Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?

[Cardboard]

It trades at a 30% discount to its NAV according to their math and you call that bad or not sufficient? If you compare to other gold stocks, that is a pretty noticeable discount and similar to other very cheap juniors such as LMC, AR and a few others. The group trades at a 10% premium to NAV by the way.

 

Moreover, free cash flow yield is anywhere from 20 to 30% as I mentioned before. So in around 5 years, the entire EV is in cash and the mines still have life left. And if you have followed at all gold miners, they always find ways to extend mine life with exploration leading to additional reserves.

 

Personally, I have never seen gold miners being this cheap. These things never had P/E's or they were sky high, rarely if ever traded below NAV. Goldbugs always paid a premium for gold shares due to high leverage on results on any improvement in the gold price. I think that it is a result of gold having been in a bear market for almost 8 years now and interest being extremely low.

 

Cardboard

 

 

[petec]

It trades at a 30% discount to its NAV according to their math and you call that bad or not sufficient? If you compare to other gold stocks, that is a pretty noticeable discount and similar to other very cheap juniors such as LMC, AR and a few others. The group trades at a 10% premium to NAV by the way.

 

Moreover, free cash flow yield is anywhere from 20 to 30% as I mentioned before. So in around 5 years, the entire EV is in cash and the mines still have life left. And if you have followed at all gold miners, they always find ways to extend mine life with exploration leading to additional reserves.

 

Personally, I have never seen gold miners being this cheap. These things never had P/E's or they were sky high, rarely if ever traded below NAV. Goldbugs always paid a premium for gold shares due to high leverage on results on any improvement in the gold price. I think that it is a result of gold having been in a bear market for almost 8 years now and interest being extremely low.

 

Cardboard

 

I should have been clearer. I recently bought this as a 6-18 month holding. I like it. But:

1) While it looks very good on P/FCF it only looks good on P/NAV, in my view.

2) I think using a 5% discount rate to calculate NAVs is crazy. To my knowledge this is only done for precious metal stocks and I think it is wrong. But I have to accept it is how the market works.

3) Trading at a premium to a NAV calculated using a 5% discount rate is even crazier - but it is still how the market works.

4) I have not modelled it but FWIW consensus has it on 15% FCF not 20-30%.

 

I'm well aware of the tendency to extend mine life. It's one of the major (and few) structural attractions of the sector in my view.

 

I don't follow these stocks much but I also have the sense they are very cheap vs history. Mind you that may be because I wasn't investing in 1998 ;)

 

 

 

 

[doc75]

An article today that might be of interest in relation to Dundee's Parq Vancouver holding:

 

https://www.cbc.ca/news/canada/british-columbia/b-c-casinos-money-laundering-foi-report-1.4972063

 

If the numbers are at all to be trusted, then the recent crackdown on suspicious cash transactions (ie. money laundering) may have been very material to the gambling ops. 

 

 

[Rod]

An article today that might be of interest in relation to Dundee's Parq Vancouver holding:

 

https://www.cbc.ca/news/canada/british-columbia/b-c-casinos-money-laundering-foi-report-1.4972063

 

If the numbers are at all to be trusted, then the recent crackdown on suspicious cash transactions (ie. money laundering) may have been very material to the gambling ops.

 

To the extent that casino capacity has been built out to handle the money laundering then I think there could be some serious problems for the casinos in Vancouver as the crack down continues. Between River Rock and Parq, maybe Vancouver ex money laundering only needs one not two.

[sculpin]

Polar continues to buy...

 

Since the last report dated December 10, 2018, there has been a net increase of 210,800 Shares over which Polar, on behalf of client accounts over which it has discretionary trading authority, exercised control or direction, representing a net increase of 0.36% in the number of Shares over which Polar, on behalf of client accounts over which it has discretionary trading authority, exercised control or discretion.

 

 

As at December 31, 2018, Polar, on behalf of client accounts over which it has discretionary trading authority, exercised control or direction over 8,766,890 Shares of the Issuer, representing approximately 15.12% of the issued and outstanding Shares.

[Sportgamma]

https://finfeed.com/small-caps/mining/mine-development-focus-zinc-ireland-secures-cornerstone-investor/

 

"After emerging from a trading halt this morning, Zinc of Ireland NL (ASX: ZMI) reported that Dundee Resources Limited, a subsidiary of Canadian based Dundee Corporation (TSX:DC.A), has become its cornerstone shareholder with 19.9% shareholding.

