Shaft Sink Share Discussion Threads

[muckshifter] 06/5/2014 15:44

Interesting reasoning Moathunter,
and nice to see that someone else reads IPO documents, ARs etc, rather than simply relying on the opinion of dishonest or incompetent journalists.

Your point about "business interruption insurance" and "high premiums" is a sort of confirmation of the point I've been making for years - that shft are in a very high risk segment of civil engineering.

The reference you make to the reflexivity risk, is, imho, a further parallel, to a definite hazard for shft that I've been banging on about for ages. If you look at their IPO document and contrast it to, from memory about note 23, to the latest accounts, you will see that the value of performance bonds shft have had to provide since IPO has leapt enormously (actually mostly since the Eurochem job went clearly wrong), and now exceeds the "overdraft" facility that the bank specifically provided for that purpose at IPO. A consequence of this is that shft had to provide the bank with $3m in an escrow account to obtain the last major bond, for Kibali, I believe. So, where does a company that is now acknowledging cash flow difficulties, and failure to agree increased lending facilities with its bank, go, to obtain a performance bond if it does get to the final stages of contract negotiation on a major project, at a time when potential clients will be very wary because of Eurochem, falling shft profits, and the fact that cashflow failure is the "normal" killer of companies in this sector.

My crude estimate of the outcome of the arbitration is 20% chance of a full blown win, or loss, with a 60% chance of a "draw" ranging from shft to pay back the profit element of the job, to no payment either way. So my feeling is that it is 50/50 overall on shfts survival as they couldn't deal with a mediocre "draw".
Regards.

[moathunter] 06/5/2014 10:33

It would be wrong for me to post last week that I bought SHFT and gave positive reasons why... and then this week to sell the holding and not give reasons why, so....

A few reasons for now selling:
# found in the AIM admission that SHFT does not pay "business interruption insurance" to protect against delays they inflict on client's operations, due to high premiums. So Eurochem could sink them.
Also the whole affair is too complicated to personally understand, but the fact that Eurochem are recently successfully freeze sinking the delayed shaft instead of using SHFT's failed grout sinking technique doesn't bode well for SHFT in arbitration.

# Directors aren't buying at £8m market cap.

# SHFT could be vulnerable to George Soros' reflexivity risk which is a risk when a falling sp, instead of merely reflecting future prospects, actually *shapes* future prospects. So the low share price could be deterring new client business which further drives down share price which further deters new client business and so on to closure/ liquidity risk/ international expansion stalled etc.

A crude estimate is that SHFT has a 40% chance of being worth £0m if Eurochem succeed.
60% chance SHFT succeed against Eurochem and SHFT is worth £40m+.
At £8m current valuation, those are very poor odds of total loss compared to our next best alternative investments we each know of, so I humbly sold!

[buywell2] 01/5/2014 08:28

From 30th Aprils results

Like I have been saying here from when SHFT was over 80p

South Africa is NOT the place to be mining now and won't be for many years due to strikes and political changes


But SHFT are stuck there

''the arduous operating environment in South Africa continues to impact our business and industry generally. The renewed strike action after the end of the year which, at the time of writing has not been resolved despite recent further offers being made, is debilitating and crippling the platinum industry in particular and is clearly affecting levels of investment. Nevertheless, South Africa remains a core market for Shaft Sinkers and we hope that the business environment will improve following elections later in 2014 and a sensible resolution to the protracted strike action is reached. ''






On going legal costs are rising

''Material impact of legal fees related to ongoing arbitration of GBP3.9 million (2012 GBP1.1 million), with outcome expected early 2015 ''

Profits this year were bolstered by the sale of SHFT HQ , it can't be sold twice and now the company are paying lease charges

''The Group disposed of its offices in South Africa on a sale and leaseback basis, generating cash of GBP2.2 million ''




I think any money from Eurochem is a very remote possibility

I think that the SHFT technology is also now very questionable

why ?

Drilling & Blasting

EuroChem has restarted the sinking of the cage shaft at its VolgaKaliy potash project near Volgograd, Russia, following the successful completion of the shaft freezing stage. The cage shaft sinking operations have been resumed from the 100m mark following the suspension as a result of the failure in the grouting technology used by Shaft Sinkers, a South African contractor which had been hired by EuroChem for the project.

