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You are referencing the wrong Congo. Banro operates in the Democratic Republic of Congo whose elections are scheduled to take place in November 2016. Joseph Kabila is the president and has been for two terms.
Thanks for your kind words. I don't follow NUGT so wouldn't have seen this piece of "headline news." I was actually tinkering around stockcharts.com today at work and was looking at relationship in gold to different currency combos and thought I'd share that chart. There are 1,000 ways you could show that the bear market in gold is over.
Have a great evening.
Yep. It's a very telling chart. That sound you hear is my 18-wheeler backing up.
Not all debt is created equal. Guyana's debt is an amortizing loan (like a mortgage) where they make principal and interest payments every year for 8 years until it is paid off. Banro's is a bond with a $175M principal payment due in 345 days. Until that is addressed this stock will not move in a material way. Banro's bond traded for 65 cents on the dollar this past Friday (4/1/16) - which is a vast improvement from where it traded pre-Chinese news. Smart money is not going to rush in to buy a ton of this with a looming possibility that they default and the company is handed over to the bondholders. If I was smart money I would buy the bonds and buy the convertibles (which is the position that Gramercy and Baiyin have on). Bonds act as your put, convertibles act as your call, and you basically have a straddle/strangle position on. The tiny position they have in the common equity is nuts on the sundae if mgmt works out refinancing. If mgmt pulls it off, the bonds go to 100 and bondholders make a killing on that position, the convertibles go in the money and they make a killing on that position, and the equity takes off and they make a killing on that position. The day-to-day is noise; production-shmroduction. I want a PR announcing a debt refinancing more than I want a PR announcing they hit production targets.
There is also an election in 7 months...
I think production will be closer to 40k than 48k, and I do not believe they will show a net profit due to transaction costs from new financing, costs to repair damaged equipment, Q1 bond payment ($8.75M) and preferred share dividends ($1.7M) flowing through income statement. I think that Q2 will be the true inflection point for the company from eps standpoint: minimal financing charges, higher production, no transaction costs.
If they weren't taking impairments and were instead carrying assets on book at a much higher value than their economic worth for the purpose of reporting positive earnings then they would be fudging numbers.
But yeah, you never really know. I haven't seen anything that sticks out as really bad. Gramercy employs a lot of smart people who I'm sure did very thorough due diligence before going in, same with Baiyin.
Nobody is manipulating numbers. The report is audited and signed off by Deloitte who happens to be one of the largest and most prestigious accounting firms in the world. With all due respect, if you do not understand how a company accounts for it's operations you should reconsider cherry picking stocks. Buying because PB, PE, or PS is low will lead you to more value traps than value opportunities if you don't know how to fully navigate the statements.
Everything is correct, and was signed off by Deloitte. You can find answers to any questions you may have here:
https://www.pwc.com.au/industry/energy-utilities-mining/assets/financial-reporting-mining-industry-2013.pdf
Because Namoya is the asset that is impaired...And impairment charges flow through the income statement. And Namoya was a mine under construction through 12/31/15.
I am not sure where your confusion lies.
looks like another ~300k share purchase went through a minute or so ago.
Did any institutions ask questions during the Q&A of the earnings call?
Assets must be regularly tested for impairment. If impairment is found to exist based on any number of factors, it is booked in the IS for that reporting period.
A capital expenditure is an expense that was tacked on to the value of the asset rather than initially flowing through the IS.
Impairment is separate from depreciation which is a regular write off of an assets value. Even though it is non-cash expense it is very real and is a good proxy for capex. If depreciation is consistently greater than capex the business is slowly liquidating.
They had to buy a new drum and ship it to the middle of Africa, they capitalized 10s of million in financing charges, capitalized a new fleet of CAT equipment, and had to completely redesign the plant after spending a ton of money on it. As I said before: the impairment was necessary, and they could have wrote off more if they wanted to.
I am looking forward to Q1 and Q2 to see how they use the new found cash with Namoya being in commercial production. They also recently got a check for $98M and I want to see what they do with it. I REALLY hope to see big reduction in liabilities.
Also, that bond...that $175M, 800-pound gorilla sitting in the corner...maturity is just under a year away
1. Just what was the current economic performance? What were the expectations to which that was compared?
You'd have to ask management for an unabridged dissection of the impairment charge. My take on that line is that the mine was a year-and-a-half late in getting to commercial production. It was also $100M+ over budget. In a nutshell: it sucked up a ton of cash, produced very little cash and did so much later than we thought, which isn't what we had in mind.
