Saturday, January 14, 2012

SHG - Shanta Gold

Some sketch notes of the Interactive Investor iBall video on Shanta Gold released on Thu 12-Jan-2012.

SHG soon to go into production. 2012Q1 estimated - there were delays due to equipment delivery. SHG's ventual goal is 200k oz pa. Singida is expected to prodcue 45k oz pa when it goes live in 2013. Most eyes are on New Luika, where production is expected Real Soon Now. It already has a stockpile that needs processing. New Luika is expected to produce 190k oz in the first three years. It should pay for itself in the first 12 months, and then bankroll Singida.

Bridging loans are in place, and the company does not expect to have to go to the Market for additional funding.

Posters have speculated that institutional investors therefore have no incentive to sit on the sidelines and hope to pick up stock cheap in a placing. they'll have to invest directly, if they want it.

Brokers have pencilled in 12.26p for both y/e 31-Dec-2012 and y/e 31-Dec-2013. I presume these estimates were done prior to a knowledge of the delays. Still, on a forward PER of 1.9, there's plenty of room for a huge margin of error.

I have a holding in SHG.



Anonymous said...

I hold as well 100,000 shares, hoping for a good move as we move towards production in March. What is your target price, if you dont mind me asking?

Mark Carter said...

Thanks for the comments. I had been looking through my blog the other day, and saw that I did some rough calcs on what SHG might earn. At a quick glance, they seem to fit approx well with the analyst forecasts on Digital Look.

I'm going to go back over my calcs, rework them, and check for the kind of schoolboy errors that I tend to make with these kind of things. I'll produce a better estimate then. Based on some old info, it looked like SHG should be about 2.5-3X its current price. I really need to revise that. Just having a quick look at ABG (African Barrick Gold), it trades on a PER of 10. SHG looks like it will trade on a forward PER of a little less than 2. So we could be looking at 5X price.

I'd need to recheck all my calcs, though. Stay tuned. I have a feeling that they don't include the potential of Singida, plus all the other bits that SHG owns.

I think that if my shares doubled from here, I wouldn't sell. There'd still be lots of upside.

I would be interested in seeing other people's estimate of values.

Take care, and here's looking forward to them generating some cashflow.

Anonymous said...

post 3341 has an indepth attempt at a valuation, seems to give a £1.04 estimate for fy 2012. Good thing about SHG is its so under the radar you can fill your boots. Seen ones like this before, it'll take off eventually.

Good luck.