EuroChem has taken the necessary steps to continue with the sinking of the cage shaft by deploying freezing technology. After installing a freeze plant to protect the shaft during sinking and performing necessary works, EuroChem construction teams continued to sink the cage shaft. The shaft is now being protected during the sinking effort by a freeze wall which is designed and operated by Thyssen Schachtbau. Thyssen Schachtbau is also involved in the sinking of VolgaKaliy's skip shaft and the EuroChem's other potash project, EuroChem Usolskiy Potash in the Perm region of Russia.

Clark Bailey, head of mining at EuroChem, commented: "We are pleased with the progress we are making with the sinking of the cage shaft. We have suffered a delay of approximately two years and nine months as a result of the failure of the original shaft sinking grouting technology used by Shaft Sinkers. We anticipate to completely finish the cage shaft in 2017."














Thus due to the recent rise on small potatoes volumes I have revised my 10p call to 8p within 8 to 12 months


If Eurochem succeed in their claim V SHFT it is all over

2015 will be the year it all ends

dyor and BOL

[hedgehog 100] 30/4/2014 20:00

30/04/2014 07:02 UKREG Shaft Sinkers Holdings Plc Final Results

"Shaft Sinkers Holdings plc (LSE:SHFT), the international shaft sinking and underground construction group, today announces audited results for the year ended 31 December 2013.

Strategic
-- Growth in International projects to partially offset a challenging South African market
-- Positive long-term industry fundamentals intact -- International alliances in India, China and the UK have the potential to support longer-term growth

Financial
-- Revenues down 21% to GBP152 million (2012: GBP192.5 million)
-- Gross margins of 13.1% (2012: 11.7%)
-- PBT down 16.5% to GBP2.9 million (2012: GBP3.5 million)
-- Net debt of GBP1.6 million (2012: GBP2.1 million)
-- Repayment of GBP6.9 million Standard Bank loan
-- Material impact of legal fees related to ongoing arbitration of GBP3.9 million (2012 GBP1.1 million), with outcome expected early 2015

Operational
-- Significant cost reduction initiatives implemented, with expenses reduced by 17%
-- GBP47.6 million of contract extensions awarded
-- Operational performance below management's expectations
-- Fatality free year

Growth
-- Year-end committed order book GBP238.2 million (2012: GBP346.5 million)
-- Outstanding Tenders GBP970 million (2012: GBP1.1 billion)

Commenting on the results Alon Davidov, CEO of Shaft Sinkers Holdings plc, said:

"The challenging conditions in the mining sector continued to affect our financial performance and we took a number of steps to restructure the business in the first half of 2013, cutting costs and reducing operating overheads by 17% and ensuring the optimal mix of skills across our business. Despite a difficult environment, the Group won in excess of GBP47 million of repeat business from existing clients such as Lonmin, Afplats and Impala and was selected as preferred bidder to sink a shaft for Kazchrome during 2013. The outlook for 2014 is mixed.

Whilst prospects for the Group's international business are positive, the continued uncertainty in South Africa is likely to significantly impact our operations there." ...

Earnings per share

Earnings per share was calculated on the 47.5 million shares in issue throughout the year.

Earnings per share decreased to 4.14 pence (2012: 4.92 pence restated), a decrease of 15.8%. The theoretical effect of awarding incentive shares to the executive directors of the Company was reflected in diluted earnings per share of 4.90 pence in 2012. The Long Term Incentive Plan (LTIP) took into account the share price at 31 December 2010 and comparing it to the target growth in price of at least 13% per annum for LTIP shares to vest each year and a net profit target growth rate of 20% per annum. These targets have not been met to date and so it is considered that there will be no dilution to earnings per share. ... "

[lennonsalive] 30/4/2014 11:32

Profits being pumped into fighting Eurochem

[nehpets81] 30/4/2014 09:39

Thanks for the replies guys, i guess that explains the brief uplift in share price. It mentions in the results that the outcome of the eurochem claim is not expected until 2015. Clearly its the end if that is lost but it really looks as though it could bury the company anyway. Would you start a major engineering contract with soneone who may not be around to finish it. No major new contracts and kazchrome dragging their heals seems to support this. The upside at this price could be huge but considering the headwinds facing the company it seems so risky. Good luck anyone.who has taken a punt imv you will probably need it

[pugugly] 30/4/2014 07:58

Accounts out:- First impression still in critical care ward and very much dependent on the results of the EuroChem case to determine if move to the mortuary or recovery ward.

