Solgold Share Discussion Threads

[pparekh20] 30/4/2020 17:41

Thanks DD - i will take note.
And LT - I will read through your posts. I have a lot to learn it seems! For now, my seat belt is strapped and I am on the same ride!

[dozyduck] 30/4/2020 17:37

Phattrader That's got to be nonsense. In the PEA gold only accounted for 20% of revenue. It would have to rocket to compensate for copper revenues 30% down. Sensitivities should be in the PEA - But last time I looked they only showed up to 10% either way. We're talking 30% down. I'll do some sums on the PEA but EY has got to be wrong. (They're bean counters after all - not mathematicians !) Depends of course what they're assuming re gold and copper prices. I've said before on here that gold would have to get to $3,000 before the NPV recovers to what it is in the PEA, with copper at $2.3/lb instead of $3.3
PS Look at the PEA (page 410 or thereabouts) to see the NPV and assumptions.

[lowtrawler] 30/4/2020 17:31

Thanks pp. It's probably worthwhile reading through some of the posts made by phat, DD and myself. Phat is getting towards your valuation while DD and myself are more cautious. This should give you a feel for the underlying valuation.As a new investor, you will come to understand that shares don't normally reflect their underlying value. Some are massively above and some massively below. These discrepancies can last for years. Sentiment is often key.

[rougepierre] 30/4/2020 17:31

Meanwhile gold is tanking....

[rougepierre] 30/4/2020 17:29

Can I repeat...you're wasting your time trying to calculate NPV...

Alpala or SOLG are only worth what somebody would pay for it and...

The starting point is that different majors have different reasons to bid:

New copper fields

New gold fields

ROI

Critical mass

Footprint in Ecuador

Etc.

And every one of them will have a different forecast on copper/gold prices; a different NPV estimate; different funding capability (e.g. BHP has enough to make a straight cash bid); different cost of capital; some have existing Ecuador exposure; etc. etc.

So give yourselves a break from academic NPV guesstimates...in my experience, companies that are desperate enough or get sucked into a bidding war end up overpaying, based on fundamentals...

AIMHO as usual...

[dozyduck] 30/4/2020 17:28

ppparek Stockopedia knows nothing about mining companies developing projects. Their systems are built around balance sheets and P&L. Completely irrelevant for a co like Solgold. Almost ditto for brokers analysts. They live by flogging shares at as high a price as they can get away with. Newsletters and tipsters just follow the analysts. There's no outlet and no money for anyone publishing honest opinions. So you're on your own !

[phattrader1] 30/4/2020 17:26

I spoke to the company today and was told the NPV is $4bn for our 85%, but the NPV is very variable (to the upside) dependent on ramp up development plans received by some bidders.

Similar to what the RNS of the 16th said. “Materially significant”.

Sensitivities done by EY prove that the current gold price rocketing will play a bigger part on the NPV than the current copper price. In fact, the gold price and recoverability Make the NPV $6.5bn to us.

Maybe DD will be a bull when funding is secured at “competitive rates”.

2 weeks is up today according to the interview Hofmaier did for the mining journal.

Let’s see what the off take agreements hold. China was off lockdown and so the final bids will have been received and shortlisted and negotiated by now. The heavy volume recently shows this. The market knows.

[dozyduck] 30/4/2020 17:18

PS - With all the uncertainty re aftermath of covid, can anyone be sure demand for copper will even hold up, let alone recover ? I think caution will increasingly be the watchword. Observers are getting more and more unwary of the apparent stockmarket resilience. That can easily extend to the mining sector - especially to those seeking funding.

[pparekh20] 30/4/2020 17:18

lowtrawler - being relatively new in investing i would one day like to be able to calculate the overall value, but my estimate is based on the analysts, stockopedia, the financial statements, news findings, the fact that the worlds biggest miner BHP has got a 15% stake in the company (and has increased this over time!).

Unfortunately more qualitative than quantitative, but I will get there one day!

[rougepierre] 30/4/2020 17:16

Any OPENING offer...

So you're saying 39p...?

What's the point, because the other insti shareholders aren't going to sell at that price...surely they would rather it was taken to production...

Also, any opening bid at that price would be immediately countered by another major, so why bother...

It either has to be a knockout bid at, say 70p, or there will be an auction which could end up at the same place...

Now I know this is all speculation, but I repeat...Alpala...or SOLG as a whole are valued at what a buyer would pay to be certain of getting it and not wasting all the DD and aggro that would go with a contested bid and...

With plenty of corporate experience on M&A the best way is to get sufficient other holders lined up before you bid...there's no way they would agree at 40p, especially BHP or Newcrest, who have come this far, so why let it go with a whimper...

But if there is a predator, they'd better get on with it, starting by taking out CGP...

AIMHO as usual...

Meanwhile...16.44...50,000 bought at 30p...

[dozyduck] 30/4/2020 17:05

RP - Depends whether you think there IS competition ! If there is, they'll be conscious of the present copper price and the current probably halved NPV. And as said before, if they pay too much in relation to the NPV, their own return on the total capital they will have invested will be that much below the project's own irr and may be below the hurdle they will need. The PEA irr at around 26% is already not brilliant, and will be a lot less to a buyer paying too much. I bet any offer will be less than $1bn.

[phattrader1] 30/4/2020 16:56

I have a feeling we get news tomorrow on financing / offtake.

May the first be with you!

