On Wednesday 11th November, we introduced our first Mining Investor Forum in partnership with London South East. Traditionally a multi-sector conference, for this quarter our Forum evolved into a timely, specialised event, focusing on the mining sector.
Driven by renewed interest in “safe haven” assets and Bank of England discussions around negative interest rates in 2021, the line-up of presenting miners provided investors with valuable insights into high conviction investment ideas and a chance to interact with management through the live Q&A.
Shanta Gold was one of three companies presenting over the webinar, with a management presentation followed by a lively Q&A session featuring questions from both investors and Hardman analysts.
Here, we transcribe that Q&A (edited for concision). You can watch the video of the session here.
We’re going to move straight into the questions now. The first question is, how concerned should investors be about political risk?
Well, political risk is prevalent across the world; you can see it in all sorts of countries, including the western world. The way to mitigate political risk is through strong stakeholder engagement. What that actually means is that you pay your taxes on time, you employ locally, and the communities benefit. It’s not rocket science. You have to be well-liked in these places, and the people you’re working with need to benefit. You would be amazed at the number of companies that just don’t follow those three simple principles, and then suffer the consequences. We think we have a strategy in place to do this. We’ve been operating in Tanzania for 20 years, we’ve shipped 205 times to Switzerland – our gold – and we think we’re in a really good position.
Thank you. The second question: your company’s stock has done well over the last three years; you’re obviously changing your strategy, as you mentioned, from being value to value and growth; what can you tell us about how your shareholder base has changed over that time, and how do you think it might change in the future?
It’s been really interesting. In October, we raised just over $40m to fund West Kenya. The downside of permanent capital was far outweighed by the size of the prize at West Kenya – we talked about $300 an ounce of value. The interest we had across the world was phenomenal: we had 50 meetings in a matter of four days, a lot of interest out of North America, and a lot of groups who saw the value and couldn’t quite put a finger on the growth, but could see that there was something pretty interesting. We’ve been institutionalised over the last month, and I continue to think that the story is, fundamentally, very strong and will attract the right investors.
The next question is, “have you received a lot more interest from the brokerage community, and what have you been doing in your investor engagement activities to narrow the gap between EV and NPV?”
Good question. The better you do, the more interest you generate, and that’s from all of the different groups, particularly in London, looking for advisory roles. In terms of investor engagement, as frustrating as it is that we are trading, we think, at 0.3-0.4x NPV, the share price has gone up by 500% over the last three years. We will continue doing what we’re doing, which is demonstrating the growth and pitching the value. It’s a pretty simple story. We generate a lot of cashflow, a lot of growth on the other side, and we have a pristine balance sheet. So it will come good – it’s just a matter of time.
The next question is a request for more information about your dividend policy. You mentioned it in the presentation, but we’ve been asked for more information, if you can provide it, please.
We’ve committed to paying a dividend, but we don’t have a policy yet. We have some ideas around it, and a figure to be determined in the new year, once the board has properly considered the policy and what to commit to investors.
So the drivers for cost – the rising price of oil, for example, or the rising price of gold – tend to be inflation-sponsored movements. How do you contain your opex in a world where the gold price may be rising and so will the price of oil?
Great question. Currently, 14% of our power comes from the grid, which is clean energy. This is half the cost of fossil fuels, and that number will go up, to just under 40% of our power needs, in the next three months, I would say, coming from the state grid – so electricity, as opposed to burning oil. We don’t hedge oil, and we don’t want to take a view on oil. We think it’s natural hedged against the gold price, anyway. But, as I said, the sooner we can get off fossil fuels, the better.
The next question is, “could you please summarise the catalysts for the next three to six months?” I think you mentioned quite a lot of them, so maybe you could just repeat them for the benefit of the audience?
Why don’t I mention two catalysts from each asset? At New Luika, the clear catalyst there will be reserve additions and any exploration upside. Luke mentioned Porcupine South as a regional target that we’re exploring. We have three rigs permanently drilling across the mining licences and the region – a lot to look forward to at New Luika. Singida is moving into construction, and the team has been deployed there. The real story at Singida is that we will shortly be drilling the reserve extension, and that is a catalyst over the next three months – whether we can do some infill drilling to increase the reserves. At West Kenya, the drilling will commence in the next few weeks. We’ve now determined the contractor, the rig is being mobilised from northern Tanzania, and that will be drilling 9,000 metres over the next three to four months across the oxide. So there will be drilling results out of West Kenya, and, hopefully, there will be resource upgrades.