Category: Canada

What are we looking for?

The price of silver has been holding above US$30 an ounce since early September and is up more than 40 per cent from one year ago. Returns on silver stocks over the last 12 months reflect this move as well. We are also seeing acquisitions in this space. Let’s see what the stockcalc models are telling us.

The screen

We used stockcalc’s screener to select the top 10 listed silver mining companies by market capitalization on the Toronto Stock Exchange (TSX) and the TSX Venture Exchange (TSX-V). We then used stockcalc’s valuation tools to calculate fundamental (or intrinsic) valuation for each stock to see if it is undervalued or overvalued compared with its price.

Overview of the techniques used:

• Discounted cash flow (DCF value) is a valuation technique in which cash-flow projections are discounted back to the present to calculate value for each share;
• A price comparables (price comps) technique values the company on the basis of ratios from selected comparable companies;
• An adjusted book value (ABV) is calculated by multiplying book value for each share by its 10-year average price-to-book ratio.
• If we have analyst coverage, we may consider the consensus target price.

More about stockcalc

stockcalc is a fundamental valuation platform with tools to calculate and report on value for each share for thousands of public companies listed on major North American stock exchanges. stockcalc also contains numerous tools to understand what the stocks you are investing in are worth. Globe Unlimited subscribers can subscribe to stockcalc using the promo code Globe30, which offers a 30-day free trial and special pricing for the second month.

What we found

You can see in the accompanying table the percentage difference between each stock’s recent close price and its intrinsic value. The “stockcalc valuation” column is a weighted calculation derived from our models and analyst target data if used.

As a bit of background here, in 2023, 28.3 per cent of silver production originated from mines where silver was the main product, 30.8 per cent as a byproduct from lead and zinc mining operations, 18 per cent from recycling with the balance from other mines, the Silver Institute reports. The all-in sustaining costs (AISC) for primary silver mines was $19.44 an ounce in 2023, with companies reporting AISC upward of $24 for the first half of 2024. Almost half of silver demand goes into industry, especially for solar-cell production. The gold-silver ratio currently sits near 80, meaning the price of gold is 80 times that of the price of silver. Over the past 25 years, the average ratio of the price of gold to the price of silver has been 68. Higher ratios, such as what we currently see, imply silver is undervalued relative to gold.

Acquisitions are happening in this space as well. On Sept. 5, First Majestic Silver Corp AG-T and Gatos Silver Inc. GATO-T announced they entered into a definitive merger agreement pursuant to which First Majestic will acquire all of the issued and outstanding common shares of Gatos at 2.55 AG shares for each Gatos share. On Oct. 4, Coeur Mining Inc. reached an agreement to acquire Silvercrest Metals Inc. SIL-T in an all-share deal valued at US$1.7-billion or US$11.34 a share. I left our models in place in the table for comparison noting our valuations are in Canadian dollars.

Let’s look at a couple of other companies on the list:

Pan American Silver Corp. PAAS-T is principally engaged in the operation and development of, and exploration for, silver- and gold-producing properties and assets in North and South America. Its operating mines consist of La Colorada, Dolores, Huaron, Morococha, Shahuindo, La Arena, Timmins West, Bell Creek, Manantial Espejo and San Vicente. Wall Street analysts expect Pan American Silver to post quarterly earnings of US$0.21 a share in its upcoming report, a year-over-year increase of 2,000 per cent. Revenue is expected to be US$743.03-million, up 20.6 per cent from the year-ago quarter. Going forward, our valuation shows more upside for PAAS-T with the analyst target considerably higher than our models.

Endeavour Silver Corp. EDR-T is a Canadian mineral company engaged in the evaluation, acquisition, exploration, development and exploitation of precious metal properties in Mexico and Chile. The company has three producing silver-gold mines in Mexico and three exploration projects in northern Chile. Our models show EDR-T has a bit more upside from here.

Investing involves risk. stockcalc accepts no liability whatsoever for any loss or damage arising from the use of this analysis.

Brian Donovan, CBV, is the president of stockcalc, a Canadian finTech based in Miramichi, N.B.

Hello and welcome to our daily digest of business, financial and economic news from around Scotland.

Natural resources including woodlands play a vital role in the economy

ALAMY

1. Scotland’s natural assets are worth more than £40 billion to the economy, according to a government report.

Researchers looked at industries that rely on nature such as agriculture, aquaculture, fishing, forestry, renewable electricity, drinks and water.

The study found they contributed £40.1 billion of annual economic output, equivalent to 14.4 per cent of the Scottish total, and supported 261,600 jobs.

Oil and gas were excluded from the data as the report only looked at renewable resources including soil, air, water, plants and animals.

