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2.3¢ beacon minerals limited

Ann: Podcast - The Cribroom, page-29

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wrcmad

1,335 Posts.

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16/02/21

23:14

Post #: 51055121
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Originally posted by MetalBee: ↑

Some loosely levelled opinions there that don't really hold a lot of analytical weight. And here are your counter points:

Limited resource, poor LOM = limited prospects: Strongly disagree with your wording. "Limited resources", well in terms of a finite resource (gold) and a limitation on what can reasonably be acquired by an individual, sure, it is limited. But the company still has plenty of land to explore and develop, including new prospects in Timor-Leste. "Poor LOM", disagree again, with around 3.5 years in the ground and 1 year on the ground there is a healthy runway in reserves. Adding to that should not feasibly extend beyond 10 years as a good management of capacity should haul a long LOM in to remain economically relevant.
Limited chance of increasing production output: If they were able to build a plant when all they had was a few holes in the very ground that they are now mining, I'm willing to bet my mothers wedding ring that they can extend said plant whilst mining said ground and making circa $40m EBITDA per annum.
Dividend payments = less chance for aquisitions [sic], expansion, exploration.... and more chance of future CR down the track:
Now at least here is something we can sink our teeth into, albeit a fairly weak argument in my view. I'll simply copy and paste my response on this:

Cash on hand at 30th Jan: $16,090,000

Estimated Avg FCF per month: $3,128,850
Estimated Converted Options: 600,000,000
Cash from Converted Options: $15,000,000
Dividend Payout at $0.007: $24,312,629
Estimated Cash at March 31st (post dividend): $13,035,070
Net cash difference: -$3,054,929

Now, there is around $54m (approx a year) in ore sitting ON the ground, and an additional 3.5 years in the ground, but without additional proved up reserves they are in no hurry to burn through existing reserves. So increasing capacity is not on the immediate agenda. Why double capacity now when you still need to spend cash to prove up reserves, which although confidence on that front would be high, still needs to be proven? Frankly that would be an amateurish mistake.

So they will pay their dividend and cash reserves will continue to grow whilst the exploration of current tenement continues. At some point in the future a decision will be made to prioritize either increase capacity or expand into Timor-Leste. I suspect increase of capacity will occur first, but now is not the time. I suspect towards the end of this calendar year plans for expansion will emerge. Importantly, the initial plant was constructed with an $18m debenture (which was paid off a year early in October 2020). Some infrastructure has already been established for the expansion such as tailings dam. Moreover there will be cost benefits from existing plant, reducing the cost of expansion. But, using the $18m as a very conservative worst case cap on costs to double capacity, there is absolutely no reason discussion could not immediately begin on that front with an estimated cash position of $41,194,720 in December. Even paying another interim dividend for H2 FY21 to the now ~3.5bn shares would only cost another $6,946,465, leaving circa $35m in the kitty. Less some for plant and exploration, lets call it $30m. Based on that, I would not at all be surprised to see another special dividend announced in July/August, possibly something in the range of $0.003 ($10.4m). Still leaving $20m in the kitty which would be more than enough to cover costs of an expansion up front.

In other words, they can well and truly do both. They are a cash making machine relative to their size, and in my view have been grossly undervalued by the market for a long time.

As for the last piece on more risk of a capital raise, I'm sorry but that is just a silly comment to make. If the company found itself in some sort of unforeseen dire need of cash beyond its own earning capacity, which would be very strange in and of itself, then they are now in a position to obtain finance at very low interest rates as they are earning disproportionately large profits for a company of its size.

4. No obvious reason for SP appreciation: I agree. Other than a PE of less than 3 and all of the necessary inputs that enable that fact. Bottom line is the obvious reason here, circa $40m EBITDA give or take a few million based on expenditure and POG fluctuations.

Expand

Some loosely levelled opinions there that don't really hold a lot of analytical weight. Correct. Merely my opinion.

But the company still has plenty of land to explore and develop. If it is ever worth developing. They may find nothing. Lost Dog extension was marginal if that was any indication. At the moment, it is just land which can be explored, and is priced as such.

"Poor LOM", disagree again, with around 3.5 years in the ground and 1 year on the ground. Sorry, but I regard that as shyte LOM.

I'm willing to bet my mothers wedding ring that they can extend said plant. Exactly. A mere bet/punt which, again, is priced as such.

So they will pay their dividend and cash reserves will continue to grow whilst the exploration of current tenement continues. Fair point. Their cash position in 4 years looks to be secure enough for some exploration.... I retract my idea that they may need a future CR. However, that position merely makes BCN an exploration company in 4 years time with cash to burn on drilling, and no guarantee of growing reserves. If they miss with the drill, my CR assertion may easily become fact. It would seems the market is pricing it as such.

Other than a PE of less than 3 and all of the necessary inputs that enable that fact. Correct. The PE is priced in at around the LOM, which is sensible and expected. Without a LOM extension (which is not guaranteed), I stand by my statement that there is no obvious reason for SP appreciation at this time.
BCN Price at posting: 4.0¢ Sentiment: None Disclosure: Not Held
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