 

ZMI has successfully completed a placement to Dundee, raising A$2.425 million at $0.005 per share — an encouraging 25% premium to the market price."

 

[...]

 

“We also welcome the in-house knowledge and expertise that the Dundee Goodman Merchant Partners (DGMP) team bring to the table. DGMP is a division of Goodman & Company, Investment Counsel Inc. (GCIC), a wholly-owned subsidiary of Dundee. DGMP finances and provides M&A advice to mining companies through all phases of their development cycle. The DGMP team has a respected corporate finance team with deep technical backgrounds in engineering and geology.

[bizaro86]

Oh good. I know when I look at Dundee I always think, man this would be perfect if they just had a bit more of their NAV in illiquid microcap speculations.

[Sportgamma]

Oh good. I know when I look at Dundee I always think, man this would be perfect if they just had a bit more of their NAV in illiquid microcap speculations.

 

Haha.

 

Well, they have been very clear about building up the merchant banking unit, so it should not come as that much of a surprise. Nonetheless, it is disappointing that there aren't actual clients participating in the placement with them.

[doc75]

Oh good. I know when I look at Dundee I always think, man this would be perfect if they just had a bit more of their NAV in illiquid microcap speculations.

 

Nicely said.  Yes, that's always been the missing link for them. ;)

 

EDIT: Just noticed Dundee's aftermarket release regarding the sale of the Union Group holding for $14.5M Canadian, approx $4M lower than the carrying value at Sept 30.

[petec]

EDIT: Just noticed Dundee's aftermarket release regarding the sale of the Union Group holding for $14.5M Canadian, approx $4M lower than the carrying value at Sept 30.

 

Ugh. That’s about the only holding (bar DPM) that’s been having good news (the ICC sale to Aurora and the Peru sale to Polaris). IIRC the last balance sheet value was at a liquidity discount to the value of the ICC stake only, with nothing for any other assets, so this sale is at a big discount. Ouch.

 

Still, more cash in the bank and a harder NAV.

[Lakesider]

Still, more cash in the bank and a harder NAV.

 

Agreed, I don't think the market was giving it much value anyway.

[Cardboard]

Less than half the value of highly liquid Aurora shares alone. Yeah morons.

 

Cardboard

[doc75]

Less than half the value of highly liquid Aurora shares alone. Yeah f. bunch of morons.

 

Cardboard

 

The press release refers to this as an "acceptable outcome". You know it's not a great deal when that's the best spin the company can muster.

 

Must come down to them recognizing there was no path to extracting full value, but I'd like to know why.  Based on commentary on the Q3 call I was expecting the private asset sales to be roughly at book.

 

[petec]

More worryingly, if this is the discount they have to accept for holdings with a visible (albeit lookthrough) market value, what on earth are they going to have to accept for junk like TauRx and Android? All the stuff where the value is really questionable is still on the balance sheet.

 

As a common shareholder I'm now praying that:

1) they use some of their recent $40m cash inflow to tender for lots of prefs at a silly discount.

2) they convert the S5 pref at $2. Conversion is highly accretive to my bear case (so removes a lot of risk), somewhat accretive to my base case, and still leaves a lot of upside to my bull.

3) They find a Spindletop in Chad!

[petec]

Must come down to them recognizing there was no path to extracting full value, but I'd like to know why.  Based on commentary on the Q3 call I was expecting the private asset sales to be roughly at book.

 

In fairness this isn't massively away from book in absolute terms. It's just disappointing they couldn't have got a better deal. They must have had almost no exit rights, which suggests a badly written deal.

[Rod]

I can't judge the price received unless I can see the balance sheet. There may be some debt there.

[petec]

I can't judge the price received unless I can see the balance sheet. There may be some debt there.

 

If that was the case presumably it would have been included in the book value. They recorded this at a discount to the lookthrough value of Aurora because they couldn’t sell it. They didn’t mention any debt that should be set against it.

