THE DAILY SERGE

STHC - Future Share Price Estimate

noreply@blogger.com (Executive Staff Writer) — Sun, 17 Jan 2021 15:02:00 +0000

Regarding Southcorp Capital, Inc (STHC) and the recent news, please refer to the previous post. That post goes in depth to the pros of buying into STHC. This post is to set an evaluation of the price. Please note that we are not financial advisors. We just want a fair assessment of the price that STHC should be set at. We also have shares in $STHC. The price may also fall outside this range. Make sure to look at all financial data yourself as it becomes available. Again, this is not financial advice, just my opinion.

TL;DR: Price range of $2.15 - $6.00

Some things to note before I go into the price target, my undergraduate degree was in mathematics and my masters degree is in STEM Education, so I understand many of the concepts that go into the maths behind stock evaluation. However, no matter how much data we have, stocks are always driven by investor attitude and speculation. So while we may have an estimate that seems fine on paper, it can always come in much higher than expected, or come in lower. This post is just to show where we see the price going, why it is going there, and possible variables that I did not calculate (and why).
There are key definitions to consider, which I will lay out here:

Definitions

Authorized Shares (AS): These are the total number of shares that the company has. In the case of STHC, this is 750,000,000 shares.

Outstanding Shares (OS): These are the total number of shares that are sold to investors and are a part of the Authorized Shares. For STHC, this is 369,462,271 shares. This is the more important number, and is what is used when valuing the price, as these are the actual shares that are traded during market hours. Stock float also affects the price, but with STHC, the last figure I found was from 2015.

Restricted Shares: These are the shares that are not available to be traded as per the company guidelines. STHC has 80,065,045 restricted shares.

Unrestricted Shares: Shares with no restrictions on them. STHC has 289,397,226 shares. Note that the float (discussed below) is much less.

Float: A stock's float is the actual number of shares available to trade. This is taken by subtracting any restricted shares, like those locked up by insiders, from the Outstanding Shares. For STHC, the last update I can find was from February of 2015 and it was 29,051,699 shares. As I can not find anything more recent, this will be the figure used. This means the float is ~7% of the Outstanding shares. This means high volatility and faster movement one way or another. To understand how few shares this is, I am aware of two people who collectively own about 4 million shares, which means they have about 13% of the available shares to trade currently. This means that demand will be very high and the volatility also be high. While float is more about the volatility, it's important to keep in mind when trying to buy shares, as the price will rise quickly as more people hold.

Market Cap: Total value of all the company's shares. This is calculated by multiplying the Outstanding Shares by the price of one share. As of January 15, STHC had a market cap of $45,480,806. This essentially means the company is "worth" this much. Remember, however, that STHC is completing a reverse merger with Ameca Mining. This means that the market valuation will be going (considerably) up as they increase revenue streams.

Earnings Per Share (EPS)

This is where speculation really starts to come into play. On one hand, we have STHC, which is essentially a shell that is taking in Ameca Mining. On the other hand, we have Ameca Mining, which does not have any public EPS. This means we need to rely on data that is provided by them through investor comments, as well as standardized industry models to find an EPS that fits Ameca Mining.

Ameca Mining lists the following resources as their main focus: Gold, Platinum Elements, Rare Earths, and Graphite. Realistically, it is the Gold and Graphite that I will be looking into, mostly because that is what the company broadcasts the most about.

Graphite

By far the most lauded point of Ameca Mining by the Twittersphere is their "$4 Billion in Graphite Deposits", and rightly so. This seems to be the bread and butter of their Sri Lankan based mining plans. Here are the figures direct from Ameca Mining's website.

Their mining deposits seem to be superior to what is commonly found in Sri Lanka, with most of it being the "high grade". The high grade is highly desirable for electric vehicle lithium-ion batteries. While batteries are trying to be changed, the reality is that for the next decade, graphite will still be used in the production. However, low grade is also used in many industries, as well.

