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General Category => Investment Ideas => Topic started by: sculpin on November 15, 2018, 01:52:09 PM

Title: SRHI.to - Sprott Resource Holdings
Post by: sculpin on November 15, 2018, 01:52:09 PM
Sprott Resource Holdings (SRHI - TSX - $1.35). Now trading at a $0.03/share discount to the value of the net liquid assets shown below. Insiders made a very large investment at $5 in 2017. Warrants/options are outstanding at $6.60. There are about 34 million shares outstanding. I have been buying recently sub $1.50. Tangible book value per share is $3.80.

Cash & loan receivable -- $0.76/share
Corsa shares ------------- $0.38/share
Inplay shares ------------ $0.24/share

Total cash & liquid assets $1.38/share

http://www.sprott.com/media/2182/srhi-conference-call-q3-2018.pdf

So the rest of the portfolio is free including what could/should be an outstanding investment in a Chilean copper mine....

"The technical studies confirm that MTV should almost triple current levels of production, achieving a run rate of approximately 18,000 tonnes per annum of copper cathodes," added Mr. Yuzpe. "Based on a long-term copper price of $2.75 (U.S.) per pound, the preliminary economic assessment which looked at the total available mineral resources on the project indicates that MTV could generate $34-million (U.S.) in project cash flow in 2020, peaking at $45-million (U.S.) in 2022."

Other investments are non core and include:

16% of Virginia Energy
40% of Lac Otenyk - a large very pure iron ore deposit in northern Quebec
15% of RII North America
50% of Beretta Farms - listed as for sale

In sum at $1.35 a share, SRHI gives you cash & major investments in coking coal (Corsa) & light oil (Inplay) trading close to all time or multi year lows just below the current SRHI share price. The 70% investment in a cash flowing copper mine that Vale had previously spent $242 million US developing & other investments are currently free at this purchase price.

Inplay (IPO - TSX - $1.15) research...

InPlay Oil (IPO-T; Rating: Buy – Target: $3.25) Strong Cash Flow Driven By Higher Oil Weighting  (Sales Commentary)

Ø  InPlay reported production of 4,773, which was inline with our estimate.  Cash flow of $0.15 beat our estimate by a penny.

Ø  Current field production is estimated at 5,350 boe/d (72% liquids), with the liquids weighting rising from the 69% in the Q3 numbers thanks to recent drill results in the Cardium and the small disposition of gas weighted production (250 boe/d).

Ø  Results from two new Cardium 1.5 mile wells continue to show results well ahead of the companies type curve, averaging 520 boe/d (87% liquids) since coming onstream early last month and cleaning up to current production of 652 boe/d (82% liquids).

Ø  Like many other producers, IPO has elected to defer bringing on two of its planned ERH wells into early 2019 because of current differentials.  Given the current production levels, and with plans to bring on two already drilled wells in Q4, we don’t see risk to our 5,100 boe/d estimate for Q4.

Ø  IPO is trading at only 2.1x our 2019 EV/EBITDA and forecast to exit next year at 0.8x D/CF.  For those looking for oil exposure and willing to move down cap, the company has shown great execution and is the cheapest name in our universe.

Corsa (CSO - TSX - $0.80) research...

Investment Thesis

 Corsa Coal Corp. is one of the few North American survivors in the coal
industry after the precipitous decline in pricing and volumes over the past five years. Corsa
emerged from the downturn with two operating divisions intact and although it has since sold its
CAPP division, its NAPP met coal division holds the potential to expand production from the
current run rate of 1.6M tons to 3M tons with minimal capital requirements. With the plan to push
more of its production into the seaborne market in 2018 to capture the current high prices,
EBITDA should improve meaningfully.

Event

Corsa Coal reported Q3/18 financial and operating results. As we expected, Q3
showed significant improvement over the disappointing results delivered in Q2.
Continued strong coal prices, along with improved operating metrics, put the company
back on track to meet annual guidance.