[Cardboard]

What I posted on September 12:

 

""Accordingly, during 2017, the Corporation has impaired its carrying value in Union Group to its 40% share of the value of Union Group’s interest in ICC Labs Inc.  In determining its 40% share of the value of ICC Labs Inc., the Corporation applied a liquidity discount  of  30%  to  reflect  the  regulatory escrow  arrangements required under  the  rules  of  the  TSX  Venture  Exchange,  and  to accommodate  any  obligations  that  may  arise  that  would  otherwise  erode  value.    The  Corporation  anticipates  that  the determination of fair value may vary significantly in future periods, both as a result of changes in the price of ICC Labs Inc., and also  as  Union  Group  provides  third-party  evidence  of  the  value  of  its  underlying  assets.    There  can  be  no  certainty  as  to  the magnitude of these potential changes."

 

I think that 30% is a pretty significant discount now considering that Aurora is highly liquid (ICC transaction represents only 3.6% of shares of ACB), there is no hold period per the press release (unless there is in the agreement) and that Union Group other asset is a 5.3 MW hydropower plant in Peru (must be worth something).

 

What are Union Group liabilities is unclear but, I would say that if you write-off the power plant in full, that it should account for the accounting issues. The rest seems to be oil & gas land. There is no mention of debt anywhere.

 

So this asset would be worth (40 million shares of ICC at $1.95 held by Union Group) x 40% held by Dundee or $31.2 million. And this would be tax free since they bought their Union Group stake for $50 million U.S.

 

The bigger question IMO is can they force a liquidation of Union Group (they hold 40%) or force a distribution of ACB shares?

 

We would have to dig into the filings of Union Acquisition Corp. which is registered with the SEC (LTN on NYSE) to try to find out more about the structure of Union Group."

 

 

[sculpin]

 

https://dailyhive.com/vancouver/parq-vancouver-casino-sold-paragon-gaming-pbc-group-february-2019

 

“PBC believes that Parq Vancouver is positioned to become a central feature of the downtown entertainment district and will serve as further proof that Vancouver has become a global destination city,” said PBC Group president Paul Bouzanis in a statement, highlighting the casino’s future potential from the long-term plans for Northeast False Creek’s transformation.

 

 

 

Paragon Gaming sells its stake in Parq Vancouver

 

by Charlie Smith on February 1st, 2019 at 11:55 AM

 

Paragon Gaming has announced that it's sold its share in the Parq Vancouver for an "undisclosed price" to another partner, PBC Group.

 

Paragon bought the Edgewater casino on the north shore of False Creek in 2006, running it for 10 years.

 

In September 2017, the $640-million Parq Vancouver opened across the street with two Marriott hotels, a 60,000-square-foot conference centre, and several dining facilities and lounges.

 

"We are proud of our affiliation with Parq Vancouver and we wish their employees the best moving forward," Paragon Gaming chair and cofounder Diana Bennett said in a company news release.

 

The Bennett family has been in the gambling industry since the early 1970s and has been linked to the Excalibur Hotel and Casino and Luxor Las Vegas.

 

Later, Paragon partnered with First Nations on both sides of the border before focusing on developing the Parq Vancouver.

 

PBC Group is a real-estate company launched in Ottawa more than 30 years ago. Through its limited partnership, PBC VUR LP, it raised US$415 million to finance the Parq Vancouver, according to its website.

 

The other partner in the Parq Vancouver is Dundee Corporation.

 

In November 2018, the facility attracted unwanted attention when rapper Drake alleged that he was racially profiled and prevented from gambling.

 

CYV News at Six reporter Jon Woodward later wrote a story citing unnamed sources suggesting that the refusal was linked to B.C.'s tough new anti-money-laundering rules.

 

Gamblers can no longer spend more than $10,000 in cash in B.C. casinos without disclosing detailed information, including identifying their financial institution, branch, and account number.

 

Paragon Gaming made no mention of B.C.'s anti-money-laundering regulations in its news release announcing the sale of its share in the Parq Vancouver.

[sculpin]

Research note from M Partners today...

 

Research Note - Dundee Corporation (DC.A - TSX, $1.26|Buy) - Dundee's Not Done Yet

 

Dundee Corporation’s Class A shares have significantly underperformed the market, falling from a peak over $8.00 in July 2016 to a recent low of $1.01. We believe at current levels that the shares present an attractive investment opportunity as the business shifts to become a more focused and profitable operation. Dundee shares provide notable value above the current price, with limited downside.

