Any thoughts on last quarter? Surely not as appealing as before. I was expecting the inventory build-up from the previous quarters ahead of the wet season to start converting to cash this quarter. At least all this cash is mostly tied in inventory and they are profitable on a per ton basis. Central to the thesis is that STAM will push for some liquidity event in Sembehun (i.e., selling a stake of it) and the stock will price accordingly. Specially given STAM holds 20% but could have much more power as a fraction of shares were voted in the last AGM. This all is still on the table but industry conditions tightening is not good.
This was always a hairy sit - some alt sources have stated that SRX did threaten to leave Sierra so a wind-down is not completely out the pic. Given where working cap is - a liquidation and complete abandonment of Semb is actually +ve and I think industry conditions tightening lends credence to that - even if Semb raises debt financing, the rate will be exorbitant and the cash flows wont be able to service the obligation. We'll see what STAM does w this eventually.
Nope. That's why stock trades at net cash level -> mkt implying cash = 0 and rightfully so as current mgmt waiting to deploy cash to Sem after feasibility studies are complete. Thesis now lies on STAM pushing for a cash return which they've done historically in various investments. A cash return of sorts implies investment in Sem is off the table and stock wouldn't sit here no more IMO.
Unfortunately I do not have experience with STAM apart from reading up on their investments. I've spoke to some resource experts and may have underestimated the ability to simply exit - I've included an update at the bottom of the piece. Would love your thoughts as well.
My two cents...the only time I buy African mines is if the Company has very consistent FCF yields of 50%+ (with no possibility of ceasing at any point in the next several years) with a plan for either buybacks or dividends. Ideally, in an African country with as much "rule of law" as possible, such as South Africa/Ghana. Ideally, spun out from as large of a Western company as possible.
Any thoughts on last quarter? Surely not as appealing as before. I was expecting the inventory build-up from the previous quarters ahead of the wet season to start converting to cash this quarter. At least all this cash is mostly tied in inventory and they are profitable on a per ton basis. Central to the thesis is that STAM will push for some liquidity event in Sembehun (i.e., selling a stake of it) and the stock will price accordingly. Specially given STAM holds 20% but could have much more power as a fraction of shares were voted in the last AGM. This all is still on the table but industry conditions tightening is not good.
This was always a hairy sit - some alt sources have stated that SRX did threaten to leave Sierra so a wind-down is not completely out the pic. Given where working cap is - a liquidation and complete abandonment of Semb is actually +ve and I think industry conditions tightening lends credence to that - even if Semb raises debt financing, the rate will be exorbitant and the cash flows wont be able to service the obligation. We'll see what STAM does w this eventually.
Thanks for replying and yes waiting to see what STAM is planning. Cheers on $PAC.AX news! Hopefully we see a higher bid.
Any mention of a dividend or buyback being started?
Nope. That's why stock trades at net cash level -> mkt implying cash = 0 and rightfully so as current mgmt waiting to deploy cash to Sem after feasibility studies are complete. Thesis now lies on STAM pushing for a cash return which they've done historically in various investments. A cash return of sorts implies investment in Sem is off the table and stock wouldn't sit here no more IMO.
Okay, thanks! Do you know anyone at STAM (or have firsthand experience with them)?...any way to get an idea as to STAM's timing?
Unfortunately I do not have experience with STAM apart from reading up on their investments. I've spoke to some resource experts and may have underestimated the ability to simply exit - I've included an update at the bottom of the piece. Would love your thoughts as well.
My two cents...the only time I buy African mines is if the Company has very consistent FCF yields of 50%+ (with no possibility of ceasing at any point in the next several years) with a plan for either buybacks or dividends. Ideally, in an African country with as much "rule of law" as possible, such as South Africa/Ghana. Ideally, spun out from as large of a Western company as possible.
All good and sensible thoughts. Cheers.