In an investor's highlight from last year, here is what they said about their economic case of the graphite they have:

The key point here being these figures are "based on only 15,000 tonnes of graphite production/year, projected annual EBITDA of $19 million and an 84.7% IRR over 15 years." (EBITDA meaning Earnings Before Interest, Taxes, Depreciation, and Amortization and is a metric used to evaluate a company's operating performance).

This lines up well with it being ideal for the growth of EV batteries, as well as the fact they can output this graphite at a decent rate.

*Note: this is where I will mention that Saint Jeans Carbon, Inc. has agreed to an off-take agreement with Ameca Mining, which essentially means they are legally required to buy a minimum amount of 7500 tonnes of graphite annually. Also, per the Ameca website, there are off-take agreements on the table with Indian companies.

Also note that 70% of graphite production is from China. Also, the "flake" graphite is what is needed for EV batteries, which China does not have much of. This means any new deposit located outside of this regime would be a much better source of graphite for both political and economic reasons.

So, to determine the industry growth potential, I referred to New York University's own "PE by Sector" report.

First, let's look at the mining sector. This is a broad term, but it is where Ameca Mining would be placed. They have a "forward PE" (one year projected) of 41.86, which is up significantly from the current PE of 30.21.

Next, I looked at the growth EV batteries, in general. This year, the industry was $35 billion. But it is projected to be $133 billion by 2027. This means there is a compound annual growth rate in the EV battery sector of 18.05%

Gold

As stated on their website, Ameca Mining is a "gold exploration company". And the details of their work are linked. One thing to note, however, is that they did not release their fire assay results, which were due in September of 2020. This means it was quite hard to figure out the potential. Also, regarding the recent "Four Gold Deposits Found" in Sri Lanka news, it seems these were exaggerated and will be discounted, in my opinion. Note: These were not reported by Ameca Mining, but I saw some people on Twitter start throwing this around. Just know that while Ameca Mining does do gold exploration globally, there were no new gold deposits reported by them, that I am aware of.

The Brass Tax

Now onto calculating the future share price. To do this, we will first look at the equation to calculate PE, which is by taking the share price and dividing it by the EPS. In this case, we have the PE and we have the EPS, so we rearrange the equation and multiply the PE by the EPS to find the share price.

The PE of mining, as stated above, is 41.86, which is a very conservative estimate. So we will keep this on the "low" range. By including the 18% annual compounded growth of EV batteries and other graphite specific industries, I have placed the "high" end at 50.86. This is based on an 18% growth (8 points), as well as their other resources that I could not accurately account for, such as gold (8 points). The latter is most likely even higher with the gold industry alone increasing over 3% just this year.

The EPS of Ameca Mining, which is a bit tougher to determine, as there are no financials easily available other than the $19,000,000 in annual revenue they list in their Investor's Highlights. But this is just for the graphite and does not take into account their three other resource streams of gold, rare earths and platinum elements. So calculating an EPS is difficult as we can only see the low end, at this time. Thus, to give a fair rante, I have calculated an EPS for just the graphite figure of $19 million, but also a rough estimate including their other sources of resources. For the "graphite only" EPS, we simply divide the 19,000,000 by the number of Outstanding Shares and we get an EPS of $.0514. (This is not share price)

For a more generous EPS that includes a rough estimate of their other income sources, we have to assume what their revenue of the other resources are. This will help give a "high end" estimate of where the price can range. If Ameca Mining was just a graphite mining company, then the $19 million figure would be enough. But as they were primarily a gold exploration company, it only makes sense that they have a revenue stream that will raise the EPS. I looked at a recent profit share agreement located in one of their mining districts worth $1.5 million. While this agreement is between two separate entities, the fact that it was on Ameca Mining land means they will have received payment for this somehow. Again, there are no public financials, so everything is truly a guess. I will showcase various EPS' to reflect a higher end range for STHC.