2. What was the long term gold price outlook? What is the instant long term outlook to which that was compared?
You'd have to ask management. I think that the drop in gold price explains less than 10% of the impairment.
3. Assuming the capital costs increase contributed to impairment, just where in the financial report does the off-setting revenue from gold sales appear?
Per IFRS and Canadian GAAP, revenue from mines under construction do not flow through the income statement. They are credited against costs to develop the mine. Note 12 on page 27 walks you through this: http://www.banro.com/assets/docs/2015-annual-report.pdf
4. Were all the costs of commissioning the mobile fleet attributed to Namoya? If so, why?
No, they were split between Namoya & Twangiza. Either way, they were all capitalized.
page 6 & 9 of MDA section: http://www.banro.com/assets/docs/2015-annual-report.pdf
5. What does management claim to be the consolidated enterprise value? What is the value of the net assets to which that is compared (of major importance in deciphering future financial reports)?
Ask management. The fact that they were a year and a half late and $100M+ over budget in getting Namoya to production tells me all I need to know about the charge - it was necessary, it was right, and they could have charged more.
average guidance is 220k with 40% coming in H1. ((220 x 40%)/2) = 44k. It could be a little lower depending on how the disturbances at Namoya affected production.
It's all on dependent on what the dollar does. If they raise rates (which would be monumentally stupid) the dollar will rally hard (further crushing EMs and Saudi) and gold will sell off. That is what I feel could trigger a capitulation sell off in gold to ~1050. That being said I feel that any sharp selloff in gold would be short lived and would be followed by a breakout which could lead us to 1400 by year end. 2017-2019 gold and silver will go into orbit.
I think that on December 31, 2016 gold will be closer to 1400 than 1200.
Yours truly,
The man with a tin-foil hat planted firmly on his head
Impairment Charge:
For those with questions on the who, what, and why of this, pages 12 and 13 of the MDA in the annual report spell it out:
http://www.banro.com/assets/docs/2015-annual-report.pdf
During 2015, the Company recorded a non-cash impairment charge totalling $84.3 million against the Namoya Mine Under Construction balance in its consolidated financial statements, resulting in a net balance of $388.0 million as at December 31, 2015. The non-cash impairment charge recorded was due to the aggregate adverse impact of the current period economic performance of Namoya compared to expectations, a decrease in the long term gold price outlook, the build-up of capitalized borrowing costs (interest and dividends directly attributable to the construction of the asset) and pre-commercial operating losses from the extended ramp up due to the delay in financing, the commissioning of the mobile fleet and the redesign of the plant as well as a consolidated enterprise value that is lower than the net assets of the Company.
Prior to the recognition of impairment charges in the current year, as at December 31, 2015, the Mine Under Construction balance included over $88 million of borrowing costs, $24 million of depreciation and approximately $38 million of pre-commercial operating losses. The 2015 non-cash impairment charge of $84.3 million was less than the amount
of the above indirect project development costs, indicating that the direct Namoya project development costs are recoverable
under the prevailing market conditions.
If they really wanted to be conservative they could have wrote off as much as $150M given everything that was tacked onto the asset through accounting gimmickry. That $150M are very real expenses that did not flow through the income statement. Reason #975,492 to look at cash-earnings, trends in EBIT, or FCF, rather than the bottom line which is so heavily influenced by accounting rules/tricks/gimmicks.
At the end of the day it is a non-cash charge, was 1,000% necessary, and in no way affects the day to day operations of the firm which is what drives long term stock price appreciation.
45k
I'm not disappointed. Operations in line with expectations, nothing blew up.
During 2015, the Company recorded a non-cash impairment charge totalling $84.3 million against the Namoya Mine Under Construction asset balance in its consolidated financial statements, resulting in a net balance of $388.0 million as at December 31, 2015. The non-cash impairment charge recorded was due to the aggregate adverse impact of the current period economic performance of Namoya compared to expectations, a decrease in the long term gold price outlook, the build-up of capitalized borrowing costs (interest and dividends directly attributable to the construction of the asset totaling approximately $88 million project-to-date) and pre-commercial operating losses (totaling approximately $38 million project-to-date) from the extended ramp up due to the delay in financing, the commissioning of the mobile fleet and the redesign of the plant as well as a consolidated enterprise value that is lower than the net assets of the Company.
For those who are praying for impairment reversals - I wouldn't count on it. But in reality it doesn't matter. Those impairments were necessary to bring them in line with economic reality. Follow cash earnings, FCF, not the bottom line. There is a reason that Buffett, Klarman, Marks, Greenblatt, etc., all ignore the bottom line.
