&utm_medium=email&utm_source=newsletter

[ppvn] 22/1/2020 11:39

Been reading a little more on the conversion terms and it's basically an unhedged conversion option. The kind of weird thing though to my mind is that currently I view USD as pretty strong when compared to sterling. Think consensus is for USD to broadly weaken through 2020, so that would technically mean fewer shares for Greenstone if they choose to convert in a year and a half.

Quite strange really and I'm sure there are greater minds than me on this - but just a thought.

[loganair] 22/1/2020 11:25

The price of gold hits yet another all time high in local BRLs and also is holding above the important $1,550 level.

[cotton4] 22/1/2020 10:14

At this time the risks for the company are still there. LOMs are still not known. Results of drilling unknown. Ore sorter - awaiting update. POG may fall substantially. Coringa may require more funding and take longer for production. Although Mike is positive on these things (And I believe Mike will be proved correct) there are still risks facing the company. In the meantime we have funding, albeit not great. One near time uncertainty removed.

[loganair] 22/1/2020 09:59

Considering how cash generative Serabi are I am very disappointed at the interest they are being charged by Greenstone then also paying Greenstone such a huge arrangement fee.

[ppvn] 22/1/2020 09:55

Hey Logan, they are still going to raise additional debt - there is a little bit on that further down in today's announcement. I assume it's relatively well progressed but the future here is looking very bright and as tiger60 said, 76p should now be a very firm baseline to build from.