So let's look at our expected share price range (PE x EPS):

Graphite only revenue stream:

Low End: $0.0514 x 41.86 = ~$2.15

High End: $0.0514 x 57.86 = ~$2.97

Including other revenue streams:

If annual revenue is $25,000,000, EPS is $.0677

Low: ~$2.83 High: ~$3.92

If annual revenue is $30,000,000, EPS is $.0812

Low: ~$3.40 High: ~$4.70

If annual revenue is $38,000,000 (i.e. graphite is half of their revenue), EPS is $.103

Low: ~$4.31. High: ~$6.00

This means that the price range can easily fall anywhere between $2.15 on the low end and $6.00 on the high end.

This also does not include other resource streams, which could push it even higher.

This also has an PE of 41.86 - 57.86. The actual PE can be even further outside of these ranges.

Finally, this does not include any other information that has not been released, which will further affect the price.

Once the merger is officially announced, the push by retail investors will be even higher (as can be seen on Twitter, Reddit and other social media posts with just the company information changing to match America and STHC. I personally believe the FOMO of this stock and low float can easily blow past any projected price range here.

In the end, I highly suggest you research the financials yourself, look close at the share structure of STHC, and not fall into FOMO, but rather buy based on your own research. After the push from 3 cents to 12 cents, I am still holding my position and won't even consider selling any time soon. I can not time markets, so I will just hold as I have been for the past few months.

As new information is available to us, we will update this page to reflect it. And remember, I am not a financial advisor by any means, and this is just to show the price estimate that we see STHC going to in the future after the reverse merger with Ameca Mining.

Below are some resources that I pulled information from, but also the hyperlinks throughout this document also contain relevant data points.

Industry PE Ratios by New York University

Ameca Mining Investor's Highlight

Original Investor's Hub Post that details a conservative price point using the same method.

Gold off-take agreement for a reference of Ameca's gold potential

Ameca Mining Homepage

STHC OTC Page

Understanding Float

STHC - A Due Diligence Deep Dive

noreply@blogger.com (Executive Staff Writer) — Mon, 04 Jan 2021 13:34:00 +0000

AMECA MINING

Ticker STHC (for now)

INTRODUCTION

Editor's Note: The original Google Doc has very clear pictures of all documents mentioned. I recommend clicking the link at the bottom to access the drive and see the pictures for themselves. In transferring them to this website, the quality suffered. Thank you.)

(skip to *** if you don’t care why I am doing this nor the perspective in which I have approached most of my work thus far with)

Thanks for taking the time to read this. Though I have posted a couple of times on Reddit either as myself or through a friend, this is my first real crack at doing a more thorough, proper deep dive into a company.

I do this because I believe in this company and want to share what I have found with others.

While you can (obviously) rightly argue that I have a vested interest in convincing others to ‘hop on the train’ since I am already on and them doing such would only increase my gains — full disclosure, I hold about 900,000 shares at 0.024 (and I’m not a financial advisor) — I am convinced Ameca Mining, as currently expressed in the ticker STHC, is a company that, after doing more thorough vetting beyond the surface level ‘DD’ that is circulating StockTwits and Twitter, is not an OTC scam, but rather a company that gives you no reason to distrust it, as well as reason to have confidence that it will continue to do as they say. I am not here to offer a new valuation or something — they are out there and you’ve probably read them. I’m here to remind you of what you hold — it’s real, it isn’t fake — and to encourage you to not lose heart nor grow impatient, or maybe help open your mind to the possibility of initiating a position in this company if you haven’t already.

What prompted this initially was my own fear and concern that I had been played — played by Twitter pumpers — and more specifically, seeing a couple of Tweeters claim the ticker is a scam,

as shown in above tweets, most significantly George Sharp’s, given his bio. Let’s not pretend this isn’t a possibility: while not uniquely an OTC problem, the frequency in which scams occur on the OTC rather than the major exchanges is higher. I thought I had done enough digging prior to initiating the vast majority of my position to know it wasn’t, but taking a step back after it had taken so long for the discharge to go through in the Delaware courts, and recounting my personal experience with OPTI — I had bought in but sold at a loss becoming sketched by it after a friend told me what they had found after doing more thorough DD — I thought to double check myself and exit my position now that I was finally in the green after holding the majority of my position for four months. On top of that, as I took that step back, I thought more about the too-good-to-be-true claims the company makes and those who tweet about it regularly echo: ‘$4,000,000,000 in graphite! This is a multi-dollar stock!’ … yet it trades for less than a nickel. If this really is true, realistically, wouldn’t they have been scooped up by another company, conducted their listing in a more ‘orthodox’ way, or secured financing and stayed private? Surely this is too good to be true! Until this company is public, they can say whatever they want and have virtually zero direct penalty if caught lying, nor are they required to disclose anything that would substantiate their claims.