Highlights

 Financial Results | Corsa reported Q3 financial results as follows:
o Adjusted EBITDA was $8.5M versus our expectation of $8M and $4.3M in Q2
and $12.6M last year.
o Operating cash flows were $6.5M, below our expectation of $11.8M for the
quarter versus $0.1M in Q2 and $10M last year — higher amortization and
reclamation costs were the main reasons for the miss.
o Net income attributable to shareholders was -$2.2M (-0.02/sh), which fell below
our estimate of $6.7M ($0.07/sh), versus -$4.6M (-0.05/sh) in Q2 and $1.3M
($0.01/sh) last year.
o Average sales prices were $106.99, compared to our estimate of $115/t versus
$116/t in Q2 and $112/t last year. The company saw actual realized prices of
$151–$157 versus our estimate of $160–$166/t on an FOB vessel basis. The
sales mix for the quarter was 60% international and 40% domestic customers.
 Q3/18 Production Results | Total met coal sales increased to 455.5Kt, compared
to 392Kt in Q2 and 488Kt last year. The growth came despite supply chain
disruptions to export terminals and rail service throughout the quarter. Although
they were an improvement, sales fell short of our estimated 550Kt. The company
lowered it guidance to 1.9M tons from 2.2M tons, as purchased coal volumes have
been reduced.
 Operating Costs | Average cash production costs per ton sold saw major
improvement as a result of recent investment in equipment at the Casselman
mine; costs were reported at $77.94/t for Q3, decreasing $15.52/t from $93 in Q2.
CSO is back on track to meet annual guidance of $82–$84/t for all sales.
 Looking Ahead | Corsa saw the benefit of strong coal pricing in Q3 as a result of
global supply disruptions and a positive demand outlook and is expecting to see
continued improvements through Q4. Management also stated that it is expecting
mining permits later this year for the Keyser project, a new underground mine,
which suggests further expansion for 2019.

Valuation & Conclusion

Q3 was the strong operating quarter that Corsa needed and was in line with our
expectations that H2/18 would be significantly stronger, with the majority of the issues
in H1 now in the past. We value CSO based on a 5x 2019e EV/EBITDA multiple,
consistent with junior coal mining companies. We maintain our C$2.50 target and Buy
recommendation.
Title: Re: SRHI.to - Sprott Resource Holdings
Post by: doc75 on November 16, 2018, 10:42:52 AM
Sculpin:   I took a brief glance at the Q3 financials.  Looks like $16M of cash + $4.4M of a loan outstanding.  How do you get to your $0.76 per share cash figure, with 34M shares outstanding?  What am I missing?
Title: Re: SRHI.to - Sprott Resource Holdings
Post by: sculpin on November 16, 2018, 11:20:41 AM
Sculpin:   I took a brief glance at the Q3 financials.  Looks like $16M of cash + $4.4M of a loan outstanding.  How do you get to your $0.76 per share cash figure, with 34M shares outstanding?  What am I missing?

Hi Doc - the Company's financials are in US dollars. So $20.4US becomes $26.5 Cdn or $26.5/34.1shares = $0.77/share cash & loan
Title: Re: SRHI.to - Sprott Resource Holdings
Post by: doc75 on November 16, 2018, 11:30:06 AM
Thanks Sculpin - That just dawned upon me and I was coming back on here to see if I could edit my post before my ignorance was acknowledged.  You beat me to it! :)

This looks like a very interesting opportunity.
Title: Re: SRHI.to - Sprott Resource Holdings
Post by: sculpin on December 12, 2018, 02:31:11 PM
“Longer term, and this is key, rising electric-vehicle production will shift the entire demand curve since EV's require multiple times the copper content of internal-combustion engines.”

