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.
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1/16
It's difficult to call this market but my view is that assuming no more operational glitches #TGR now steadily re-rates as the operations sign off the various stages to 30ktpa.
2/ Front-end valuations should depend on where graphite prices go but as Syrah demonstrated yesterday (graphite fines not large flake) orders are buoyant.
Forward orders there running at 90,000 tons which are 50% of their current yearly output. So substantial.
3/ Note also Syrah cannot produce for less than FOB C1 $543/t even at 15,000 tons per month output and that's fines.
It is clear after last night's presentation that TGR C1 costs have also risen but this is to be expected in this current market.
1/12
Here are Verde Agritech's expected sales targets for 2022 which were revised in May and offer a significant read across to #HMI and what it can achieve this year and also.
1/9 In a previous #HMI thread, I highlighted that the $600k write-down in the FY2021 accounts meant that trade debtors (so effectively trade receivables) almost doubled between YE 2020 and YE 2021.
1/18
I've been running an extensive exercise on Verde Agritech also a relatively new but expanding fertiliser producer based just c. 70km from #HMI in Minas Gervais in Brazil. The results to date are rather fascinating and certainly worthy of review.
2/ Verde is a TSX-listed producer with a current plant capacity nearly double the size of HMI (0.6Mtpy) but with a phase 2 expansion due to come online in 2023 which would take output to 2.4Mtpy.
So a much bigger operation to come and soon.
3/ Those that remember my 5th July numbers on #HMI sales prices will perhaps remember that they demonstrated a $53.20/t average sale price for 2021.
At the average achieved AUD/BRL for 2021 of 4.054, this equated to an average price of BRL216.
1/7 Based on what I have just talked about if #HMI had received all the monies from its sales in 2021 then this would have amounted to $4.52m and the business would have been profitable at the operating level in 2021.
2/ What's more, the $4.454m paid out in 2021 reflects more accurately the true costs to run the business over the course of one year.
One cannot conclude exactly how much HMI produced in 2021 because the cash receipts reflect payment dates and not when the goods were received.
3/ Inventory was fairly minimal which reflects an operation that leans towards producing to order.
However, the costs associated with administration clearly eat up the vast majority of this with the consolidated statement accounting for c. $3.85m in the period.