Cha
Thanks for your confidence in seeking out my point of view - I wish that I could have as much confidence in my judgement these days.
For what it is worth-
1. WAF is very undervalued for what they have, currently a very profitable producer in Burkina Faso (around 200k ounces pa production for around 10 years). They have a second poject nearby in BK that is being developed and borowed funds of USD265 were approved last week that would increase annual production to over 400k pa (starting in late 2025.
Main problem with WAF is a discount for massive country risk - jihadist have destabilised a lot of the country, which has had two recent military coups. I am a shareholder at 97 cents and underwater at present. BK used to be one of the better places in invest in Africa, has a reasonable tax regime, but new leaders could grab more of the profits. Gold fundies may shy away from them.
WAF has the potential to at least double its current share price if all goes well, and I think they will be able to repay the loans in due course at the current gold price, a higher gold price would make them debt free earlier. Have plenty of cash on hand and will continue to generate more prior to completion of the Kiaka project. They built their previous mine on time and within budget.
2. WGX is a high cost 240-260k ounce pa Australian gold producer that has struggled for a long time. Most of their ore is sourced from their underground mines which took a long time and much capital to develop. Operations are scattered in the Murchison region of WA with ore being supplied to 3 high operating cost mills. Its long term CEO/Chair has departed and the new CEO is improving things. Have over $150m in cash. A key factor in my expectation of its improved profitability is that its 50% of its hedging of production runs out at the end of July 2023, thereby significantly improving its operating free cash flow.
A few weeks ago WGX made a takeover bid for MGV to acquire it for its 900k ounce reserve (you can read my thoughts about this proposal on that thread), which would result in a share dilution of around 19% for WGX shareholders. WGX costs would be reduced if it could access high grade open pit ore which MGV claims to have (its yet to be drilled to reserve status despite the long lapse of time since it was acquired or discovered (SLR unsuccessfully tried to mine in those tenements and found some of these deposits). As you would know, RMS has now made a higher bid for MGV, and I hope they win.
I am a WGX shareholder with an average entry a bit under $1, and I think that they get back over $2, and do even better if the AUD POG runs.
RED is one that I now do not hold but think that they will not need to seek extra funds via a CR so long as they can maintain the current rate of production, expand their milling from 4.7mtpy to 5.5mtpy and the gold price hold up. The main problem is their hedging of around 45-50% of quarterly production at prices that are too low for their costs in the next 18-24 months. Once the hedges are gone they would have a good run for 10 years at perhaps 200k ounces pa, so long as their ore reserve modelling has been OK. Unfortunately there are now around 3.6 billion shares on issue so upside is limited - but they will benefit from a higher gold price that will de-risk them as far a their debt obligations are concerned (debt is not that big in the circumstances). Longer term upside to 35-40 cents if all goes well (which is not how things have been working out for RED shareholders over the years).
KCN - It is my largest holding and I think it could get back over $2 later this year once the second plant has been refurbished, they have shown to be generating free cash flow and mining has resumed of higher grade ore (its only around 0.8 g/t in the reserve but there is scope to improve this from new ore sources over time). They are currently producing from their first refurbished plant using only low grade stockpiles that would be exhausted in around 12 months if they were fully operational. A CR was done recently at $1.50 after which the share price tanked (I bought back several hundred thousand shares around this price believing the company was now a safer investment, perhaps I am wrong). KCN operates in Thailand and the govt there stopped KCN from operating after which KCN used the TAFTA international arbitration process to gain compensation. No decision on this case has been announced but the panel has finalised its deliberations and awaits advice from either party to make its determination (KCN agreed with the Thai govt for a delay pending negotiations) - KCN Chair wants the mine to continue operating as the best solution so perhaps there will be no determination.
Expected production is around 110k ounces pa possibly extending into the 2030s. KCN has won some tax concessions but there is still a gold royalty of 20% for gold at above USD1500/ounce (I think)- its less at lower gold prices. There is high country risk. When fully operational there would be significant scope to increase production from the 5.5 mtpa milling capacity if they can inprove on the ore reserve grade - past exploration success suggests that this should be feasible but getting local co-operation to explore and mine may be time consuming/costly/difficult.
