What's your opinion on GEO's shares after publication of results and lowered interim dividend, at current price of 0.27-0.275 SGD?
Also, did they said to you, that a takeover is already a done deal? Or it was published somewhere? Hope it will be a thermal coal mine also, as I am interested in pure Thermal coal mines, not metcoal or mixed mines ...
I haven't looked at the results in detail but I would say they're very underwhelming. Production was only 1.8 Mt (vs 2.5Mt in Q1 22') and cash costs keep going up (52.88$ - 36.63$ in Q1 22'). There doesn't seem to be end in sight to the increase in cash costs which is very worrying. Current ICI4 strip is around ~68$, which means their gross margin is just 15$/ton. At 2 Mt production per quarter they're barely going to generate profit after SG&A, taxes, other costs.
Regarding the adquisition they've been stating it for some time. According to their latest business update: "• The Group is making active progress towards value accretive acquisitions of producing coal mines, to increase our
reserves, production volumes, as well as achieve diversification."
They've been having problems with production and cash costs for a while. It is the main reason I sold a few months ago.
From my understanding the current mining areas of the mine are simply 'harder' to mine therefore strip ratio goes up, cash cost goes up. At the same time having less production will usually mean higher cash costs.
I understand, but are they expanding into adjancent area(s) - when you start to mine a new surface area you always have higher costs at first, as you have to strip (all) of the upper layers of earths, above coal - when we speak about open pits, but even undeground there area additional /higher costs when building new tunnels and other infrastructure
I don't think they're attractive. As I said many times before the issue is that their previous production's profitability is severely hindered given the high cash costs, therefore at current prices they're making little profit.
The mines they acquired aren't adding much current capacity nor they'll impact profitability significantly in the short term. The new mines have a big amount of reserves that could be developed.
At the end of the day you have to compare GEO with other coal mining companies, and when you have many companies that are trading at ridiculously low multiples I don't think GEO is that attractive.
Are they expanding into adjancent areas - when you start to mine a new surface area you always have higher costs at first, as you have to strip all of the upper layers of earths, above coal - when we speak about open pits, but even undeground there area additional /higher costs when building new tunnels and other infrastructure
Thanks and inciteful. Interesting that you made a trip down to their main mines. Couple of questions:
- You visited SDJ & TBR mines; apparently there are mines next door owned by other parties. Did they hint to any discussions with them?
- Did they give you any reason for holding the cash?
- Kind of irrelevant but did they give you any updates on there mining activities at BEK?
Lastly, Anthony Tan is not a 'mining man' and considering how the cards are on the table a complete sell out could be the way to go. Do you have any opinion on whether something like this would be in the cards considering that you spoke with him?
thanks for the write-up, particularly as you currently hold no position.
What's your opinion on GEO's shares after publication of results and lowered interim dividend, at current price of 0.27-0.275 SGD?
Also, did they said to you, that a takeover is already a done deal? Or it was published somewhere? Hope it will be a thermal coal mine also, as I am interested in pure Thermal coal mines, not metcoal or mixed mines ...
I haven't looked at the results in detail but I would say they're very underwhelming. Production was only 1.8 Mt (vs 2.5Mt in Q1 22') and cash costs keep going up (52.88$ - 36.63$ in Q1 22'). There doesn't seem to be end in sight to the increase in cash costs which is very worrying. Current ICI4 strip is around ~68$, which means their gross margin is just 15$/ton. At 2 Mt production per quarter they're barely going to generate profit after SG&A, taxes, other costs.
Regarding the adquisition they've been stating it for some time. According to their latest business update: "• The Group is making active progress towards value accretive acquisitions of producing coal mines, to increase our
reserves, production volumes, as well as achieve diversification."
Why they are suddeny having problems with tonnage /production?
They've been having problems with production and cash costs for a while. It is the main reason I sold a few months ago.
From my understanding the current mining areas of the mine are simply 'harder' to mine therefore strip ratio goes up, cash cost goes up. At the same time having less production will usually mean higher cash costs.
I understand, but are they expanding into adjancent area(s) - when you start to mine a new surface area you always have higher costs at first, as you have to strip (all) of the upper layers of earths, above coal - when we speak about open pits, but even undeground there area additional /higher costs when building new tunnels and other infrastructure
What's your opinion on GEO's shares after recent publication of takeovers, at current price of 0.21-0.22 SGD?
I don't think they're attractive. As I said many times before the issue is that their previous production's profitability is severely hindered given the high cash costs, therefore at current prices they're making little profit.
The mines they acquired aren't adding much current capacity nor they'll impact profitability significantly in the short term. The new mines have a big amount of reserves that could be developed.
At the end of the day you have to compare GEO with other coal mining companies, and when you have many companies that are trading at ridiculously low multiples I don't think GEO is that attractive.
Are they expanding into adjancent areas - when you start to mine a new surface area you always have higher costs at first, as you have to strip all of the upper layers of earths, above coal - when we speak about open pits, but even undeground there area additional /higher costs when building new tunnels and other infrastructure
Thanks and inciteful. Interesting that you made a trip down to their main mines. Couple of questions:
- You visited SDJ & TBR mines; apparently there are mines next door owned by other parties. Did they hint to any discussions with them?
- Did they give you any reason for holding the cash?
- Kind of irrelevant but did they give you any updates on there mining activities at BEK?
Lastly, Anthony Tan is not a 'mining man' and considering how the cards are on the table a complete sell out could be the way to go. Do you have any opinion on whether something like this would be in the cards considering that you spoke with him?
Best, Arthur (I hold shares)