To make these cars and trucks, manufacturers will require an additional 1.7 million metric tons of copper each year by 2027, according to the International Copper Association. Battery-powered EVs use an average of 183 pounds of the metal versus between 18 and 49 pounds for conventional cars, according to data from the Copper Development Association. The difference is even starker for buses. A bus running with a hybrid electric and diesel engine needs 196 pounds of copper, but a fully electric-powered bus requires 814 pounds. Charging ports for electric cars also need copper.

Even without EVs, the market isn’t producing enough newly mined copper to keep up. Global mined production totaled 20 million tons last year, versus demand of 23.8 million tons, according to data from the International Copper Study Group. The deficit typically gets filled through recycled metal or a drawdown of inventories. Moreover, auto-related demand hasn’t yet peaked, and major increases in mined supply can take years to develop.

Still, the shift from fossil-fuel-powered vehicles to electric-powered ones looks set to be a secular, long-term trend from which mining company shares should benefit. During the 2008 recession, usage of refined copper fell by less than 1%, or 148,000 tons, according to ICSG. However, usage of copper in EVs and associated hybrid vehicles is expected to add more than 200,000 tons to demand this year, which will rise steadily for the next decade, according to a 2017 study commissioned by the International Copper Association.

https://www.barrons.com/articles/as-e-cars-surge-some-major-copper-mining-stocks-should-rise-1541173787
Title: Re: SRHI.to - Sprott Resource Holdings
Post by: sculpin on December 29, 2018, 01:53:23 PM
So the insiders put quite a lot of money in and they had institutions follow them in for $30 million back in 2017 (pre share consolidation of 1 for 20 at $0.25) at a price of $5.00 per share! Now the shares have been trading from $1 to $1.20 for most of December and there have been no insider buys or a move to repurchase even though they have $26 million in cash sitting on the balance sheet. Crazy. Are they waiting for it to go back up 5 times before they begin buying again??? Buying back 20% of the stock at these levels would be ridiculously accretive to the remaining shareholders.


TORONTO, April 20, 2017 (GLOBE NEWSWIRE) -- Sprott Resource Holdings Inc. (“SRHI”) (TSX: SRHI) is pleased to announce that it has closed its previously announced “best efforts” marketed offering (the “Offering”) of units (the “Offered Units”) made pursuant to an agency agreement dated April 3, 2017 between SRHI and a syndicate of agents led by Sprott Capital Partners, a division of Sprott Private Wealth LP, and including Haywood Securities Inc.

Pursuant to the Offering, SRHI sold 120,000,000 Offered Units at a price of $0.25 per Offered Unit for gross proceeds of $30,000,000. Each Offered Unit consisted of one class “A” common share in the capital of SRHI (a “Common Share”) and one Common Share purchase warrant (a “Warrant”). The Warrants expire on February 9, 2022, and have an exercise price of $0.333 per Common Share.


That was quite the sweetener in the warrant they got back in April 2017 - only $5.50 out of the money now! Trading at $0.01 but you need 20 of them to get a share at $6.60. If the copper investment goes to plan I would think it could work but it's amazing how fast 3 years can go by....
Title: Re: SRHI.to - Sprott Resource Holdings
Post by: Cardboard on February 08, 2019, 08:02:01 AM
I think that you should all have a look at this as the value is quite incredible, solid and I would say growing. Stock seems to have bottomed as well. Depending on how you look at it, you can come up with $4 - $6 per share of holdings value while it trades at $1.15...

Copper has firmed up recently reaching $2.83/lb and inventories are depleting fast while few are developing new mines. Fundamentals look very good on supply and demand front.

If one believes that India will ever develop itself in a meaningful manner it has to spend more on electrification. They have done a lot to bring power to smaller towns but, it is really the last mile that takes a lot of copper vs aluminum: transformers, housing. And it is the same for every developing country. One firm measures that by copper (lb) used/capita compared to the likes of China and I don't think that there is any way around it. Even more if you believe in renewables.

Beauty here is that we don't need a big rally in copper at all. If it stays right around here we already have the $4-6 of value that I mentioned.

