Grossly Undervalued, page-40

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422 Posts.

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24/07/18

08:41

Post #: 34529316
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Originally posted by ThinkinLoudly ↑

I was looking at a buy. At face value 5c looks good, so I spent some time trying to understand 5c ...

I'm not sure I can see how this undervalued. As a mine and facility and resource and reserves, I agree. But as a company, no.

Key targets missed.
Target Delivered
Milled (Mt) 875 -> 900 1,012
Feed grade 1.6 -> 1.7 1.45
Recovery (%) 92 -> 93 84.2
Production (oz) 40 - 45 k 40k
ASIC 1100 -> 1200 ~ 1300

These targets were set circa 6 months ago when BLK was against the wall. You would hope they were well considered and understood.

=> In this context the feed grade miss is significant ... 6 months mining ahead is not a long time in the life of a mine ... it suggests they either don't know what's ahead (despite a thousand geologists on board) or they just fluffing the numbers (possibly because there are so many accountants around).

=> Recovery miss is too significant. The "... as well as increasing AISC ..." tag on this explanation suggests (a) the ASIC blow-out was June qtr; and (b) they have either decided to sacrifice yield for short term cash flows or the marginal cost of extra yield is (and will continue to be) greater than value of that recovered. Neither of these possible conclusions bodes well for the future.

From the operations update BLK declare debt of around A$32.3m. If you do the calculations based on 15 January 2018 recapitalisation notes, at end of June debt should have been Orion A$15.5m and MACA A$14.3m. Total A$29.8m Maybe the difference of $2.5m is capitalised interest or maybe an accounting anomoly. Maybe. Regardless, another missed representation.

Ahead the debt obligations are significant. Most of Orion's debt must be repaid this side of 1 December 2018 including A$7.6m in September ... big ask, IMO.

None of the above bodes well. Missed representations. Sagging financials. Obvious debt stress. The principal contractor is also a business controller and the one party most likely to benefit in event of BLK's demise. Looks very much like a lender has dictated operations since late last year (and maybe collaborated with management) so as to lessen it's inevitable haircut. A classic tail wagging a dog!

I think the next announcement (June qrtly) will be a shocker! The one after that, even worse ...

I'm out.

Good luck.

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I think your calculations are way out mate

BLK Price at posting: 4.9¢ Sentiment: Hold Disclosure: Held
2 Upvote

0 Great analysis

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