***(pick back up here if you decided to skip – the link immediately below is important)

Most important was the discovery of a document on the Sri Lankan Geological Survey and Mines Bureau (or “GSMB”) website (tipped off by ToastTurtle on Reddit — a huge shoutout!!!). Open the file on the page that opens when you click this and see if you find any mention of Ameca or any of its leadership on it. You won’t. This troubled me greatly and thus took the saying ‘Do your own DD’ that so many say but don’t actually do to heart and resolved to get to the bottom of this. This was the springboard to me investigating whether or not this company was legitimate or not — maybe it was just some Catfish-like scam. Relatively speaking, Sri Lanka is not well off financially, so why wouldn’t someone potentially try to scam people into a scheme that would get them some tendies off empty hype? Easy gains right there!!!

With that, I put on as critical a lens as possible and got to it. I emailed Mark Bolster, Michael Paterson, Norton Fernando, William Pfaffenberger, Chinthaka Kumara, Upendra Kannangara, Aruna Amarasekera to see if they could either fill me in on information that, ignorant of, would lead me to think they had been lying about their licenses, given they seemed to not be on GSMB’s 2019-2020 license list, but when informed of said potential information, show they indeed weren’t lying, or explain why they weren’t listed on it — perhaps there was a legitimate reason for the discrepancy.

No reply from them after 48 hours and I started to worry even more than I had been scammed. A company would typically respond to an inquiry, especially one of this nature, within that amount of time, I’d think.

Simultaneously, I decided to begin trying to verify from independent entities as to whether or not this company even exists. For some reason, I decided to focus on people with deeper roots in Sri Lanka. Maybe we are all being scammed by some guy who just wants to siphon funds to the developing country and get out of poverty. If I could establish that the company exists, then, I reasoned, there is less of a chance this is all the work of one mastermind pulling strings behind the scenes.

NORTON FERNANDO

Chairman of the Board

First on the list was Norton Fernando. Has anyone else wondered if this is even a Sri Lankan name??? It sounds Spanish or something! Surely we are getting conned! Googling his name, you’ll find some of the words in his name on LinkedIn are actually honorary titles given to him from the government. That is good if true, but it could just as easily be made up, and doesn’t prove anything. Further, after delving into my search, I found a number of other Sri Lankans with similar names and became less skeptical of it being fake. I imagine people with these names may use them more in professional settings, especially if they interact with people from other countries a lot. I know it is common for Chinese people to take an English name and use it despite it not being a legal or given name.

I pulled up his LinkedIn and went through his most recent activity that was listed at the time — he had shared a few posts of someone looking for work or something of the sort and told them to contact him, leaving two email addresses. One was his ‘Ameca account’ (I put that in quotes because it isn’t actually — I got an immediate undeliverable notice reply from Microsoft when I emailed it; norton@amecamining.com) I assume he just made a typo or something since the one that is listed on Ameca’s website is nortonfernando@amecamining.com.

The one he had commented on LinkedIn omitted his last name. The second email he had commented is to what seemed to be a personal gmail account. I threw it in google and found that it is associated with a Pinterest account. Checking out the Pinterest page, you’d find his personal website listed. This website verifies Norton Fernando’s bio on Ameca’s website — a good sign, in my opinion.

I decided to comment on that post he has on LinkedIn, telling him the norton@amecamining.com was an invalid email address and that I had emailed him the other day, as well as other members of the Ameca team, inquiring into the discrepancy.

