Thread by @BigBiteNow

1/9
Not surprised at all by the positive reaction to the #SRB update this morning, the business is starting to look really good value now in this gold environment.

2/9
Now paying down their Coringa acquisition from cash flows with $9.5m to go.

Coringa build costs of $25m with $4m of contingencies with company clear that this is effectively a replica of Palito, so the process is well known.

Current cash of $9.5m.

3/9
Palito generating cash flows of min. $4m per quarter at 8,500 oz and $1,710 oz gold prices.

Q3 expecting same production and prices currently of "approximately US$1,880 to date"

So cash flow should be over $5m

4/9
Q4 expected to be at least the same but with the intention of greater production levels. So min $5m more.

That would make cash on hand c. $19.5m

Then there is the $10m of remaining convertable loan from Greenstone.

So c. $29.5m

Total expenses = $34.5m

5/9
Coringa construction was planned for Q1 2021 start with production ramp up by end of 2021.

I would now expect disruptions of min. 3 months.

That gives SRB the ability to drive further cash flows at expected (normal) 10-11,000 oz quarter production.

6/9
Build costs also spread over the full year.

SRB may still raise some cash but the reality is that current gold prices, dramatically reduce the need for further cash raises and remaining needs should be through debt only now.

7/9
Meaning the business is heading towards 2022 of up to 80k oz with maximum c. 73.5m shares in issue.

At current prices, the business is valued at just £70m.

Whilst a small pull back in gold prices may occur over the next few months,

8/9
I fully expect prices to be trading at least at today's levels, if not considerably higher in 2022.

Meaning SRB should demonstrating an ability to pump out c. min. $40m profits by 2022.

Risks of a further lock down in Brazil but production of 17.5k oz in 2020,

9/9
was achieved against a back drop of the very worst Covid period there.

Given the expected considerable upside in gold prices over the next 5-7 years, I really like the value here moving forward.

9A
Listening to the latest an again excellent #SRB @CruxInvestor interview, the thoughts very much tie in with my earlier posts.

Idea being that the $10m of Greenstone CLN, will act as the equity element for the Coringa build out.

9B
Thus allowing a debt element to be created to complete the build.

As suspected end of Q1 2022 looks more realistic for production ramp up, which as I say allows for greater cash flow build up out of Palito, so is not a negative.

Well worth a listen.