[buywell2] 29/4/2014 18:00

I hope nobody bought in on the strength of this






This article offers colour on a potentially lucrative special situation opportunity surrounding the main-listed company, Shaftsinkers (LSE:SHFT). It is one of only a handful of specialist mining services firms in the business of sinking vertical and decline shafts as well as the development of underground infrastructure. Currently, the company's prospects are entirely over-shadowed by the arbitration claims made against it by Eurochem, the listed Russian minerals company. EuroChem are claiming an eye-watering sum of $1,060m (around £640m).

Against SHFT's market cap of £5.6m, it clearly looks like a ridiculous claim – are Eurochem just flexing their muscles or is something more sinister going on? It turns out the story is far greater than just a disagreement between Shaftsinkers and Eurochem. The Company has rather stumbled into the middle of two titan Oligarchs battling it out, using their companies ENRC (the ultimate owner of Shaftsinkers) and Eurochem as vehicles with which to do it.

Conclusions:

Thus, this binary outcome scenario looks very much like an option: purchase shares for the opportunity of significant upside whilst considering the cost for this right as sunk.

It is worth considering Shaftsinkers with respect to an investment portfolio, and what appropriate weighting would limit risk and offer good upside. Imagine a £100k portfolio and one opts to invest just 1% in Shaftsinkers. If the bet pays off, the portfolio will be up, according to the above calculations, by a minimum of 2.6%. In the bad state though, the ultimate downside for the portfolio is -1%. A loss of 1% can be quickly retrieved on other investments while the upside such an allocation can provide is material to the entire portfolio for the year.

We think that Shaftsinkers offers an attractive binary bet which could pay off handsomely. We also believe that the probability of a positive outcome is greater than the bad state, further enhancing the attractiveness of this investment. Finally however, we do stress that the allocation of one's portfolio to exposure in this name should be small, far smaller than one's regular holdings given the fairly simplistic set of outcomes laid out above.

Dated: 20 April 2014















Regarding EuroChem claim I don't see where they talk about this




Drilling & Blasting

EuroChem has restarted the sinking of the cage shaft at its VolgaKaliy potash project near Volgograd, Russia, following the successful completion of the shaft freezing stage. The cage shaft sinking operations have been resumed from the 100m mark following the suspension as a result of the failure in the grouting technology used by Shaft Sinkers, a South African contractor which had been hired by EuroChem for the project.

EuroChem has taken the necessary steps to continue with the sinking of the cage shaft by deploying freezing technology. After installing a freeze plant to protect the shaft during sinking and performing necessary works, EuroChem construction teams continued to sink the cage shaft. The shaft is now being protected during the sinking effort by a freeze wall which is designed and operated by Thyssen Schachtbau. Thyssen Schachtbau is also involved in the sinking of VolgaKaliy's skip shaft and the EuroChem's other potash project, EuroChem Usolskiy Potash in the Perm region of Russia.

Clark Bailey, head of mining at EuroChem, commented: "We are pleased with the progress we are making with the sinking of the cage shaft. We have suffered a delay of approximately two years and nine months as a result of the failure of the original shaft sinking grouting technology used by Shaft Sinkers. We anticipate to completely finish the cage shaft in 2017."

[stockonomist] 29/4/2014 15:27

Headuphisownasshog is back on TGL must have sold at the lows here and punted into TGL at its highs of 2.4p

So he has had two massive reverse baggers in space of months

Couldn't happen to a nicer troll

[moathunter] 29/4/2014 14:17

Thanks muckshifter for your thoughts.
I do agree there is a lot of uncertainty and your thoughts could well prove correct.

I dropped studying this in late 2012 and 2013... but two things changed since then:
1. the share price is now so cheap that a positive outcome could be very positive and
2. their actions along with suppliers/ clients/ partners since 2012 have suggested a viable trading company and a future.

But it's very hazy! Thanks again and goodbye.

[stockonomist] 29/4/2014 13:58

Will be fun to see if headuphisasshog shows his face again after being so wrong on TGL. Ramping from 2.4p now 0.24p within six months !

[muckshifter] 29/4/2014 13:56

Moathunter,
Although I disagree with quite a few of your expectations as outlined above, such as the change from opencast to deep mining in say the next decade for most minerals, the "survival" signs, the award of new contracts ( I reckon they need two major new shaft awards a year - since late 2010 they have won just two, with another possibly pending, iirc, and these awards are vital for cashflow, imho), their trading record, and their liquidation value, but,
I wish you luck with your investment.

Regards.

[moathunter] 29/4/2014 12:51

"FWIW, I think the rise is probably a result of a bit of speculative buying."