I browsed through his profile yet again for the n-teenth time and decided to see if the license he has listed on his profile, D/S/F0489, was included in the GSMB list — it isn’t — it’s from some social services entity if I remember correctly (you can check on the desktop version of his LinkedIn profile). Further, after googling the name of the credential to see if I can find out any information on it, I get nothing. The only hit is some white woman run yoga studio with one of the words in his credential as the name of their studio. Possibly Ameca’s license is under his name, not the company’s, so I search his name and find 8 Fernandos, but none of them are him, at least his name as written on his LinkedIn, Ameca’s website, and his personal website. Maybe a full Sri Lankan name, if he has one and indeed only uses Norton Fernando in international business contexts, is the one used on the spreadsheet though. I can’t verify this given my ignorance of whether or not he has a non-English sounding name.

I emailed the office of archives, alumni, and registrar at Manchester University to try to verify whether or not he actually attended the school but have yet to receive a reply from them.

I also contacted the Sri Lanka Geological Survey and Mines Bureau (“GSMB” in case you forgot), as well as the Sri Lanka Geological Society.

I initially emailed the GSMB but never received a reply. I called a couple of days later a number of times (their English was amazing, which is nice if you’ve been in Japan for three and a half years) and finally found out after speaking with about three people what specific department I needed to speak to. Upon being transferred, I finally got through to the appropriate director, but was hung up on nearly immediately. To be honest, I think my internet connection was poor at the time (I was calling via Skype), so there is a chance that whoever I was going to be speaking to could not tell that I was there. I tried calling back a few times but didn’t get beyond the automated reception for whatever reason. It was Friday evening (Japan time) and my wife got home shortly after I had tried calling back a few times and we shortly thereafter went out for dinner. I thought I’d try again after getting back home, but by the time we returned, it was past end of business Sri Lankan time. I’ve still not yet received any reply from the bureau, but I have not attempted further contact — we will get to why later.

I did receive a reply from someone associated with the geological society — and this was big — a lecturer (I assume professor?) in the geography department at the University of Colombo. Why I think this is big is because he is a professional not directly associated with Ameca but is connected to the industry in Sri Lanka. Acknowledgement of someone like this of the company’s existence would demonstrate to me that the company actually exists, and that is exactly what I got. Check out the screenshots of my email correspondence with him below. Being only a university lecturer, I am not surprised that he does not know of Ameca’s specific projects, as I do not imagine he would be out in the field much, if at all. This is merely my own conjecture though. Had the company been a fraud or not actually exist, I don’t think a lecturer at a university would lie, saying it did.

I finally heard back from Norton though. He replied to my original email six days after I had emailed the Ameca team initially. His response given explains why, and suggests what I and others have expressed is spot on: Ameca is busy at work behind the scenes and is keeping quiet in the meantime. Actions speak louder than words, right?

(Continue Scrolling)

In the picture below, image 1, is my initial email to Ameca using the email addresses they have listed on their website. Image 1a, 1c, and 1d are my follow up addressed to the faulty ameca domain email address he listed in the LinkedIn post (a), his gmail account listed in the LinkedIn post (c), and the email address I found on another LinkedIn post that I did not comment on (if I remember correctly). Image 1b is the automatic reply I received to 1a. Image 2 is his reply to my email. Image 3 is a second email he sent separately. Images 3a-3i are the attachments he included in the email.

His email is pretty straight forward, but I am not 100% sure how to understand the attachments he sent. It seems that a license they had was cancelled on 23 September (3b), but a new license was requested within a week (3c). Any suggestion on my end as to why this occurred is nothing but speculation. I imagine due to their nature of their business changing with the upcoming merger and going public, that may have been at play in it. They could also be seeking to begin exploring and mining in a different area than prior or for a different mineral that would require a different license than previously held. Regardless, images 3e-3h show us progress made regarding the acquisition of a new license, and it seems to be all but issued. Payment and a request to GSMB for allowance to present in requesting said license were made by Upendra Kannagara (senior partner of Ameca) on behalf of Ameca on 16 November, followed by a specific date request on 20 November with confirmation from GSMB on 23 November, and finally a request to issue the license on 1 December with submission of the project timeline.

