Good Day All,
First i'd like to congratulate the team on a wonderful effort to get this far. They have done all that is promised of them. We move into the next phase now. Management are building a business where they are the majority owners hence i am sure they considered every option before deciding what was best.
They keep ticking those boxes, i wouldn't bet against a team that has yet to miss a target.
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Although like most, the share continues to frustrate and leads to doubts in your own investment decision. So i thought i would talk out loud in this post, i am scarred resource investor after the brutal 5 year bear market so skeptcism is a must.
First the numbers from the Sprott deal.
There are some hidden costs, over and above the yield rate. In AUD, it works out to be:
Principal A$35m
Term 36 months
Interest: 9%*
Shares issued 3.5m**
NSR 1.5% on first 100k oz***
- we'll assume the highest interest yield of 9% x A$35m x 3 years = A$9.45m
- Let's value the shares at today's price of A$0.31c = A$1.085m
- NSR, let's assume POG is A$1,650 --> 100k x $1,650 x 1.5% = A$2.475m
Total cost of debt over 3 years = A$13.01m.
Annualise that by dividing by 3 = A$4.33m
Find out p.a. % cost on principal = 12.4% p.a.
So Management has taken a higher cost in the short term capital markets vs a dilute approach on the hope of a few things
- Quicker than expected payback i.e 2 years saving 4.33maud
- Less dilution means higher EPS (earning per share) or full leverage to their own project. It is simple debt = leverage.
- Confidence in the project is higher than expected in terms of free cash i.e higher cash output / grade to come by management and they are willing to bet on that.
Advise: If you dont feel comfortable with the leverage that KIN just added, best sell now and move into other producers. As the market has plenty on sale miners at discounts. SLR RSG PRU are three i own and will continue to buy at these discounted rates. So no need to stress, sell and move on.
Secondly the Share price action.
Unlike many 'AUD producers' KIN doesn't have funds or super funds buying into them hence keeping them elevated i.e NST EVN RRL etc
North American tax selling is on and usually lasts til mid December, i have many stink bids on the TSX for miners already down 70% from their 2016 highs like First Majestic / Bear Creek / Contintenal Gold etc - So this isnt KIN limited action.
Also adding on ASX epsecially RSG and KIN.
Chart shows uptrend intact from 2016, despite all noise, there is heavy selling at that above break out line and buying at the trend line. Will this continue ? i dont know. If it breaks 21c is the test if it breaks out 34c weekly hold is required.
Thirdly, I agree with my good friend
@speculator101 KIN still needs to raise cash for GA and drilling, someone knows it and could be playing with the price, best they just pulled the trigger !! But knowing management, they are calm and try best not dilute themselves nor shareholders.
So this could dampen they mood in the short term, unless
@Copperkote drill hole send this above 45c - they could know something we dont !
Lastly
I am not going to run through the value propostion, there are alot smarter guys on the KIN forum than me, that have already posted fabulous pieces. But one poster wrote how he / she wished they were in Nugget stocks and couldnt wait to exit KIN, to that i will quote Oscar Wild 'We know the price of everything and the value of nothing'
All the best
(20min delay)