Mairi Gougeon, rural affairs secretary, said: “This research reinforces the vital role of our natural capital in supporting many of our vital industries, a connection that is often under-represented when we look at economic performance.”

Martin Allan, left, and Colin Kinghorn are handing over the reins of Bon Accord Glass

2. A home improvement specialist has undergone a management buy-out.

Bon Accord Glass, founded in 1974 and based in Aberdeen, is being taken on by its senior team as directors Colin Kinghorn and Martin Allan step aside.

The new owners, Michelle Kinghorn, Danielle McAnespie, Ian McDonald and Neil Wilson, have a combined 75 years of experience in the business.

Colin Kinghorn said he was proud that his daughter Michelle taking a stake would mean a family interest in the company was retained.

Ooni experienced rapid growth during the pandemic when outdoor socialising became an alternative to restaurants

3. Pizza oven maker Ooni has been named the fastest-growing retail business in Scotland.

The West Lothian company, which had revenue of more than £157 million last year, came 14th in the UK in the retail index list supported by Interpath.

Other Scottish firms that made the top 100 included Baynes, the baker, and Chisholm Hunter, the jeweller.

Castore, the sportswear brand that makes Rangers football kits, was at the top of the rankings.

4. A Scottish technology firm has been acquired by a Canadian software specialist.

Traveltek, based in Glasgow, provides booking software and other tools to travel agents around the world.

The financial terms of the sale to Juniper Group, a subsidiary of the Toronto Stock Exchange listed Constellation Software, were not disclosed.

YFM Equity Partners and Fullbrook Thorpe confirmed they had exited from Traveltek as part of the deal.

Jonathan Marlow, portfolio director at YFM, said: “Traveltek’s success is a testament to Scotland’s vibrant tech ecosystem.”

Colin Ross will have responsibility for corporate strategy, marketing and communications at Ashtead Technology

RAWFORMAT

5. Ashtead Technology has hired a chief strategy and marketing officer.

Colin Ross joins the Aberdeen subsea technology business, which is listed in London’s Aim exchange, in the newly created role.

Ross was most recently with John Wood Group, where he was vice-president of marketing and communications.

Allan Pirie, Ashtead chief executive, confirmed that Ross that would join the company’s executive committee with responsibility for areas including corporate strategy, marketing and communications.

In today’s industry news roundup: Bell Canada extends its fibre broadband reach across the border with the acquisition of US operator Ziply Fiber; sources suggest the Jio Platforms IPO in India is on course for 2025; rumours mount around BT’s plans to offload its international assets; and more!

Bell Canada (BCE) has struck a deal worth 7bn Canadian dollars (US$5bn) to acquire Ziply Fibre, a regional ISP that is based south of the border in the north-west region of the US. The Canadian telco will buy the company for CAN$5bn and, once the deal is completed (expected late 2025), take on board Ziply’s CAN$2bn in debt, giving the deal its CAN$7bn valuation. The move will expand the number of premises passed by BCE’s fibre access network infrastructure by 1.3 million to a total of 9 million: The operator has a target to reach 12 million properties across North America with fibre by the end of 2028. “This acquisition marks a bold milestone in Bell’s history as we lean into our fibre expertise and expand our reach beyond our Canadian borders,” stated CEO Mirko Bibic. “Fibre is at the heart of what we do, and we’re proud to connect people and businesses and enable them to do more through our fibre networks. By bringing together Bell and Ziply Fiber’s exceptional talent, we’ll accelerate our growth while continuing to deliver significant value for our customers and shareholders,” added Bibic. Ziply Fiber has network operations in four US states – Washington, Oregon, Idaho and Montana – and was founded in 2020 when the company acquired network assets and broadband service operations from Frontier Communications for US$1.35bn. Harold Zeitz, Ziply Fiber’s CEO, noted: “Bell’s leadership and vision aligns perfectly with our commitment to improve the connected experiences of our communities through fast, reliable fibre Internet and a refreshingly great experience. This acquisition enhances our growth strategy with the scale and experience of one of North America’s leading fibre operators. I’m also grateful for the support of our original partners at both Searchlight Capital and WaveDivision Capital.” BCE’s shareholders aren’t best pleased with the deal, though, as the Canadian operator’s share price took an 8% hit in early trading on the Toronto stock exchange to drop to CAN$41.15. For more on this M&A deal, see this press release. 