SLR and PRU we both hold, so I assume you see upside here.
TIE (operates in Ivory Coast) is cheap if it can deliver on its promise. So far their production has not met expectations and they have had to take out a loan. It is worth watching to see if the grade mined can match the reserve model. The concern here is that ore grade has been over-estimated. Production is the previous quarter was very poor and I would have expected them to have announced some good news by now if things on track. Also their founding CEO has resigned, and taken on a paid advisory role via a contract while the COO (who was first engaged to build the plant) have been promoted to CEO. I do not understand why the ex-CEO did not join the BoD, unless he wanted a free hand in selling out his substantial share holding without giving public notification.
BGL I do not follow because I lost money when its former CEO was the CEO of GRY and ran it into the ground. Also it looks over-valued and I suspect actual production will be less than forecast due to grade dilution, but it could still be profitable once it comes into production late this year.
SBM - a very disappointing end, it seems. Left with two lingering overseas mining operations. Perhaps they will sell these assets for what they can and return any surplus funds to shareholders.
GMD - I have no idea. Perhaps they can make a go of it.
SSR - I have not followed them much recently - not really cheap enough to tempt me, but a very solid company (I hope they do not stuff up in Turkey again as this is their best asset). I am not a fan of their silver mines - the silver price will not do well in a global recession, and some are located in South America which can be a difficult place at times. OZ "shares" are pretty illiquid as its mostly traded in north American markets.
X64 - former MML - supposedly 95-100k ounce pa producer needs to complete its decline (not a big capital outlay) sometime in late 2024 I think. Has lots of management issues now with a shareholder revolt and the loss of control over their mine in the Philippines (if press reports are to be believed). Company is currently suspended from the ASX - has not issued its March 2023 q report or half year report. I think their cash balance and production have gone downhill.
I am thinking of buying some shares as a hopium trade if the price is really low as shareholders attempt to exit the sinking ship - biggest concern is that the cash they had will vanish and its operations are even more mismanaged under the new regime.
RSG is looking more interesting under its new CEO. It is not really cheap given that there are about 2.2 billion shares on issue and its Mali operations are high cost (but they would benefit from a good gold run. They have plenty of ore reserves at the Mali mine (both for the oxide plant and the refractory ore processing plant, the latter sources its ore from an underground mine that was over-capitalised by a preceding CEO. RSG has been milked by the Mali govt (there have been a range of tax disputes). Their other mine in Senegal is profitable but only has around 3 years of mine life left, after which they may re-locate the plant to Mali to boost their production there. I think their debt should just about be gone by now but there could be still a few outstanding tax issue left.
CMM. ERM. GOR - none of them have looked cheap enough to tempt me in recent times, but are profitable operations so there is safety in knowing that they will not vanish in the near term. ERM which I owned for some time has a mine in Cambodia and a gold project in Oz that could turn into a mine. I suppose their share prices will rise with a run in the gold price.
As regards to one of your favourites, RRL, the quarterly reports keep omitting that they have debt of around $AUD300m (net debt is a lot less than that). Another thing to be aware of is that the ore reserves at Duketon are running out, in particular there is probably only around 2 years of ore reserves left for the North Duketon operations and mine life of the south Duketon is pretty short, and that for Tropicana is less than 10 years (you can find the reserve/resource details on the recently released related report and note their inability to replenish ore reserve depletion). Also there is still some terrible hedging that finally expires around June 2024 that crimps cashflow. In addition they will need a large amount of capex on a new mine in NSW where more than half of their ore reserves are located (I presume they will do a new assessment on this project before going ahead). Such issues may somewhat constrain the upside in the share price from a higher gold price. However a much higher gold price would help signficantly fund the cost of the new mine and help to underpin the conversion of more of the resources into reserves.
I have not looked at some of the very small producers or near producers such as CAI or ORR recently. The real strugglers are last to move so if people are interested in these plays they generally have time on their side to decide when to jump in once the POG starts moving.
I hope this makes some sense and there is somewhere to put some of your spare goldie play money. There are probably a lot of better options for investing in north American listed goldies.
GL
loki (I wanna see PRU back at $4.00 in the next major gold run)
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