Looking forward to Q1 production.
$0.045, excluding impairment or any other one-time, non-recurring charge
The only part I see being reversed is whatever amount can be attributed to drop in gold prices. In my opinion that is maybe 10-20%.
Yes, I do think something happens with the bond sooner than later. That's not one of things that you wait to the last minute to do.
It doesn't take a lot of money to control the price. Put in a $10M gtc limit buy order at $0.30 and you'll never see it drop below $0.30 again.
That its great news. I don't think they would be adding to their equity position if their end game for owning the bond was to force BAA into BK to claim ownership of business through BK courts. Their equity will explode in value when it is announced that bond was refinanced with a 10-year maturity.
Of course this is all my opinion.
I see where it's coming from...
http://www.sec.gov/Archives/edgar/data/1286597/000091957416011673/d7073472_13g-a.htm
On a fully diluted basis they own 60,337,733 shares. That is 16.2% of 372.4M. That 372M share count number looks like it excludes the 21.6M options (1/2 have a strike < $0.79 and 1/2 have a strike > $0.80. 1/3 have a stike above $2.75 with 9 months to expiry) and the 8.4M warrants that wont be exercised ($6.65 strike with March '17 maturity).
options info, page 25: http://www.banro.com/assets/docs/banro_fs_q3_2015.pdf
Someone please correct me if I'm wrong.
As of a month or so ago Gramercy owned ~8% of common equity, now they own ~16%, which will grow to 19.9% when they exercise convertibles? And the Chinese group owns ~15% which will grow to 19.9% when they exercise both the new warrants and the convertibles they bought from Gramercy? And BlackRock owns ~25%, in addition to being the biggest bond holder? So on a fully diluted basis those 3 entities own 65% of the common equity and ~100% of the bond?
I am more concerned with cash flow, and the types of investors that we want on board could not care less about knockout "earnings" due to a non-recurring, non-cash entry. A one-time headline will attract fleas that will jump ship the second their -5% stop is hit.
Zip code can definitely explain some of the discrepancy. When it comes to debt, maturity date and ability to pay up tells the story - not just notional value of debt - timing is everything. If BAA's bond was due in 2020 I have no doubt this stock would be > $1 right now. If BAA had $200M in cash in the bank I'm sure this would be > $1 right now. But they don't have $200M cash, and the bond is due in 375 days. That being said, stellar numbers for Q4 and knockout Q1 production should make for a nice rally...
Eps for Q1, not sure. That'll be the first quarter that Namoya ops show up on the income statement, it'll also be the first quarter in quite some time where a huge % of interest pmts go through the IS rather than being capitalized to the BS. With the new financing they secured the last 3 senior bond pmts, so I'm not worried about it per se, but that 8.75M will be deducted, in addition to any other interest, before arriving at net earnings. I think Q1 brings them around $35M in EBITDA. I also don't think impairment will be reversed without a massive rally in gold. They capitalized almost $80M in interest alone due to Namoya being a year and a half late - that $ would have flown through the income statement all along had it been on time. It's accounting slight of hand, which is why I'm not counting on it. And even if it does reverse, it's a non-cash gain, so what do they get from it? Nothing, aside from helping their leverage ratios through gimmickry.
BAA - the only red ticker on my watchlist of 40+ miners...I feel like I'm on the sidelines, holding a bag of sht, watching the beginning of a massive rally in miners
No clue. I don't buy the delisting BS either. There are plenty of high quality Canadian and Aussie miners that list on home exchange and OTC in US.
I wouldn't touch that with a 10-foot pole. Has an uglier balance sheet than Banro
Another day of watching all the juniors soar, except BAA of course.
I am comfortable with a slow ascent on the back of over 1M shares traded/day.
The days of wallowing in the teens on maybe 300k shares traded/day were a test of conviction, or sanity depending on who you ask.
Cheer$ to the longs.
To paraphrase someone from the FB group: they dug a bunch of holes which ended up having quite a bit of gold in them, with some of the holes having enormous amounts of gold (over 18g/t). They also found a "wall" on Namoya property that has a shtload of gold. They're going to have a formal report out on reserves in March or April I believe.
Net income is an opinion. Free cash flow is gospel. Follow the free cash flow. They should be free cash flow positive for the first time ever by mid to end of 2016. Once that goes positive Emerging Market Value Funds will be buying stock faster than you can kiss your mom on the lips.