Cardboard
Title: Re: SRHI.to - Sprott Resource Holdings
Post by: sculpin on February 08, 2019, 08:31:53 AM
New presentation...

http://www.sprott.com/media/1216/srh-investor-presentation.pdf

Title: Re: SRHI.to - Sprott Resource Holdings
Post by: petec on February 08, 2019, 09:45:10 AM
Just starting on this one (my investment in Dundee isn't exciting enough :o ). I need to understand MTV better. Anyone an expert/have good sources?
Title: Re: SRHI.to - Sprott Resource Holdings
Post by: sculpin on February 08, 2019, 10:30:54 AM
Copper Outlook 2019: Supply And Demand Analysis

https://seekingalpha.com/article/4236760-copper-outlook-2019-supply-demand-analysis


Chile's Copper Commission 'Cochilco' just released its 2019 copper forecast a $3.05/lbs representing 14% upside from current levels amid an expected market supply deficit.

While demand is seen rising 2.4% globally in 2019, half of which is from China, global production may only increase 1.6%.

Estimated supply deficit for 2019 and 2020 is revised higher from  forecast last year due to to lower than expected production from Grasberg mine in Indonesia, the world's second largest.

Deceleration of global growth, ongoing trade tensions between U.S. and China, and financial market volatility highlighted as main negative factors slowing recovery of metal prices.

The Bull Case for Energy Metals Going into 2019

https://www.visualcapitalist.com/bull-case-every-energy-metal-2019/
Title: Re: SRHI.to - Sprott Resource Holdings
Post by: sculpin on February 08, 2019, 10:31:56 AM
Inplay position should be worth triple from current level

At a $3.25 price the Inplay position would be worth $23 million or about $0.68 per SRHI share. Much higher if they were to assume WTI $65+ and a more realistic 5 multiple.

Canaccord catalysts Inplay 

Duvernay activity IPO holds ~48 section in the Eastern Duvernay. Offsetting activity by peers in the area could derisk the acreage. At $2M/section, this is worth ~$1.40/share.

2019 Multiple expansion Continued success in the Cardium could lead to a multiple expansion. At prevailing pricing (US$55 WTI), a 4.5x multiple puts the stock at $1.80.

Acquisition target With a discounted multiple and strong Cardium well results, IPO may become a takeout candidate.
Title: Re: SRHI.to - Sprott Resource Holdings
Post by: Cardboard on February 08, 2019, 11:19:16 AM
Cash, Corsa and InPlay are worth over $1.30/share right now. Both of these public securities are severely undervalued.

This does not take into account any of the other holdings.

Then you have the copper operating mine in Chile, or a great jurisdiction, the largest asset with NPV and feasibility study on expansion published recently by the company. It is already a low cost mine and on the way to be cheaper and to produce more.

If I were you Petec, I would not study this too long or buy and study after. The chart is now looking very good. Unlike Dundee there is really no cash burn and you have some of the smartest mind in the business overseeing this or Rick Rule and John Embry. A holding company trading for 20 to 25% of NAV...

Cardboard
Title: Re: SRHI.to - Sprott Resource Holdings
Post by: petec on February 08, 2019, 11:57:25 AM
Noted and I likely will, but I'd still like to know more!
Title: Re: SRHI.to - Sprott Resource Holdings
Post by: Cardboard on February 08, 2019, 12:07:49 PM
Heavier volume over last 10 sessions, just crossing 50 day moving average and I think that the nice pattern we are seeing is almost a perfect cup handle.

They will be all over this soon!
Title: Re: SRHI.to - Sprott Resource Holdings
Post by: NorteCapital on February 08, 2019, 12:15:50 PM
Cardboard, I've spent less than 1hr so I may be wrong but I do not see how MTV is a low cost mine. Their guidance says cash costs will be 2.2-2.5$ per lb for 2019. What can we expect for 2020-2022? Is it going to decrease dramatically?
Title: Re: SRHI.to - Sprott Resource Holdings
Post by: sculpin on February 08, 2019, 12:35:40 PM
Cardboard, I've spent less than 1hr so I may be wrong but I do not see how MTV is a low cost mine. Their guidance says cash costs will be 2.2-2.5$ per lb for 2019. What can we expect for 2020-2022? Is it going to decrease dramatically?