Since I received the above emails from Norton, I was less inclined to initiate more direct, individual contact with any other of Ameca’s board members, as I found what he sent me to be sufficient. That to say, the following sections will be much more brief. I include them though to substantiate my claim that Ameca is legitimate because a number of other external sources verify what they state on their website.

MICHAEL PATERSON
President: North American Division
Can confirm that Michael Paterson does valuations, mergers and acquisitions, and corporate finance for Beacon Advisors outside of his LinkedIn page. Click here for more information.
ATULE SENARATNE
Scientist, Partner
Atule can be verified from external sources as well, namely his personal website.
CHRISTIAN DEROSIER
Senior Geologist North America
Despite not being listed in his bio on Ameca’s website, I was able to find Christian’s LinkedIn.
CLOSING THOUGHTS
REMINDER: I am not a financial advisor and these are merely my own thoughts.
Some considerations:
•Bureaucracy. I imagine bureaucracy has been a factor in causing the delays we have seen so far. This is not shocking, but nevertheless something to keep in mind, especially in a country like Sri Lanka. Living in Japan, while I still very much hate American bureaucracy, it is nothing compared to here. I’ve not been to Sri Lanka, but there is a chance it could be closer to Japan than America in this regard.
•Cultural differences. Living in Japan has made me understand how naive I was prior to leaving the States. I used to think of culture as shallow surface level differences between people groups, but being here for three and a half years, I have come to understand more just how deep ‘culture’ is. Cultural differences are not just things like ‘the Japanese bow instead of shaking hands’, but more along the lines of a view and interpretation of the reality. That to say, Sri Lanka may, in general, like Japan, do things that would be perceived by a typical American as being ‘cheap’ (I do not mean to come off as racist, I am just being honest), and on top of that, being a relatively small, modest company (that doesn’t mean undervalued at current share prices though!), decide to go about becoming public in an unorthodox way (on the OTC no less) such as the way in which they are as it may be better for them from their perspective.
•View of technology/the internet. Japan is not what you think it is. In many ways, I feel like I am still in 1970. While Twitter is pretty popular here and you can read random one-off articles online about how technologically savvy Japan is, by and large technology is not used as it is in the US, or, more simply put, the power of the internet and social media hasn’t really set in here yet overall (in my opinion). This very could well be the case in Sri Lanka, and I’d bet probably more so than Japan. That to say, they may not be too aware as to how Twitter is used by many companies in the US.

Based on this digging I’ve done, I conclude Ameca is a company that current or potential shareholders have no reason to distrust, anymore than they would any company, and are thus reliable to continue matching word with deed . After vetting them further, they have passed my test. Are my standards lower than yours? Maybe, maybe not — you decide.
The short of it: after having done this dig, worst case scenario — Ameca is exaggerating their holdings. I do not think they are an outright scam though. Best case scenario — and we have reason to side this way — we see some of those pps projections people have dropped in valuations realized in due time.
Feel free to contact me via the platform you got this through with any questions, comments, or issues to raise. I am pretty opened and would love to hear from you in general, especially regarding how I may be wrong!

Merry Christmas and a Happy New Year.

Original Google Doc with Crisp Pictures: https://docs.google.com/document/d/15jAtXFFkUFBmcUzGndEbOIUZqrvEUqqme_BhLliR3rc/edit#

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Updating our website

noreply@blogger.com (Executive Staff Writer) — Tue, 10 Nov 2020 05:00:00 +0000

We have decided that leading into the 2021 New Year, our website will have a new look with more topical articles. While in the past we looked at a wide range of topics and had the chance to cover events in-person, this COVID pandemic has allowed us to focus more on business, politics and economic changes.

Thank you for your patience as we update everything.

Be safe during the pandemic

noreply@blogger.com (Executive Staff Writer) — Sun, 15 Mar 2020 13:36:00 +0000

Mask on in South Korea.