The long-awaited IPO of Jio Platforms, the Reliance Industries Ltd (RIL) division that includes India’s largest mobile operator Reliance Jio, is expected to take place in 2025, according to Reuters, which cited two sources with knowledge of the plans. Speculation about such a move has been mounting for months, with analysts from investment advisory firm Jeffries assigning a value to Jio in July of more than $100bn (see Is India’s Jio heading for an IPO?). If the IPO happens, it will be the biggest in India’s history. Jio ended August with 471.8 million mobile connections, giving it a market share of 40.5%. Jio has more than 148 million 5G customers, with those 5G users generating 34% of the mobile data traffic running over Jio’s networks in the fiscal second quarter that ended in September: Jio Platforms generated revenues of $4.4bn in that quarter, up by 17.7% year on year, while its earnings before interest, taxes, depreciation and amortisation (EBITDA) grew by 17.8% to $1.89bn. 

BT Group’s CEO Allison Kirkby is prioritising the sale of non UK-based assets and is “determined” to offload the global operations of BT Business, according to a report from UK newspaper The Mail on Sunday. The speculation won’t come as a surprise to anyone in the telecom sector as Kirkby signalled that BT’s global operations were under review when she presented the telco’s full financial year results in May. During that presentation, she stated: “As we move into the next phase of BT Group’s transformation, we are sharpening our focus to be better for our customers and the country by accelerating the modernisation of our operations, and by exploring options to optimise our global business. This will create a simpler BT Group, fully focused on connecting the UK, and well positioned to generate significant growth for all our stakeholders.” In recent weeks, speculation has emerged of interest in BT’s operation in Ireland from Macquarie-backed service provider Viatel, while in September Telecom Italia (TIM) was reported to be one of a number of companies interested in picking up what is left of BT’s operations in Italy. What is interesting to watch with regards to these developments is what happens with the Global Fabric infrastructure that BT recently launched following years of planning, deployments and investment – see What now for BT’s Global Fabric?

Aira Technologies, based in Saratoga, California, has unveiled Naavik, which it describes as an “intent-based platform that uses GenAI to help network engineers deal with the most pernicious challenges holding back modernisation of the telco radio access network (RAN).” The system combines AI-enhanced data analytics, energy management tool, automated network configuration and root cause fault management capabilities, and more. “Aira Naavik is the first platform to seamlessly combine GenAI with traditional AI to solve impactful use cases for network operators,” boasted Aira co-founder and CTO RaviKiran Gopalan. “A lot of intentionality has gone into the design of Naavik and we are proud to reveal its capabilities to a wider audience,” he added. Read more.

Huawei continues to grow… The giant Chinese vendor reported a 29.5% year-on-year increase in revenues for the first nine months of 2024 to 585.9bn yuan ($82.5bn), according to a filing with the Shanghai Clearing House, reports The South China Morning Post. The increase in sales is believed to be driven by growing demand for the vendor’s new smartphones.

Deutsche Telekom subsidiary MMS (T-Systems Multimedia Solution) has teamed up with private bank Bankhaus Metzler to launch a pilot project to “operate a Bitcoin mining infrastructure using surplus energy”. According to this DT press release, the “mining is intended to be powered by electricity from renewable energy sources, which would otherwise remain unused due to insufficient grid input possibilities and/or lack of storage options. The pilot project aims to provide valid field data and insights to plan subsequent projects. With the increasing production of electricity from renewable energy sources, the need to stabilise the energy grid (regulating power) also rises, as production peaks occur irregularly depending on the weather. Particularly through photovoltaic and wind power, there is an increasing amount of surplus energy… The long-term goal is to use the data obtained from the pilot project to contribute to the stabilisation of the energy grid during energy fluctuations that stress the grid. Additionally, wind power producers or photovoltaic plant operators could benefit from this technology, as they often face the challenge of unpredictable regulating power,” added DT. 

– The staff, TelecomTV

• ReconAfrica debuted on the OTC markets in February 2019 after a reverse takeover of Lund Enterprises Corporation.
• ReconAfrica initially promoted plans to use fracking in Namibia, claiming potential for “billions of barrels” of oil. However, in September 2020, the Namibian government clarified that fracking wasn’t authorised. 
• The company quickly shifted to conventional oil production and, on April 15, 2021, announced “clear evidence” of a working oil system from its first test well, doubling its stock price in just two days.
• In August 2021, after Viceroy Research released several reports, ReconAfrica disclosed test well data that showed poor oil and gas prospects.
• Following this disclosure, the company’s stock price plummeted by 29%. 
• Shortly after, shareholders filed multiple lawsuits against ReconAfrica, claiming the company was hiding poor well results and selectively sharing only positive data.
• ReconAfrica recently agreed to pay CAD $14.5 million settlements to investors to resolve the lawsuits. Affected investors can now file a claim to receive the payout.