See page 10 of the corp presentation...

http://www.sprott.com/media/1216/srh-investor-presentation.pdf
Title: Re: SRHI.to - Sprott Resource Holdings
Post by: sculpin on February 10, 2019, 09:26:44 AM
From the most recent G&R research note...

Copper continues to be our favorite base metal.  Since peaking at $3.30 per lb. in June of this year, copper prices have pulled back 20%. Although much has been written about the slowing Chinese economy, according to the World Bureau of Metal Statistics (WBMS), Chinese copper consumption for the first 10 months of 2018 grew almost 6%, a significant acceleration compared to lackluster demand in 2015, 2016, and 2017. 

Also, after several years of meager, we believe we are beginning to see the first  signs of strong copper demand growth coming from India. In previous letters, we outlined how India is making a huge push to electrify the country and that we should expect to see a significant acceleration in Indian copper demand in the next several years.

Also global copper exchange inventories continue to fall, indicating to us that the copper market remains in deficit. On the supply side, global copper mine supply continues to stagnate. Over the last three years, we have repeatedly stressed how copper mine supply was going to  stagnate after growing strongly in 2015 and 2016 and our modelling has been confirmed by mine data.   According to WBMS, global copper mine supply (as reported on monthly basis) has shown no growth over the last two and a half years. Our models also tell us to expect little   copper mine supply growth as we move into the next decade.

With the prospect of extremely strong demand and little if any mine supply growth, we remain bullish towards copper and continue to recommend significant investment exposure to copper equities.

http://gorozen.com/research/commentaries

Title: Re: SRHI.to - Sprott Resource Holdings
Post by: sculpin on February 11, 2019, 10:57:14 AM
Sprott Resource Holdings Inc. Forms Special Committee

TORONTO, Feb. 11, 2019 (GLOBE NEWSWIRE) -- Sprott Resource Holdings Inc. (TSX: SRHI) (“SRHI” or “the Company”) announces that, in consultation with its significant shareholders including Sprott Inc., the Board of Directors of the Company has formed a Special Committee of the Board comprised solely of the Company's four Independent Directors which will be chaired by Terry Lyons, the current Chairman of the Board. The purpose of the Special Committee will be to review and evaluate potential measures to address the Company's market valuation. This review will be comprehensive and will look at all measures to maximize shareholder value. The Special Committee has engaged financial and legal advisors to assist in its evaluation.
About Sprott Resource Holdings Inc.

SRHI acquires and grows a portfolio of cash-flowing businesses and businesses expected to cash flow in the natural resource sector. Based in Toronto, SRHI is part of the Sprott Group of Companies and seeks to deploy capital to provide our investors with exposure to attractive commodities. For more information about SRHI, please visit www.sprottresource.com.

For further information:
Glen Williams
Managing Director, Investor Relations
T: (416) 943-4394
E: gwilliams@sprott.com
Title: Re: SRHI.to - Sprott Resource Holdings
Post by: sculpin on February 12, 2019, 11:19:11 AM
From Stockhouse...

Insider buys and extremely undervalued shares

Spoke to IR - Steve Yuzpe, CEO, puts 100% of his annual bonus into stock and 25% of salary into stock.  The entire board and insiders are blacked out one month before year end results and much of the last while due to recent developments. Board seats are blacked out much of the year. It sounds like whenever the blackout is lifted, there will be significant interest in insider buying.

I asked about the new committee to maximize shareholder value.  It is an independent committee to make non biased recommendations. IR is uncertain what will be recommended but it could range from A to Z, whatever maximizes shareholder value ranging from continue operating as is to complete liquidation of assets.