I can see your logic muckshifter, but I've caused most of today's rise with modest buying for someone's pension and own savings and hope it's not speculative.

In a nutshell, my little view is that SHFT are no.1 in S.Africa at deep vertical boring due to years of experience gained in extracting the most precious metals in the most abundant country from the deepest depths. They're taking this unusual expertise overseas and the future of mining can only be deep vertical boring, as shallower resources are gradually exhausted. The sum of this appears to be a major future growth opportunity within their competitive advantage.

Shorter term, many signs suggest they will survive recent bad news (BEE, Eurochem, temporary contract problems) and are behaving with long-term intentions: major clients are awarding new contracts, shft are investing in sightpower technology, booked order book of £280m, trading since 1961.

Worst case is either liquidation £5m valuation or major equity dilution or closure but the probability appears slim.
An approximate valuation during this deeply uncertain period, based on historic performance and one or two simple scenarios, suggests SHFT to be worth between £20m- £80m. Currently priced at £7m.

I cannot post on here again but we'll see how this turns out within 3 years (if it is still around!).
Best wishes to all individual small guy investors.

[muckshifter] 29/4/2014 12:26

nehpets 81,
FWIW, I think the rise is probably a result of a bit of speculative buying - I don't think it takes much with this sort of share before the price gets marked up a little, in order to encourage more potential buyers who have been sitting on their hands.

If shft are going to abide by the rules, the results have to be released tomorrow. Perhaps leaving the results to the very last minute has got a few people thinking they are holding back to coordinate the poor results with an announcement that:
Kazchrome award is done, or,
Arbitration settled, or,
another job somewhere.

We'll see.
Regards.
P.S. Wasn't the next part of the court action between Eurochem and IMR scheduled for April? Not sure but I think it was, in which case that might have a few speculating.

[nehpets81] 29/4/2014 11:38

and yet they are up 25% in five days... It can't have been the news that Impala are putting their loss making contract out to tender again!

[buywell2] 29/4/2014 07:30

when I looked yesterday circa 47k of shares traded ... ie less than £5 grand

says it all

[ivyhuang] 29/4/2014 07:25

today is believe, tomorrow will be reality.

[nehpets81] 29/4/2014 00:02

Something seems to be moving these shares upwards in recent days. Any ideas?

[buywell2] 22/4/2014 08:58

I see AQP is doing a rights issue .... advfn biggest faller today

wonder if SHFT will follow suit ?




buywell2 14 Mar'14 - 17:48 - 2399 of 2418 edit

SHFT

Is now in a dark place

Chart support being tested ... if it goes then 10p cometh

dyor

[lennonsalive] 21/4/2014 00:22

A gamble, put this on a watch list and if they win then review/buy/hold...etc However, if they don't then you've lost all your money.

Risky....

[547trader] 20/4/2014 20:50

Meanwhile, beyond the battlefield of Hedgehog and Muckshifter, an article on SHFT has been written by PM. Read it here:

hxxp://phynixmanifesto.wordpress.com/2014/04/20/shaftsinkers-arbitration-option-play/

GLA

[buywell2] 16/4/2014 11:57

Well ...... check out if the chart support went







buywell2 14 Mar'14 - 17:48 - 2399 of 2418 edit

SHFT

Is now in a dark place

Chart support being tested ... if it goes then 10p cometh

dyor

[empirestate] 16/4/2014 01:55

Tea and biscuits all round.
Results at the end of month or there abouts. Plenty of negatives and auditors could well be tougher than management expect when it comes to write offs etc. Should be an interesting read though.

[hedgehog 100] 13/4/2014 15:45

From "THE TIMES", Friday April 11 2014:

"Aquarius Platinum enjoyed a bounce after its $225 million rights issue, which it is using to buy back about the same in bonds to avoid paying their high coupon rates. "This is a good solution for the company as it should remove future financing risk and secure its future," Investec analysts said. It will announce the result of its offer to buy back the bonds today, but investors were anticipating a positive result, sending the shares up 7 1/4p to 41p.

Unlike Aquarius, its rival South African platinum miners are still suffering from a strike that is in its tenth week. Lonmin, Anglo American's platinum business Amplats and the Johannesburg-listed Impala Platinum have reported that the strikes have cost them $1.1 billion in lost revenues so far, but their workers' unions continued to demand a doubling of pay in three years. Lonmin lost 5 1/4p to 283 1/2p and Anglo shed 9 1/2p to close at £15.49."