Overview

Reconnaissance Energy RECAF went public in 2019 with ambitious claims of “billions of barrels” in Namibia’s Kavango Basin, spiking its stock by 1884%. However, in 2020, the Namibian government clarified that no fracking licences had been issued, pushing ReconAfrica to pivot toward conventional drilling methods. By August 2021, the company reported disappointing results, resulting in a 29% drop in its stock and prompting a wave of investor lawsuits. Recently, the company ultimately agreed to pay a CAD $14.5 million settlement to affected investors.

The Unravelling Of ReconAfrica’s Oil Promises

In early 2019, ReconAfrica started an ambitious project to search for oil in Namibia’s environmentally sensitive Kavango Basin, aiming to find large oil and gas reserves. The company initially planned to use hydraulic fracturing, or “fracking,” which involves injecting high-pressure fluid into rock to release oil and gas. However, since fracking had never been tried in Namibia and due to strict environmental concerns, the government had not issued any licences for this type of operation.

Despite these challenges, ReconAfrica continued to highlight its potential, claiming access to vast oil reserves with significant profit opportunities. This optimism resulted in an impressive stock surge of over 1800% from early 2020 to mid-2021. 

However, in September 2020, the Namibian government raised concerns about the company’s fracking plans by stating that “no licence for the development of unconventional resources has ever been granted in Namibia.” 

In response, ReconAfrica quickly adjusted its messaging, removing any references to fracking and shifting its focus to conventional oil exploration — though executives still left the door open for fracking in the future.

In 2021, ReconAfrica followed a carefully crafted PR strategy focused on two main themes: highlighting its “partnerships” with Namibia’s state oil company, NAMCOR, and promoting local “community benefits” like job creation. 

However, the company avoided giving clear answers about its true intentions with fracking. For example, during a community meeting, when asked if they would rule out fracking, spokesperson Ms. Preece sidestepped the question, even saying she “won’t be around” by then. 

On April 15, 2021, the company announced its first test well findings in collaboration with Namibia’s Ministry of Mines and Energy, claiming “clear evidence of a working petroleum system” with over 200 meters of oil and gas indicators. 

The market reacted positively, driving ReconAfrica’s stock up by 143.7% over three trading sessions.

Broken Promises And Shattered Trust

The truth began to emerge in June 2021 when Viceroy Research published its findings. Their analysis featured a direct quote from Namibia’s Petroleum Commissioner, Maggy Shino, which raised concerns about ReconAfrica’s claims:

“There is no way we will licence RECO or any other company to carry out fracking or unconventional hydrocarbon exploration in Namibia.” 

Viceroy Research’s report exposed critical gaps in ReconAfrica’s April disclosures, pointing out omitted technical details like mud logs, drill depths, and intercept depths — standard information in drilling updates. 

Viceroy’s analysis also questioned ReconAfrica’s geological claims, suggesting that the rocks in Zones 2 and 3 were older than the company stated. It found that Zone 1 was filled with water and not suitable for oil production, while Zone 2 was too dense to produce oil commercially. 

Additionally, data from a smaller firm contradicted ReconAfrica’s claim about Schlumberger doing the logging. Viceroy concluded that the well had no areas suitable for oil or gas production.

After these disclosures, ReconAfrica’s stock price plummeted from a high of $11.23 per share to just $4.65 by September 2021 — a staggering 58% loss.

The scandal caught the attention of U.S. regulators, who expressed concerns about potential environmental harm and policy conflicts. To make matters worse, executives sold off substantial shares before the negative news surfaced.

After the turmoil surrounding ReconAfrica, investors filed multiple lawsuits against ReconAfrica, alleging that the company misled them with overly optimistic projections about its operations in Namibia, resulting in significant financial losses. 

There were also growing worries about ReconAfrica’s environmental impact and its treatment of local communities, especially regarding its failure to consult affected residents, which violates Namibian law.

Resolving The Case

To resolve the lawsuits, ReconAfrica has reached a CAD $14.5M settlement, including $9.05M for U.S. investors and CAD $5.075M for those on the TSX Venture Exchange and Frankfurt Stock Exchange. If you invested in ReconAfrica, you may be eligible to file for a portion of the settlement to recover your losses.

After all these events, in June 2024, ReconAfrica drilled its first Naingopo exploration well, targeting around 163 million barrels of unrisked oil resources. The company is pursuing joint ventures to boost its exploration efforts and has received positive community feedback, employing over 1,350 local workers and establishing 36 water wells that benefit over 10,000 people. With class-action lawsuits now settled, ReconAfrica’s stock is rebounding, marked by a recent CAD $17.25 million public share offering showing renewed investor interest.

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