[mknight] 30/4/2020 16:37

UT 27.25 down 6%

[lowtrawler] 30/4/2020 16:18

pparekh20, good to have you on board. Can you share how you arrived at your 60p valuation? It may help others reassess their own valuations.

[pparekh20] 30/4/2020 16:00

It is so easy to doubt yourself.. Solgold just speaks long and good value! For me i value this around 60p minimum!

[rougepierre] 30/4/2020 15:50

Had a wee extra punt at 27.1p to back up my bullishness...just a trade on T20 basis...core holding still long and strong...

[lowtrawler] 30/4/2020 15:49

A lot of the items making up the 97% were nominee holdings. This is true for the Fidelity Canada's 10.8% and bank of Singapore 6.09% as well as Bell etc. When you or I sell shares, we don't hold the certificates personally, they are held by nominees. The important thing is beneficial holdings. I believe anything over 3% needs to be disclosed?

[pparekh20] 30/4/2020 15:44

Just topped up my shares!!

[rougepierre] 30/4/2020 15:44

pob69...

So what happened to Fidelity Canada's 10.8% and bank of Singapore 6.09%?

I've looked again at the "97% list" from yesterday and I totally get the potential duplication between Bell Potter/Samuel Property (the latter is the vehicle for NM's DGR underwriting...) and Mather, but DGR Global has only 10.6% cf thew combined holdings of the above two at 19.68%...

So does that suggest that NM and connected parties hold another 9.1% outside DGR?

And BTW the 'Significant Shareholders list is unlikely to be the complete picture as it only shows holdings over 5%...

Whichever way you look at it, PIs do not hold the whip hand...

PS DD I believe 40p is way undercasting it, in a competitive scenario involving several major gold, copper and copper/gold players...

You can't tell me that if one of those bids, others won't counter, including BHP that would be let off the hook...this could end up as an auction where the winner gets Alpala as the prize and NM (Solgold) holds onto the rest...

[dozyduck] 30/4/2020 15:19

Pob Nas - it says 'significant' shareholders. Omits large nominee holdings and other institutions who have notified. 97% is more like it. You can ask the co for a 'full' list.

[lowtrawler] 30/4/2020 15:16

Here is a very simple valuation example. Let's be very optimistic and assume that the eventual NPV from Alpala is 10bn (double the PEA).

To extract the NPV, we need to spend 3bn which SOLG do not currently have. If we wanted to, we could do a 6:1 rights issue at the current share price. This would give us the 3bn we need but existing shareholders would only own 1/7th of the NPV.

That's great you say because it still means that I get 1.4bn of NPV against the current market cap of 0.5bn.

Reality then hits. You will start to earn that NPV once the mine is in production. That's a few years before you start to earn. Next, you can have all sorts of problems achieving production and so the 3bn may not be enough (does Lundin spring to mind?). Also, you have not yet done all the exploration and discovery you need on the mine and so it might be less or more productive than you first hoped.

That all sounds risky I hear you say! Maybe all of the 1.4bn shouldn't be fully reflected in the current share price.

I then say, Ecuador is unstable politically. They may implement windfall taxes, take state ownership or rescind your production license. Maybe even more of the 1.4bn shouldn't be reflected in the price.

As DD has then pointed out, a lot of the NPV is 15 years and more out. Are you willing to wait that long for your return?

Finally, you are taking on all the operating risk of the mine. Accidents, changes to metal pricing, Coronavirus etc etc.

So, even though I have doubled the NPV for Alpala, as an existing shareholder this only gives you a maximum return of 1.4bn against which you need to offset all the risks and timing. Is a market capitalisation of 0.5bn as big a bargain as you were thinking before?

The hope is that some of the financing arrangements being entered into will leave existing shareholders with more than 1/7th of the eventual NPV. Some of the metal pricing risk can also be alleviated by offtake and hedging arrangements.

However, a share price of 45p would give a market cap of 0.75bn which is roughly 1/7th of the currently known NPV. This is why I don't see us getting there without a takeover or new discoveries. It's why I think we are unlikely to trade at more than 35p in the near future.

I do accept the points made by rp and mk regarding sentiment. We are a sentiment driven share and this could drive the price up to 45p and beyond. Personally, I like to see value in the shares where I invest and so I would sell.

[dozyduck] 30/4/2020 15:12

Well Red Cloud would say that, wouldn't they ?
RougeP - I partly agree with you. Sell off Alpala and concentrate on exploiting (building up the value of) the rest. That would benefit the shares more and quicker than hanging on with an uncertain Alpala value. Where I disagree is on the numbers where |I think others would agree) yours are unrealistic. We could accept 40p per share for Alpala (£800m) - That would satisfy a buyer who will be baulking at the current low copper price (probably halving the 2019 PEA) - leave us with a good 20-fold development profit; leave him with the net NPV he wants; enable NM to pay some of that 40p to shareholders; use the rest to ramp up exploration elsewhere with no more share dilution; and clarify |NM's strategy which will be to find; prove up; and then quickly sell - rinse and repeat ad infinitem while repaying profits to shareholders.. The market would then give the shares a higher rating as a wheeler dealer - rather than as a risky miner. All agreed then ?

[nas_daq] 30/4/2020 15:11

Slight difference to someone's ramping post earlier about 97 percent held by institutions

[pob69] 30/4/2020 14:58

Just to confirm the correct information as to major holdings, this is the definitive list updated yesterday;



Approximately 65.83% of the Company’s ordinary shares are not in public hands.

[rougepierre] 30/4/2020 14:56

Red Clouds target is 86p equivalent ($1.50)...