The current mine life of 6.5 years may be extended through further exploration and feasibility studies.  One confirmation is that MTV is funded at the project level, thus corporately protecting SRHI. 

Dividends are not off the table once cash flow starts.  They are expecting some cash flow at eh end of 2019. 2020 will be a transformational year for the company where the cash starts to roll in.

I look forward to hearing recommendations from the special committee, especially considering liquidation value is likely $5 CDN per share. Regardless of the recommendations and the direction they take, the share price at $1.35 today is a gift.   

Title: Re: SRHI.to - Sprott Resource Holdings
Post by: Pondside47 on February 13, 2019, 04:34:43 AM
MTV may be funded at the project level but the debt is guaranteed by SRHI.
Title: Re: SRHI.to - Sprott Resource Holdings
Post by: valuedontlie on February 13, 2019, 09:52:21 AM
this has been my big question for the name... they still need to fund the project to reap the big 2020 cash flow figures... they don't have the cash on hand to do so... and you can't value the business using the net cash / securities today when they have some cash burn + capex need for the projects...
Title: Re: SRHI.to - Sprott Resource Holdings
Post by: sculpin on February 14, 2019, 08:15:43 AM
A great example that SRHI can take guidance from is Clarke Inc which has created significant shareholder value over several years in a series on substantial issuer bids and special dividends that have moved the share price from a substantial discount to book value to a premium to book in the last quarter...

During 2018, the Company's book value per share increased by $1.50 or 14.0%.  The increase can be ascribed to (i) positive $1.31 per Clarke common share ("Common Share") resulting from the recognition of additional surplus in one of our pension plans, (ii) positive $0.23 per Common share due to repurchasing Common Shares at prices below our book value per share, offset by (iii) negative $0.04 per Common Share of investment performance. Our book value per Common Share at the end of the year was $12.21 while our Common Share price was $12.50.

Halifax-based Clarke invests in a variety of private and publicly-traded businesses and participates actively where necessary to enhance the performance of such businesses and increase its return. Clarke's securities trade on the Toronto Stock Exchange (CKI); for more information about Clarke Inc., please visit our website at www.clarkeinc.com.

Title: Re: SRHI.to - Sprott Resource Holdings
Post by: netnet on February 14, 2019, 12:24:45 PM
Stupid question here: Why is this trading at these levels?

Not so stupid question: What would turn this into a disaster? (Did they really guarantee the MTV debt?)
Title: Re: SRHI.to - Sprott Resource Holdings
Post by: sculpin on February 14, 2019, 12:37:40 PM
Stupid question here: Why is this trading at these levels?

Not so stupid question: What would turn this into a disaster? (Did they really guarantee the MTV debt?)

1. The entire Cdn resource & small cap market has been undergoing selling pressure for years now. A small cap conglomerate in this sector is especially punished as there are few new buyers of such equity or many legacy sellers who have became impatient or are selling for reasons not related to fundamentals (tax reasons, need cash, portfolio manager change etc)

2 Yes they guaranteed a $15mm line which is still below the cash they currently hold....

 In July 2018, the Company agreed to guarantee (replacing the previous majority shareholder) the line
of credit provided to MTV from an investment fund in the amount of $15 million on the same terms as the prior guarantor. There are no other restrictions or externally imposed capital requirements of the Company.
Title: Re: SRHI.to - Sprott Resource Holdings
Post by: netnet on February 15, 2019, 04:45:43 PM
Quote
1. The entire Cdn resource & small cap market has been undergoing selling pressure for years now. A small cap conglomerate in this sector is especially punished as there are few new buyers of such equity or many legacy sellers who have became impatient or are selling for reasons not related to fundamentals (tax reasons, need cash, portfolio manager change etc)
Weakness ok, but Cdn small cap resource has not gone down by > 50% in the last 12 months, as Sprott has.