 

INVESTMENT THESIS

 

After a period of poor investment performance and a bloated portfolio, Dundee is becoming a leaner, more focused company. It has cut the number of investments from nearly 100 positions before CEO Jonathan Goodman returned to the company in January 2018, to roughly 30-40 positions by end of 2018. Recent transactions include the sale of Dundee Securities and the corporation’s stake in Union Group International. Management is largely getting back to the company’s roots and core competencies with a focus on mining. In the medium term, the company should see the benefits of significant corporate cost savings once one-time expenses are paid.

 

As part of its organizational shift, Dundee is focusing on building out its merchant banking business as part of the investment management division. Merchant banking will bring in fees as a complement to the long-term investment plan. Management expected to invest $20M-$30M in the 6 months since September, and to potentially reach profitability in this segment in 2019.

 

Dundee Corporation owns 36M shares of Dundee Precious Metals (DPM – TSX). This position alone is worth $2.50/share for DC.A, providing exposure to DPM at a discount.

 

After a disappointing start to operations at Parq Vancouver, Dundee is in a position where there is limited downside on the balance sheet for its investment, with potential to refinance its existing debt.

 

PARQ VANCOUVER

 

Parq Vancouver is a destination resort in downtown Vancouver, comprised of the

Edgewater Casino and two Marriott luxury hotels with a conference centre, spa, five

restaurants, three lounges and a parking facility. Dundee owns 37% of Parq Holdings LP

through Paragon Holdings, a joint venture between Dundee and Paragon Gaming Inc.

 

Parq Vancouver opened its doors in September 2017 and became fully operational in

January 2018. Financial performance has been disappointing as a result of slow ramp-up

and the effects of new anti-money laundering regulations in British Columbia.

 

Management anticipates another two to three years before Parq is closer to stable

operations. As a result of the poor performance, Dundee reported a loss of $52.6M in the

first nine months of 2018 including an impairment charge of $22.3M related to Dundee’s

position in Paragon Holdings. The investment currently has a carrying value of zero on

the balance sheet, providing little downside on book value. The key consideration for the

Parq investment is the potential for a refinancing of its debt to reflect its status as an

operating company. Until then, it may require additional injections of cash from investors

with expertise in the casino industry.

 

Dundee’s subsidiary United Hydrocarbon International sold its interest in its subsidiary in Chad to Delonex. In connection with this sale, UHIC could receive $50M in additional payments in the event of first oil by 2021, on top of royalty payments. These payments are represented by Resource Assets on the balance sheet. Because these are inherently uncertain, we are not accounting for them in our core book valuation. However, this could provide significant additional upside in the future.

 

Depending on the outcome of the Series 5 redemption in June, the risk of DC.A shares could be decreased.

 

Our core book value analysis indicates a price of $2.50/share, with potential for additional upside.

[Cardboard]

Maybe this is helping the stock to move up today? Some decent bids.

 

We should hear about Chad drilling/results anytime now. In the last call, they mentioned that the rig should be turning or very soon and that was 2 1/2 months ago...

 

DPM also had a very nice run and gold remains in a solid uptrend having crossed $1,300 USD/oz.

 

Sale proceeds from Union Group were deeply disappointing but, it remains a small asset. At least now they have enough ammo to offer a substantial partial repayment to the DC.PR.E holders combined with an extension. I am thinking that this would be the favoured outcome by preferred holders.

 

As I mentioned previously there was an opportunity to ask for redemption at par on January 31, 2018 and only 303,265 were redeemed out of 611,695. Things were not looking so great either at that time...

 

Cardboard

[Rod]

I picked out from todays' news release that Dundee owns about 1 share of Reunion Gold for each share of Dundee. At about $0.20, Reunion is worth watching to get a more up to date fix on NAV

 

 

 

 

 

Dundee Corporation Acquires Further Interest in Reunion Gold Corporation

 

TORONTO, Feb. 13, 2019 (GLOBE NEWSWIRE) -- In accordance with regulatory requirements, Dundee Corporation (TSX: DC.A) (“Dundee”) announces that its wholly owned subsidiary, Dundee Resources Limited, has acquired 14,350,000 common shares of Reunion Gold Corporation (“Reunion”) pursuant to a private placement at the price of $0.15 each for aggregate consideration of $2,152,500.

