Ok, so I’ve been listening to a few pod casts this week and I thought I might share the main themes as they apply to us and CXO I think – I also did a bit of a comparison between CXO and LTR a bit further down, for my own reference but thought I would share it as well.
Key Themes
1.Patience is key: the majority of investors trade the short term but being prepared to wait the long game invariably rewards those that are prepared to weather the downturns. There were a number of fund managers that take the perspective “I only invest if I am prepared to hold the stock for the next decade”.
2.Stick to your convictions: be prepared to back your research and your intuition – just because the market is selling a stock down, it doesn’t mean that there is anything wrong. A number of sellers get scared by the retraction in a SP and sell out of fear. A wise investor looks at the fundamental value, and if this hasn’t changed, don’t get drawn into selling before you’re ready.
3.Look at stocks that you see in use every day: the advice here is to look around at product that you use in your life or might use in your life – this is a good guide as to whether the product is likely to be viable. I for one, regarding EVs, can definitely see a use in my life for them, and I will definitely be using a home energy storage option within the next couple of years.
4.Look at management and their track record: Regarding CXO, I have little to doubt about the management team, and this is part of the reason I stay invested.
5.Pick stocks where management is heavily invested: This ensures that management has some skin in the game and gives shareholders some surety that managements interests will align with shareholders. I’m not sure I am as certain about this particular aspect regarding CXO, SB has ~8.2m shares (2018 annual report), GE ~6.3m, and HH has 0, - going through the annual statements for the past 5 years, most have been issued from performance rights, rather than out of their own pockets. This is one thing I would like to see a bit more of.
Comparison
After reviewing the KDR takeover bid from wesfarmers this week, I noticed the big jump in LTRs stock price (it has effectively doubled in the past 3 weeks), and it got me thinking whether I should look at it, but I wanted to learn from decisions of the past and did not want to buy in on the hype. To confirm an assessment, I thought I would compare LTR and CXO projects – please understand, I am not doing this to encourage anyone in or out of CXO or LTR, it was just an assessment I made that may be useful for some readers – it was for me anyway.
Project Aspect
CXO
LTR
1 Size
8.85mt @ 1.3
~21.2mt @ 1.4
2 1.0mt @ 1.4 proved
1.2 mt @ 1.3 probable
nil
3 1.09 measured
1.91 indicated
3m measured
12.7m indicated
4 Stage
DFS
Initial Scoping Study
5 Capex
A73m
A232m (40m contingency)
6 Cost per tonne
US300/t
US376/t
7 Share registry
694m
1.5b
8 IRR
80%
38%
9 Mine Life
3.5yrs
~9yrs
10 Annual Production
180,000t
~360,000t
11 NPV
114m (NPV10)
~421m (NPV8)
12 Transport
~A9/t
~A75/t
13 Share price 03 May 19
4.4c
4c
Looking at the information difference between the CXO PFS and DFS, moving to a higher level of confidence downgraded the scenario somewhat, and I am keen to see the numbers of the PFS/DFS when LTR get to that stage and any offtakes that come. For me, and after looking at the numbers, I can conclude three things:
1.it’s too early for me to invest in LTR, I would like to wait for additional detail to be released before jumping in, but it does have the makings of a significant project,
2.CXO has a good little project. When looking at the two side by side, the CXO project will be cheap to run – even though it is likely to be smaller in scale compared to LTR, but LTR is approx. 500km in any direction to the nearest port, and CXO is 88km, and the port of Darwin is 7 days sailing closer (when compared to Fremantle) to Asia (used shanghai as a reference) – it is 12.7 days Darwin to shanghai, and 20 days Fremantle to Shanghai, and
3.If CXO can identify some real tonnage over the next few months – the project will be very attractive indeed.
As I said above, this is not to encourage anyone to invest/divest in/out of either company, but I figured I was looking at it, and the research might help others –I am very keen to hear others thoughts on the above.
