Shanta Gold Share Discussion Threads

[338] 23/7/2020 07:46

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[meanreverter] 22/7/2020 20:49

Chestnuts: Whether share buybacks are a good idea depends on the market valuation of the company. If the shares are persistently undervalued, then buybacks benefit continuing shareholders. For example, consider a simple case where the company has £200m in assets and £100m shares in issue, so that NAV is £2 per share. Let's say that the market price is stuck at £1 (i.e. at a 50% discount to NAV). The company borrows £50m on the strength of its assets (we'll assume at an interest rate low enough for us not to worry about) and steadily buys back its shares until the loan capital is exhausted. Now the assets are reduced to £150m (£200 minus the £50m debt), and the remaining investors hold 50m shares. So, each share in the loyal shareholder's hands now corresponds to £3 of assets, compared with £2 before the buyback programme.

For a similar reason, a company whose shares are overvalued would destroy value for its shareholders by buybacks. Rather, it should consider issuing new shares (perhaps to offer in a takeover bid).

[lowtrawler] 22/7/2020 20:18

Chestnuts, it depends if the company is undervalued. If it is, chances are you can buyback your own shares and increase your overall net worth in the process. A bit like investment trusts do when they are trading at a big discount to NAV.

[redhill] 22/7/2020 20:03

chestnuts

A few years ago the Company had a rights issue to cover unpaid VAT refunds. If this money or when this money is repaid i believe it only fair to buy back the stock which was issued in lieu.

I'm not a great lover of share consolidations.

[chestnuts] 22/7/2020 19:22

Redhill

Companies buying there own shares is like giving your self a blood transfusion, better off having a share consolidation, which in my mind it doesnt matter about how many shares in issue what does matter is the market cap, if they have ant spare cash a special dividend is much better.

[bogotatrader] 22/7/2020 19:20

17 million shares traded today - this sort of volume over the next few trading sessions supportive of further rises

[redhill] 22/7/2020 17:28

juju

I think you will find that is market maker to market maker at mid price.

[juju44] 22/7/2020 17:26

1/2 mill after hours sell . That cools it

[jk1206] 22/7/2020 16:23

Here is link to 19th June presentation highlighting value catalyst for next 6 months for ppl who may have missed it. Things already start to happen what they mentioned in this presentation...worth a watch again.

hxxps://www.proactiveinvestors.co.uk/companies/news/922337/shanta-gold-limited-proactive-one2one-virtual-event-922337.html

[lowtrawler] 22/7/2020 15:58

Interesting thought. I hadn't considered share buyback. In principle, if they used their free cashflow next year and the Share price remains where we are today, they could buy back half the shares in issue. Shows how undervalued we are.

[redhill] 22/7/2020 15:41

Lowtrawler

I think there are too many shares in issue and that needs to be addressed if we get some VAT back.

[qs99] 22/7/2020 15:33

then put the new Kenya asset into the mix....1m etc....

[lowtrawler] 22/7/2020 15:16

Redhill, I agree with you but it appears the market does not. We need others to have the same confidence we do.

[redhill] 22/7/2020 15:07

Life of mine is never discussed as it has never been a problem.
I believe at the moment there is another 4 years of measured and indicated gold and i fully expect this to be substantially increased when the results of the further drilling are put into the mine plan.

[lowtrawler] 22/7/2020 14:49

What does the hedge cost us even with the current price of gold? A: 27k x ($1860-$1250)= $16.5m or £13m.

For a business that is generating over $40m annual cashflow, even with the hedge in place, it is a minor irritation which has no long-term relevance to the share price.

Next year, the business will benefit by not having the hedge. If gold prices remain at current levels, the hedged income next year will be higher by 40k x ($1860-$1250)= $24.4m or £19m and the unhedged by 40k x ($1860-$1660)= $8m or £6.3m. In total, profit improvement, from current gold price and removing the hedge, next year will be £25.3m. Assuming taxation reduces it to £19m, applying a post-tax PER of 6 means that next years profitability IMPROVEMENT alone is worth a market capitalisation of £114m. The current market capitalisation is only £129m. This is daft. The fair value market capitalisation is easily over £200m based on current operations alone and when you project values for Singida / Kenya, should be a lot higher.

I've been conservative in my sales volumes, haven't taken account of the expected cost reductions and don't anticipate further gold price appreciation. Also, a PER of 6 is lower than you might expect. In other words, this is a highly conservative estimation of fair value.

Forget the hedge, past poor management, VAT and all the other noise continually dragged out on these bulletin boards. The real issues are concern over remaining mine life and cost / success of delivering new mines into production. I believe these concerns are over-cooked but it is these items we should be debating not the more easily understood VAT and hedging nuisances. Once the world is satisfied on these topics, we should easily reach 30p - 50p and once the new capacity starts to be delivered, higher still.

[redhill] 22/7/2020 14:41

The market is a forward looking indicator.Hedge will be cleared soon.

[saint in exile] 22/7/2020 13:58

The hedge reduces every month too

[jasper2712] 22/7/2020 13:31

Look on the bright side. Half of their production to the year end is unhedged so the higher it goes the average price they achieve will be higher. Not much of a consolation but better than nothing.

[5070481] 22/7/2020 13:20

SHG has a chunky gold hedge heading into 2021. Needs ot trade out of it and get more gold produced for current pricing

[plentymorefish] 22/7/2020 12:34

What hedge?.....

[juju44] 22/7/2020 12:32

Its the hedge man . Big gold leap no use here in the short term

[qs99] 22/7/2020 11:17

will we ever get rid of this drip drip drip?!

[redhill] 22/7/2020 10:52

Trades just shown up but probably not todays.
Expect an RNS

[338] 22/7/2020 10:47

New buyers are waiting for more sellers 👍