Shanta Gold Share Discussion Threads

[jc2706] 18/4/2019 11:01

In case it wasn't clear from my last post, high grade ore produced from BC wasn't anomalously low in Q1 but anomalously high in Q4.

[jc2706] 18/4/2019 10:58

The use of the low grade stockpile is understandable - it is certainly not uncommon to mix the grade to ensure that you achieve a steady state production profile and to make use of the lower grade ore at times of higher gold pricing.

However, AG has (finally) asked a reasonable question. Normally you would continue with the underground operations and stockpile some of the higher grade ore - this makes processing more flexible and would be a sensible activity. Instead they reduced the underground ore to 136k in the quarter. As no open pit mining was carried out in Q4 or Q1 this was definitely a reduction in ore mined.

Now, I prefer to look for reasons that aren't conspiracies but my thoughts on this are, of necessity, speculative (I was unable to listen in to the call this morning). I suspect that a certain amount of activity has switched to Ilunga which has resulted in faster development there than anticipated but to the detriment of ore production from BC. Also I would add that Q4's ore production from BC was anomalously high compared with Q2 and Q3 and Q1 sees a return to 'normal' levels.

This undoubtedly reduced the potential production - if ore from BC was used, rather than the stockpile, the production numbers would have been considerably higher. Now, you can look at this either negatively (as undoubtedly AG will) and say that the reason for the ore drop from BC was because they didn't have a choice or positively (as most of those invested will) and say that this indicates confidence that they can meet their commitments easily and do not need to push the production levels beyond a standard run rate.

I prefer to look at it slightly differently. I believe that it was important to have a good Q4 to put them in a position to more easily meet their commitments in a lower gold price environment. As such they needed to increase the grade of material processed and reduce the lower grade feed from the ROM stockpile.

[roguetreader] 18/4/2019 10:37

An interesting and positive call on the whole. Slide 7 of the new deck is the key to the next twelve months IMO, where Eric Zurrin has put his reputation firmly on the line in publicising the target so clearly. If he meets the publicised repayment schedule then the share price will be well north of here this time next year, if he doesn't then expect no mercy from the market; my expectation given his performance so far is that he will deliver.

One niggle from the call. EBITDA makeup for Q1 was brought up by one of the callers and Luke Leslie suggested taking it offline with him for further breakdown. I'm sure there were others on the call (me included) who would have very much liked to hear that breakdown. If he is giving it to one of the Brokers offline it is in the Public Domain, so why not outline to everyone on the call!!
RT

[tsmith2] 18/4/2019 10:19

interview

hxxps://youtu.be/xh_aB4vZ4iU

[tsmith2] 18/4/2019 10:18

hxxps://youtu.be/xh_aB4vZ4iU

[redhill] 18/4/2019 10:11

Obviously to reduce the stockpile. Silly question really.

[tsmith2] 18/4/2019 09:45

VAT recoverable is $23.5mn - do the maths!

[tsmith2] 18/4/2019 09:41

Call is well worth of a listen

The net cash position by mid-2020 does not include any upside from the VAT refund which would obviously accelerate this!

[redhill] 18/4/2019 08:33

Throwing off cash were the words Eric used but i don't see it either.Need to hear the Conference call because its very difficult to make sense of the figures shown. Was money spent on Singida ?

However i do believe the VAT issue will be resolved shortly.

[hard work] 18/4/2019 08:27

Must admit to being slightly concerned at the lack of cash generation in the quarter.
Nearly $12m EBITDA but very little cash improvement.

I'd also like to be a fly on the wall with the auditors and the VAT liability - will SHG be able to argue it's still recoverable? Needs resolving quickly.

[qs99] 18/4/2019 08:10

£53m market cap, debt free next year, if can deliver £35-40m EBITDA p.a. and extend reserves etc etc, then what multiple would you apply? 5X? DYOR but genuinely believe that with that progress over next 6 months, with IPO, then why should this not be on a decent multiple?

[redtrend] 18/4/2019 07:58

Gold sales were just over 21,000 this quarter, with production 22,000+. Gold bullion increased by $1m to $2.5m and trade receivables increased by $1m when stripping out the VAT portion.

On the move but I'll have look in detail later today when back at the laptop and after the analyst call.

[johnrxx99] 18/4/2019 07:53

Excellent update. Maintaining confidence imo.

[redtrend] 18/4/2019 07:40

Capex is estimated at 16m for the year. They clearly are on track for Capex holding none back, spending $4m.

[qs99] 18/4/2019 07:30

Pretty good results IMO....$11m EBITDA, net debt nearly below $30m, forecasting NET CASH in a year(ish)...can see line of sight to a multi-bagger IMO....DYOR and if ONLY some of that VAT would come back!!! GLA