To answer my own question, if the Chilean mine were to blow up literally or figuratively (severe decline in copper) that would considerably change the upside.  (There is still downside protection though with net cash of C$33 million on a $C46 market cap, plus add in 20 mm of portfolio investments.)

Hey Cardboard is this the best you can do...just kidding.  In your universe is this the most attractive company?
Title: Re: SRHI.to - Sprott Resource Holdings
Post by: sculpin on February 19, 2019, 12:17:11 PM
Quote
1. The entire Cdn resource & small cap market has been undergoing selling pressure for years now. A small cap conglomerate in this sector is especially punished as there are few new buyers of such equity or many legacy sellers who have became impatient or are selling for reasons not related to fundamentals (tax reasons, need cash, portfolio manager change etc)
Weakness ok, but Cdn small cap resource has not gone down by > 50% in the last 12 months, as Sprott has.

To answer my own question, if the Chilean mine were to blow up literally or figuratively (severe decline in copper) that would considerably change the upside.  (There is still downside protection though with net cash of C$33 million on a $C46 market cap, plus add in 20 mm of portfolio investments.)

Hey Cardboard is this the best you can do...just kidding.  In your universe is this the most attractive company?

SRHI as an attractive net net negative enterprise value stock...

*Net net - Yes
*Margin of Safety - Yes - cash & publicly traded securities >mkt price
*Significant Upside - current $1.35 to potential $5+ based on current assets & pricing alone
*Catalyst - Yes - Strategic review, Copper price rising, Significant free cash flow <1yr


https://blogs.cfainstitute.org/investor/2013/07/10/returns-on-negative-enterprise-value-stocks-money-for-nothing/

Value investing is about finding and buying a bargain, a dollar selling for 70 cents or less. One of the most tantalizing apparent bargains offered by the stock market is the negative enterprise value (EV) stock: a stock that is trading for less than the net cash on the company’s balance sheet. Buying a negative EV stock seems like a no-lose proposition: Imagine a house selling for $1 million with a safe in the basement that contains $1.2 million in cash. Why would anyone offer up such a deal? If you find one, should you take it, or write it off as too good to be true?

To answer this question, I investigated the performance of all negative EV stocks trading in the United States between 30 March 1972 and 28 September 2012.

The average return across all 26,569 opportunities was 50.4%. That is, if you had diligently watched the market over the last 40 years and invested $1,000 into each negative EV stock each month, your average investment would be worth $1,504 after holding that investment for one year, not including trading costs, taxes, and so on. Not bad!

Title: Re: SRHI.to - Sprott Resource Holdings
Post by: sculpin on February 19, 2019, 12:32:06 PM
Will 2019 Be the Year of King Copper?

https://www.forbes.com/sites/greatspeculations/2019/02/19/will-2019-be-the-year-of-king-copper/amp/

Last week Morgan Stanley joined Citi and Goldman Sachs in making a bullish call on the metal. The investment bank projected a 14 percent upside for copper in 2019, based on a widening supply deficit and the likelihood of a resolution to the U.S.-China trade spat.

Singapore-based DBS Bank also sees a copper shortage over the mid-term. Analysts expect supply to be in a deficit each year between now and at least 2022, when it could be at its widest since 2004.
Title: Re: SRHI.to - Sprott Resource Holdings
Post by: ingalsbe.parekh on March 04, 2019, 09:51:36 PM
Sculpin, please let me know if I am missing anything here, but it seems like even before MTV can begin operations, the company needs significant capital; both for paying off financial obligations and for beginning their expansions on their deposits.

These figures are as of September 30, 2018 and might have changed, but among the mine's current liabilities is around $13.5 million outstanding in debt from a credit facility that is guaranteed by SRHI. Additionally, there is $18 million of accounts payable and accrued liabilities to be paid off within a year.

