Detailed Infor. on HKEX,SRK Report and Implied Valuation The HKEX application can be found in this link……….
https://www1.hkexnews.hk/app/sehk/2022/104767/2022093002025.htm
Within the above link, the SRK report of June 2022 can be found in App 111.
The information provided here is largely from the SRK report.
Significant Points ( all Currency in C$ )
1…No initial capex is required to expand annual production to 1.3 mtpa versus 2.0 mtpa in 2022
2..This will be assumed /accomplished by mining contracts, using under utilized current capacity and more shifts
3..Sustaining capital to expand the current open pit to include 3 new mining benches will be very modest ( see Table below )
4..These three new mining benches will be constructed over the next several years , incrementally increasing production
5..average cash cost will be be $520 CAR per ounce = $380 USD
6..POG is assumed to be constant at $1700 USD / oz = $2150 $C CAD
7. The UG mine is not included the table below but will add about $ 25 m to gross revenues
8..It follows that the expansion of the current two mines can easily be funded by current MJS resources and incoming strong cash flows..ie
9..The HKEX IPO will therefore raise funds for inorganic growth ( Acquisitions )
10.The reason is Persistence has been chosen to be one of four gold producers to consolidate the over 20 + gold mines in its current Shandong province
11. Advanced due diligence has been completed on the first first acquisition which is estimated to cost about $48 m USD
12. Minimum Resources have been set at 750,000 ounces equivalent to sustained and significant new production
13..The current Mining Contractor owning 25 % of Persistence has been granted the right of first refusal should MJS decide to sell its 70 % Ownership
14..In all circumstances, Shandong mine production will be operated by current Chinese operator, and listed on the HKEX
15. In all Circumstances , MJS will be split off and continue listing on the TSX under Canadian + management of current and to be acquired advanced projects
16..In all circumstances, except if MJS decides to sell out right its 70 % Ownership of Persistence, MJS will continue to benefit from Persistence cash flows and earnings
17..The table below includes no contribution for planned acquisitions
Free Cash flows are equivalent to net earnings ( ie go directly to the cash position ) .
Should MJS decide to sell its 70 % interest in Persistence , regardless of the outcome of the HKEX process, it would accrue about $70 million CAD per year in net earnings.
Considering the elevated p/e of Chinese Metals and Minings stocks, that Persistence will be producing over 100,000 ounces ( trip point for acquisitions for large Gold majors ),
that it has no debt , that it has one of the lowest cash costs in the world ,
and substantial growth upside for at least another 10 years after the current expansion , I would think that an offer in the $ $500 million CAD would be close to fair value
| Year | Grade ( gm/t) | Production | Sustaining Capital | Opex ( M CAD ) | Cash costs /Oz ( CAD) | POG ( CAD ) | Cash Flow ( M CAD ) |
| | | | ( | | | | |
| 2022H2 | 1.02 | 18700 | $3.5 m | $15.50 | $800.00 | $2150.00 | $25.00 |
| 2023 | 1.20 | 73300 | $4.5 m | $39.70 | $540.00 | $2150.00 | $118.00 |
| 2024 | 1.24 | 92100 | $4.4 m | $40.10 | $435.00 | $2150.00 | $158.00 |
| 2025 | 1.32 | 106500 | $1.4 m | $43.70 | $410.00 | $2150.00 | $185.00 |
| 2026 | 1.37 | 110900 | $1.4 m | $43.90 | $395.00 | $2150.00 | $194.50 |
| 2027 | 1.15 | 122200 | $1.7 m | $54.60 | $445.00 | $2150.00 | $208.00 |
| 2028 | 1.18 | 125700 | $1.7 m | $54.90 | $435.00 | $2150.00 | $215.50 |
| 2029 | 0.96 | 102300 | $1.7 m | $52.80 | $515.00 | $2150.00 | $167.00 |
| 2030 | 1.03 | 107400 | $1.7 m | $52.70 | $490.00 | $2150.00 | $178.00 |
| | | | | | | | |
| Total cash flows | | 759200 | $22 m | $395.9 m | | | $1449.00 |
| LOM Cash costs /oz | | | | | | | $520.00 |
| LOM Total Addition Costs | | | | | | | $534.00 |
| Free Cash flow | | | | | | | $915.00 |