Shanta Gold Share Discussion Threads

[kennyp52] 14/8/2019 12:21

qs99 .. HUM ... interesting enough to start taking a holding in it . Worth a gamble with the latest figures and if , as you say is so , unhedged then it should generate a lot of upside cash to clear the loans off ( forecasting be repaid by 2021 anyway which is impressive ) . Good luck and thanks .

[redtrend] 14/8/2019 12:17

Having said all that I do think SHG at 9-10p is now "fairly valued" weighing up the pros and cons and whilst it should continue to rise in line with gold price and improving Net Debt position, I no longer believe SHG is "undervalued" compared to other gold miners. I did of course believe this when it was 3.5 – 5p and I was heavily buying.

Even with the Acacia deal, I’m not confident this will solve the VAT rebate issue for other miners. If the news story coming out are to be believed, the $300m Barrick/ Acacia require to pay Tanz Government is over a long period of time. I think only $100m gets released early on. I do not think there will suddenly be a cash windfall for Tanz to pay out the accumulated VAT rebates. Also at best SHG will only get paid the remaining VAT rebates left prior to the July 2017 when the new law was enacted. This is in the region of $10-11m.

So only in my opinion, SHG appears to have corrected much of the undervaluation compared to its peers. The only thing that would change my opinion on this:

1) If they get VAT rebate of $10-11m back for periods prior July 2017
2) Successful Singida IPO at $15-20m, providing an additional buffer if in short-term they can do inter-company loans in event gold price goes down or if they want to start slowly closing out some of the hedges thereby lowering gold price SHG receive compared to gold spot.

The hedge in terms of an opportunity cost really will weigh on SHG at some point when compared to other miners if gold stays at $1,500. The "opportunity cost" is now over $11m.

[redtrend] 14/8/2019 12:11

As per the Interims, SHG has the following Debt to pay off over next 12 months:

Borrowings: 17.523m (cash items. Silver stream settled in silver so excluded)
Loan Notes: 9.854m (April 2020 due)

TOTAL: 27.377m

==============================

Let's say gold can retain $1,450+ spot price and $800 AISC (even though AISC is around $730, let’s be conservative). Also SHG's bullion stockpile is at least 1,300 Oz over its historic norm:


1,450 gold spot – 800 AISC x 80,000 Oz = 52m
1,450 x 1,300 Oz = 1.9m

TOTAL: 53.9m

Minus:
- Interest payments = 3m
- VAT = 6m
- Capex = 9m
- Admin & Exploration = $8m

FREE CASHFLOW: $27.9M

So being conservative and depending when debt falls due, it looks like SHG at $1,450 gold spot can pay off the debt and that's assuming they need to keep same cash position they currently have and no VAT rebates (I haven't included the $3.1m cash).

Additionally you get to the same figure if you reverse engineer the fact the last 12 months at average gold price of circa $1,275, SHG's Net Debt position improved by $11.2M. With $200 increase in gold spot since then x 80,000 Oz and less interest payments, you again get to $27-28M free cashflow.


It also appears some are not quite appreciating the significance the Singida IPO could have. SHG plan to raise $15-20m in IPO which will then release a further $10m loan. With gold at $1,500 the IPO now has every chance of success of at least meeting the lower $15m threshold. Whilst the $10m loan will no doubt be ring-fenced at the Singida Asset level, I could see some inter-company loans taking place for some of IPO monies, if gold had a pull back and SHG needed to utilise some monies for the Loan Notes in April. This could then easily be paid back to Singida in Q3/Q4 2020 when SHG is in a Net Cash position.

In terms of cashflow and ability to pay debt, I honestly don’t understand why some can’t grasp non-cash items nor the fact gold spot is $1,500!

[redtrend] 14/8/2019 12:10

AG - no wonder you've predicted 50 out of the last 2 placings over 3yrs if you still read Accounts like that.

Trade payables rolls over and continuously gets paid but will always hover around $12m. Derivative financial liability (gold hedge) is a non-cash item and as long as they can roll it over until after April 2020, will look bad in the books but has no impact in terms of paying off debt.

[redtrend] 14/8/2019 12:07

andypar - was it confirmed by SHG the hedge has to be settled by May 2020?

I know the Interims state "45,000 oz had been sold forward to May 2020", but that doesn't necessarily mean they can't roll them over again.

[qs99] 14/8/2019 12:01

Topped up on HUM....must be making some serious hay and also CEY as unhedged, taking in-country risks etc. and yes HUM needs to up mine life etc....DYOR

[juju44] 14/8/2019 11:56

Yield curves now inverted so expect US recession . Could be an interesting afternoon. What's with the crazy spread here . We need another shove up to avoid double top

[qs99] 14/8/2019 11:56

gold seems to have perked up a tad as well today

[qs99] 14/8/2019 11:36

okydoky 338! Looking forward to September as shouldn't Barrick#s bid for ACA close then? We may then see some swift resolution of their tax issues and we can all then see whether this will translate into any VAT repayments for SHG. PLUS the IPO and hopefully further EBITDA progress and debt pay down. DYOR

[338] 14/8/2019 11:25

QS99,

My point is that Shanta was considered cheap with market cap £97 million

Now, Shanta have passed the most difficult situation technically and financially in 2017

So, Shanta fair valuation should now be 5 times of 2012 valuation at least 😁

[qs99] 14/8/2019 11:15

maybe off we go?

[redhill] 14/8/2019 11:13

MM spread . 9.20-9.90p . Actual spread 9.65p--9.75p !

[redhill] 14/8/2019 11:04

Good to see a 10p UT trade. Market makers appear to be going short at present.Ridiculous spread !

[jc2706] 14/8/2019 10:58

Have we really got to go through all of this for the umpteenth time? Can we not keep the discussion to the real world rather rather AGville?

[hazl] 14/8/2019 10:44

Gold all over the place today.
Silver up as we speak.

[jc2706] 14/8/2019 10:35

You can never be sure of course but it looks like multiple small pi buys versus a significant offloader.