 

Immediately prior to the acquisition of securities described in this report, Dundee owned indirectly 52,838,838 common shares and 3,730,769 warrants representing an approximate 16.48% interest in Reunion on an undiluted basis and a 17.45% interest on a partially diluted basis.  Immediately following the transaction that triggered the requirement to file this report, Dundee owns 67,188,838 common shares and 3,730,769 warrants, representing an approximate 16.48% interest in Reunion on an undiluted basis and a 17.24% interest on a partially diluted basis.

 

[lessthaniv]

DPM moving higher...

 

 

Beacon

 

Dundee Precious Metals (DPM-T, Buy) – Announced Q4/2018 production results this morning… On a consolidated basis, Chelopech achieved another record year of gold production in 2018 and exceeded the Company’s guidance while copper production was in line with guidance. Payable gold production came in at 164k payable oz’s, Cooper production came in at 34M lbs and processed 232k tonnes of concentrate at its smelter, no costs disclosed look for that to be disclosed with year-end financial results. Analyst Jacob Willougbhy has a $6.25 target price, which is the highest on the street.

 

CIBC

 

Dundee Precious Metals

Incorporated

 

2019 A Transformative Year; Upgrading To

Outperformer

 

Our Conclusion

 

We see DPM shares re-rating in 2019 with the start-up of

Krumovgrad, while the company continues to build on a strong

operational year in 2018 at Chelopech and Tsumeb. Gold production

for Q4/2018 was 45.8koz, exceeding our expectations of 44.5koz. For

2019, we expect DPM to produce 240,000 ounces at AISC of $742/oz,

representing production growth of 20% Y/Y at comparable costs. As

of Jan. 9, we are upgrading DPM to Outperformer (from Neutral) and

increasing our price target to C$6 (from C$4).

 

Our price target is calculated using the average of short-term and

longer-term valuation metrics. The short-term valuation is calculated

at 6x the average 2019E-2020E CFPS of $0.92, while the long-term

valuation is calculated at 1x the $4.23/share in NAV (at a 5% discount

rate), both calculated using the CIBC price deck with a long-term

gold price of $1,300/oz. Target multiples for DPM have now been

recalibrated to be more in line with the trading multiples for the

intermediate group.

 

Implications

 

Krumovgrad is a high-grade, low-strip, open-pit gold mine, with a

reserve grade of 4.04 g/t and a 2.6:1 strip ratio. In the most recent

update, the start-up remains on time, with the introduction of ore to

the Krumovgrad process plant expected by mid-Q1/2019, and

production of first concentrate by the second half of Q1/2019.

Elsewhere, significant improvements were made at the Tsumeb

smelter in 2018, with 232,000 tonnes of complex concentrate

smelted in the year, meeting its improved guidance and representing

an increase of 6% Y/Y. We expect these positive operational

improvements to continue.

 

Valuation

 

For 2019, we expect DPM to generate >$100 million in FCF. At our

CIBC price deck, DPM shares currently trade at 0.7x P/NAV and 3.5x

2019 P/CF, at a discount to the group at 1.1x P/NAV and 7x P/CF.

 

DPM continues it’s nice push up touching $4.44/sh

[petec]

DPM continues it’s nice push up touching $4.44/sh

 

It might have touched 4.44 but it's retraced to 4.20 now.

[petec]

I picked out from todays' news release that Dundee owns about 1 share of Reunion Gold for each share of Dundee. At about $0.20, Reunion is worth watching to get a more up to date fix on NAV

 

 

 

 

 

Dundee Corporation Acquires Further Interest in Reunion Gold Corporation

 

TORONTO, Feb. 13, 2019 (GLOBE NEWSWIRE) -- In accordance with regulatory requirements, Dundee Corporation (TSX: DC.A) (“Dundee”) announces that its wholly owned subsidiary, Dundee Resources Limited, has acquired 14,350,000 common shares of Reunion Gold Corporation (“Reunion”) pursuant to a private placement at the price of $0.15 each for aggregate consideration of $2,152,500.

 

Immediately prior to the acquisition of securities described in this report, Dundee owned indirectly 52,838,838 common shares and 3,730,769 warrants representing an approximate 16.48% interest in Reunion on an undiluted basis and a 17.45% interest on a partially diluted basis.  Immediately following the transaction that triggered the requirement to file this report, Dundee owns 67,188,838 common shares and 3,730,769 warrants, representing an approximate 16.48% interest in Reunion on an undiluted basis and a 17.24% interest on a partially diluted basis.

 

Do we know the warrant exercise price?