Added todayI've added to my holding today @ C$18.78. Here's why:
- Edison have a DCF based fair value of US$29.76/share (=C$39.27)
- Whilst earnings and cashflow YTD have been less than impressive, the company expects a strong Q4 (mentioned in the conference call), as we're past the rainy season, Agbaou moves into better ore and completion of the Tabakoto sale eliminates a loss making mine and brings in $60m in to reduce net debt.
- 2019 should bring a dramatic improvement in cashflow, as a) the drag of Tabakoto is removed; b) Ity CIL production begins (now 2 months ahead of schedule, bringing 40koz of additional production in 2019) AND Ity CAPEX spend completes. Answering a question in the call, management said that they would take their time over starting Kalana construction, wanting a solid revised DFS first. Edison are currently assuming Kalana construction starts immediately, so a delay would mean a considerable boost to cashflow in 2019 - could be anough to start paying a divvy by the end of the year (having paid down most debt) and 2020 operating cashflow (estimated at over $500m by Edison) from Ity, Hounde, Agbaou & Karma should be enough to fund Kalana CAPEX, pay down rest of the debt and continue the divvy.
- Near term, management stated in the CC that the Kari Pump resource statement would be "material" and higher grade than the current Vindaloo pit at Hounde. After that, we can expect a resource upgrade for Kalana.
So, lots of catalysts IMO for the SP to move higher over the coming months.
Cheers,
Mark