Moving on to the capital expenditures, the mine demands anywhere from $8 million (base case) to $13 million (PEA case) in capital expenditures in the coming year. We have a cash outflow of at least $40 million to $45 million. I am assuming SRHI/MTV are looking for at least $50 million in long term financing. I am not experienced in investing in junior mines, but are you comfortable with MTV taking this amount of debt?

Also do you have any background info on the management team? Have any members of the board had a controlling stake in such an extensive project. The uncertainty of the financing and the lack of a track record from management just look like risks to me.
Title: Re: SRHI.to - Sprott Resource Holdings
Post by: mjm on April 16, 2019, 08:29:37 AM
https://finance.yahoo.com/news/40-years-chile-copper-giant-230000625.html
Title: Re: SRHI.to - Sprott Resource Holdings
Post by: sculpin on April 16, 2019, 08:38:30 AM
GMP reinitiates on SRHI – NAV of $5.85 under mining option.

Sprott Resource Holdings Inc.
BUY
SRHI-TSX

Last: C$1.37

April 10, 2019 ▲ Target: C$2.95

Updating NAV; maintaining BUY rating

As stated at the outset of our note, we believe SRHI’s strategic review could result in two likely outcomes. The first would be a complete liquidation of the portfolio, with the proceeds being returned to shareholders. Under this scenario, which incorporates the Base Case scenario for MTV, we estimate the SRHI NAV to be $4.30/sh.

Note that this value is inclusive of the 2% management fee, as it would take time to liquidate the portfolio, as well as the 1% termination fee that would be payable to SCLP given the terms outlined in the Master Services Agreement (MSA). Under this scenario, our SRHI implied target price of $3.25/sh is derived by applying 25% discount to our NAV. We continue to believe that a discount to NAV for target purposes is appropriate given the price discounting that may be required to liquidate some of the public and private holdings.

It is also possible that the strategic review could result in SRHI transforming itself into a mine operator. Under this scenario, we would expect that all the investment assets would be liquidated with the proceeds being used by SRHI to expand production at MTV. In addition to examining a Base Case scenario, the MTV Technical Study also evaluated the potential to expand production beyond the Base Case. Specifically, additional ore zones are brought into production such that annual average copper production increases to 34mm lbs versus 24mm lbs in the Base Case, the mine life increases to 7.5 years from 6.5 years previously and LOM capital is increased to US$52mm from US$32mm. Using a LOM cash operating cost of US$1.65/lb, we derive a value for SRHI’s 70% interest of US$124.6mm, which net of management and termination fees equates to a SRHI NAV of $5.85/sh.
Title: Re: SRHI.to - Sprott Resource Holdings
Post by: Pondside47 on June 03, 2019, 06:34:42 PM
There has been no update from the Special Committee for nearly 4 months.The value here is clear unless they pawn off the listed securities to fund MTV and MTV turns out to be a dud. The market clearly has no confidence on the management include Rick Rule. I wonder if we can find people with enough shares to push for change here. Maybe this is our own version of Sanborn Map that needs a little bit push. Don't get your hopes up but if you have a big enough stake that you care about the outcome, please message me on the forum.
Title: Re: SRHI.to - Sprott Resource Holdings
Post by: sculpin on October 25, 2019, 10:10:02 AM
While short-term trade talk headlines continue to dominate and provide
headwinds for the copper price, we continue to believe the long-term copper
market fundamentals remain supportive of copper price appreciation due to a
widening copper deficit.

Forward to 2020, the International Copper Study Group
(ICSG) estimates a deficit of about 250k t Cu, as growth in refined production is
expected to lag usage. Market tightness is beginning to manifest in copper
treatment and refining charges, which are falling as rising refining capacity in 2019
is met with flat concentrate supplies.

Ahead, there continues to be a growing demand for copper from renewable
energy and electric vehicles (both of which
require more copper than conventional sources), with few new significant
sources of production to come on line. The production delay and cost overrun at
Rio Tinto’s Oyu Tolgi highlight the lack of mega projects developed during the
last cycle, and the significant time required to get production to market.