Fully agree with your analysis Oak Bloke …….I have held PAF for probably 15 years ……buying originally for 5p or thereabouts …….adding to it over the years ……it is now my second biggest holding ……I thought the comments on Stocko were a bit superficial and to be fair to Roland they do say they normally don’t cover miners etc and I am pretty sure this is their first time covering it.
As a play on gold ( which it is) and as part of a diversified portfolio I am struggling to find a better risk/reward play ……the timing of their financial update was a little unfortunate …….based on the gold price movement and the way PAF had moved since the start of the year I could very easily have seen it move to a mid 40’s price.
If the gold price stays at or around where it is now for the next two years then a 50p+ sp is a real possibility with the risk on the upside not only from PAF specific performance but from higher gold prices.
Great write up Oak and you cover the main points. As per Graham I also have been a LT holder, and if you look at the chart, PAF has tracked the Gold Price, all the while paying nice dividends.
Reading the tea leaves, the market reacted negatively for 2 main reasons: 1) the revenue miss, and 2) the large rise in AISCs.
The first, as you've demonstrated, is less of a worry. There's plenty of cash that will be coming in FY 25-7. Even with the hedging etc, the AISC jump however is a valid concern. This is bc management have been hammering cost containment and this sudden increase indicates that something is awry. The illiterate messaging also didn't help.
Now onto the plus point. The market seemed to like the Tennant acquisition bit something that needs to be added is that Aus miners trade at a significant premium to anywhere else in the world.
This then brings us onto management. Next year imo will be a major test of Cobus' capabilities. If costs continue to spiral, then this stock will shally along as a kind of a poor man's iamgold. However, if he can contain AISCs and ramp up Tennant smartly, then the value proposition is maintained.
A really bold move might be to divest all SA assets, and buy a major tier one mine (they're still going cheap) eg in PNG or another mining friendly jurisdiction. But I don't think that will happen.
Drills in the ground in Tennant with upsizing the Reserves would be a happy medium.
All told I think this is a buying opportunity, and a bet essentially on Cobus.
it's not a stock I can claim deep knowledge so wrote the article with a little trepidation and less fluidity than some other holdings. South African accounts (I noticed this with Goldplat too) are subtly different to the UK in their presentation too.
The key for me was that there's a high degree of optionality around the "what next". i.e. if gold prices plummet mothball the most expensive mines onto C&M. If the opportunity to further expand makes sense go for it and let the gearing take the strain where growing operating cashflow supports the usual covenants and ratios of debt to cash flow.
Your perspective on Cobus and the future success pivots on him was something I was oblivious to, so that's a very valuable insight. I will watch some interviews and get to know him better.
The kudos is on you. It's a good summary and nicely picked through the results.
Bottom line is that PAF is undervalued, if it achieves its production targets this year (as it should) it will be on a P/E of ~3. Too cheap for a company with an Australian mine. But again, costs are the big issue.
Goldplat I also own. I think the market has lost its mind. This is a simple waste recycling business, it's on a stable growth trajectory, little debt, growth options in Brazil, director with a large slug of equity.
Perhaps a little conservatively run, but as investors we need to ask what is the R/R. The reward can come from a rerate, and just marking this to a P/E of 6 - surely not that demanding - is a double. Zeus has a target price of 17p. Another broker, 20p. Neither of these targets seem outlandish. The Risk side - it's hard to see the company running into jurosdictional issues when it basically cleans up waste. Just my 2 cents
Fully agree with your analysis Oak Bloke …….I have held PAF for probably 15 years ……buying originally for 5p or thereabouts …….adding to it over the years ……it is now my second biggest holding ……I thought the comments on Stocko were a bit superficial and to be fair to Roland they do say they normally don’t cover miners etc and I am pretty sure this is their first time covering it.
As a play on gold ( which it is) and as part of a diversified portfolio I am struggling to find a better risk/reward play ……the timing of their financial update was a little unfortunate …….based on the gold price movement and the way PAF had moved since the start of the year I could very easily have seen it move to a mid 40’s price.
If the gold price stays at or around where it is now for the next two years then a 50p+ sp is a real possibility with the risk on the upside not only from PAF specific performance but from higher gold prices.
GerryOD
Great write up Oak and you cover the main points. As per Graham I also have been a LT holder, and if you look at the chart, PAF has tracked the Gold Price, all the while paying nice dividends.
Reading the tea leaves, the market reacted negatively for 2 main reasons: 1) the revenue miss, and 2) the large rise in AISCs.
The first, as you've demonstrated, is less of a worry. There's plenty of cash that will be coming in FY 25-7. Even with the hedging etc, the AISC jump however is a valid concern. This is bc management have been hammering cost containment and this sudden increase indicates that something is awry. The illiterate messaging also didn't help.
Now onto the plus point. The market seemed to like the Tennant acquisition bit something that needs to be added is that Aus miners trade at a significant premium to anywhere else in the world.
This then brings us onto management. Next year imo will be a major test of Cobus' capabilities. If costs continue to spiral, then this stock will shally along as a kind of a poor man's iamgold. However, if he can contain AISCs and ramp up Tennant smartly, then the value proposition is maintained.
A really bold move might be to divest all SA assets, and buy a major tier one mine (they're still going cheap) eg in PNG or another mining friendly jurisdiction. But I don't think that will happen.
Drills in the ground in Tennant with upsizing the Reserves would be a happy medium.
All told I think this is a buying opportunity, and a bet essentially on Cobus.
Thank you Wizard,
it's not a stock I can claim deep knowledge so wrote the article with a little trepidation and less fluidity than some other holdings. South African accounts (I noticed this with Goldplat too) are subtly different to the UK in their presentation too.
The key for me was that there's a high degree of optionality around the "what next". i.e. if gold prices plummet mothball the most expensive mines onto C&M. If the opportunity to further expand makes sense go for it and let the gearing take the strain where growing operating cashflow supports the usual covenants and ratios of debt to cash flow.
Your perspective on Cobus and the future success pivots on him was something I was oblivious to, so that's a very valuable insight. I will watch some interviews and get to know him better.
OB
The kudos is on you. It's a good summary and nicely picked through the results.
Bottom line is that PAF is undervalued, if it achieves its production targets this year (as it should) it will be on a P/E of ~3. Too cheap for a company with an Australian mine. But again, costs are the big issue.
Goldplat I also own. I think the market has lost its mind. This is a simple waste recycling business, it's on a stable growth trajectory, little debt, growth options in Brazil, director with a large slug of equity.
Perhaps a little conservatively run, but as investors we need to ask what is the R/R. The reward can come from a rerate, and just marking this to a P/E of 6 - surely not that demanding - is a double. Zeus has a target price of 17p. Another broker, 20p. Neither of these targets seem outlandish. The Risk side - it's hard to see the company running into jurosdictional issues when it basically cleans up waste. Just my 2 cents