Centrogold: Luis Azevedo:
Luis Azevedo spoke for the first time at an AGM and was very well received by the attendees. English is obviously not his first language but his communications skills were very effective. He was genuine, intelligent, strategic, humble and passionate about his work and the role he has played. He highlighted his modus
operandi of looking for win-wins wherever he can. He made a point of discussing how his work with landholders and unions has resulted in all stake holders being happy with the commercial and social relationships that get built. Hence, reducing contention and increasing profitability for the company.
He also spoke at length about sovereign risk and the mass media perception of political instability. He argued intelligently and persuasively that Brazil is in much better shape now than it has been for many years and that he felt excited about prospects for the increasing rule of law, democracy etc.
When speaking of Centro, to my ears at least, he effectively said the regulatory work is done. AVB now have to move forward and implement the required moves and that the time required to successfully conclude negotiations and be in a position to advance Centro towards a Bankable feasibility study was perhaps 3 to 6 months. That will involve buying the land that the artisanal miners are living and working on and offering them jobs at the future Centrogold mine. He made the point taht most of those miners work for a pittance and live under deplorable conditions. By purchasing the land AVB will become
ipsofacto the party who has requested the mining licence suspension. They can then turn around and request the suspension be dropped and the pre approved Environmental and Mining licences be made in good order again.
Having heard Luis speak, it would not surprise me to see AVB focus more keenly on concluding the Centro deal. I also suspect that the NPV of the project will be very attractive, especially considering the small all up price we will have paid. Check the historical data on north american exchanges re Jaguar if you aren't aware of antecedents. Whether we end up mining it, selling product stream for cash to fund PB, sell it and just keep a royalty etc is still up in the air IMO. This is one situation where optionality will be a good thing.
Luis also made it very clear that as he is the head of the independent miners association, both the association and AVB get substantial benefit from the relationship and very good contact with government. He noted there was no rise in the copper royalties in the new mining code, only a 1% rise for Gold and that tenement ownership during exploration was being extended to 4 + 4 years rather than the proposed 2 + 2 years that had initially been muted (currently 3+ 3 ). He also argued that the new auctioning process for tenement acquisition would work in the favour of the smaller cashed up miners as they could move faster in any auction process. They would have lifted and won bids while the likes of Vale were sending it to a committee for discussion in his opinion.
I'd also add that the 2% of share holders who voted against Luis Azevedo retaining his role as executive director really have no freaking idea. I could go on but I'll leave it there
Pedra Branca:
The PFS came out on the morning of the AGM. A solid report based on realistic but perhaps a touch conservative numbers. The initial 24,000 tonne target in the east is expected to be in production at some time in 2020. There was discussion about how quickly they could really get it done and 6 months earlier was mentioned as a theoretical proposition but TP was at pains to emphasise that his projected 'sometime in 2020' was the position he was comfortable with. There was also suggestion that the additional 10,000 tonnes from PB West would be a lot quicker. Whilst the timeline indicated a Feasibility start up for the west in 2020 I suspect we will see it coming on line as the plant proves itself and completes shake down etc. It should make for a great story as tonnage continues to grow over that period.
Simon Mottram will be doing reserves/infill drilling at PB soon. They will then move on to test opportunities nearby including PB east extensions and the new tenement optioned from Codelco, Canaa West.
Corporate:
The hunt for a new Chair is underway and it was emphasised (with support from share holders attending) that AVB were about to take a step up the tables and needed a Chair for that increased profile. They will not rush the process but will settle only for the right person. Colin jones will step down in coming months to focus on his role as consultant to PB engineering, design etc.
The new website has commenced rollout.
TP:
TP's mantra of under promise and over deliver was maintained. What was notable in the presentation though was their choice to mention that December production which had shot the lights out was the product of doing an in production test to see how much ore could be put through the plant. Whilst not directly mentioned by TP it's my understanding that 2000 tonnes of copper per month from the current plant is a realistic production target. It's also notable that with that additional production headroom available TP still had the desire to mention that $20 million dollars spent would double the size of the plant. Hence, a future 48,000 tonne production target is an option. This of course could lead us to conjecture re what he knows that we don't at this stage? Why are they looking at what it will cost to duplicate the plant? What makes TP think they might need a significantly larger plant?
In contrast to his prepared presentation, in response to questions from the floor, TP was very animated, assured and passionate when talking about the potential upside that was to come. He spoke of a number of opportunities to increase AVB's production numbers. In particular he spoke of the current exploration (EM and drilling) happening around the Antas North pit where the goal is to find the available ore that would allow the expansion of the pit in a commercially appropriate manner. He pointed out that the current production bottle neck is not the plant but rather the pit design itself. There is only sufficient room, now that we are down at the bottom of the current stage, to get one truck at a time in and out. A larger pit would not only have the goal of delivering extra reserves but also allow greater access. The current round of EM and drilling is designed to facilitate that process. In addition, they pointed out at various points that satellite deposit discovery on their existing tenements was a high priority.
TP was also very animated when talking about the fact that they are in negotiation with a number of parties related to new JV's etc. In my opinion they are closer to kicking sizable goals here than many would imagine. TP's personality is one where it takes something special to get him as excited as I believe he was. He is usually extremely conservative. The last time I saw him this excited they turned up the PB deal with Xtrata a few months later. My interpretation of what he said is that we will see at least one major announcement and possible two within a couple of months. TP also reiterated that by virtue of their success in the Carajas they are frequently offered new opportunities outside their existing portfolio and that there is a constant process of evaluation happening. Having said that, we must remember that there is obviously not yet a fully concluded transaction with anyone or it would already have been announced.
Simon Mottram:
The imminent arrival of the downhole EM gear will allow greater discoverability of what sits below the existing pit floor. It was explained to me in the breakout that because the copper in the current pit floor was so rich it effectively acts as an EM shield and prevents clarity about what lies below. The down hole EM will get around this problem. From the floor, SM also said that drill/assay results will start turning up in approximately one month's time and both SM and TP emphasised that exploration would receive major attention over coming months. SM stated that within 12 months and maybe within 6 months all worthwhile tenements will have been covered with EM and drilling where appropriate. They were both, I believe, trying to emphasise that while we may all be impatient for increased production they were expecting a strong growth period for the company based on the work done and the opportunities they had in hand. Several directors made the point that their options expire next year and that on top of the general companies benefit, there was self interest in significantly improving the share price.
Nick Bias:
A large part of his energy to date has been spent wooing the majors to make sure they were happy and would leave the board to rollout their vision. He has succeeded in that. They obviously voted to support the board, as did most retail holders.
New website now online and will be expanded in the short term.
Much discussion at the AGM was about actions to increase share price and New brokers will be coming on board shortly. There is a roadshow to the mine site soonish for those new brokers. I am wondering if it is meant to coincide with news?
He is also targeting potential investors; including high net worth individuals, sovereign wealth funds etc etc.
Conclusion:
I am expecting at least one left field announcement within approximately 8 weeks.
Next AGM probably Perth.
Ask questions if you have them. I may get the time to respond 0r others who were present will likely respond. The range of opinions will hopefully help people come to their own conclusions.
PS Socially it was great to catch up with many that have made the effort to attend year on year and new holders who thought it worth the effort to get there.
PPS Current production levels indicate EBIT of 1.5 to 2 c per share on AN alone. Maintaining current copper price etc would lead us to 5c per share earnings by some time in 2020. Of course higher prices, discoveries or Centro being secured could multiply that upside.
Sentiment: You'd be stark raving mad to sell.
