Santa Barbara Gold

My largest gold position (Presentation from Weird Shit)

As promised, I am releasing my presentation, audio (to listen in the car), and transcript for download from my presentation at Weird Shit.

This is being released as part of a double header with my Venezuelan Oil idea.

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Two Australian companies, two balance sheets the market prices below the cash sitting inside them.

In both cases the actual operating assets get thrown in for roughly nothing.

St Barbara (ASX: SBM)

A gold producer with ~A$509M of cash and listed securities against a ~A$544M market cap, nil debt, no hedging.

Back out the cash balance sheet and you’re paying about A$35M for 40% of a producing mine in PNG and a fully funded 100% owned restart in Nova Scotia.

Energy World (ASX: EWC)

A dumpster fire that finally did something right. I covered it already here.

It sold a set of never fired Siemens turbines to Hallador Energy (Nasdaq: HNRG) for US$350M, roughly 4x what it paid a decade ago and more than twice its own market cap.

Post-close that’s ~A$0.12 a share of net cash against a ~A$0.058 share price, no debt, and an 80% complete LNG import terminal in the Philippines valued at less than zero.

Presentation for download:

Weird Shit Investing Online 2026 St Barbara Energy World

1.26MB ∙ PDF file

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Audio:

Transcript:

[Swen ]

We’re moving on to Sara, who I believe is probably in Texas, well known for her SSSS special situations investing substack, specialized in bankruptcies, litigation plays, quirky financial setups. And one of the great things about Sara is that she’s always looking for ideas and to collaborate and communicate with other investors. So if you send her an email, she will probably get back to you faster than you’d expect.

And Sara, good to see you. Floor is yours.

[Sara]

Thank you. So we’re going to be discussing two stocks from Down Under. So I call this the double Down Under presentation.

And you can name the animal on the right. It’s mentioned further in this presentation. It’s super cute.

We both of these companies have balance sheets that sell for below their cash value. And one is more of a long term hold, and one is potentially more of a trade. So we’re going to be talking about Santa Barbara Gold, which is on the ASX exchange and Energy World Corporation, which is also on the ASX exchange.

A little bit about me, I do all sorts of weird shit. I’m assuming if you’re in this presentation, you’ve heard of my blog. If you haven’t, it’s free.

My QR code is in the top right, please sign up. And you’ll see it at the end. So let’s just get into it.

So Santa Barbara Gold is a company made up of two separate assets. One is in PNG. That asset is called Sinbari.

And they have another asset, which is in Nova Scotia, Canada. And basically, that’s their other asset. So we’ll kind of get into the story with both of these in a second.

But to kind of kick it off, I want to thank Quokka Research. This is their idea. So I did a lot of work on this when the stock price dropped, and I am now a fairly significant holder in this company.

The share price currently is around 45 cents. Market cap’s about 540 million. When you take in cash and investments, it is 510 million of cash and listed investments.

13 million of that is just listed investments. And 82 million is a cash bond for the Nova Scotia operation. They had to post a cash bond as a remediation bond for their mine, although I don’t think it’ll cost that much to remediate it.

So if you want to take out the cash bond, you can. People have different opinions on that. No debt, so that’s good always.

So what’s the setup? You have two projects, which are basically selling for nothing. Two gold projects for 35 million Australian.

If you put that in kangaroo bucks to American, that’s not a whole lot of money, and you’ll see in a second why. There is an asterisk associated with that. There is a tax issue, which the company is being told it owes about 200 million dollars to the PNG government.

I believe that this tax issue will get resolved for either zero or 20 percent of the claimed amount, and we’ll get into that in a little bit also. So your upside is, you know, these projects get further built. The stock does relate to your multiples, and it’s going to be a multi-bagger, and your downside is they somehow lose this tax matter, which I think is highly unlikely, and their expansion plans all fail, which I don’t see happening either.

So why is this a special situation and not a cheap miner? You know, I do own a lot of mining stocks that are not special situations, and I rarely, if ever, talk about them. This one actually is.

So to kind of set the stage, why does this company have so much cash? Well, they recently sold 50 percent of that Simbari asset to a Chinese company called Lingbao. Lingbao paid around 390 million dollars to buy 50 percent of the asset.

So if you just think about that for a second, the company now sells it its cash value and owns 50 percent of an asset, a third party, just paid 390 million dollars for. So already it’s undervalued by 50 percent, just by those two metrics alone. But wait, there’s going to be a lot more, where you’re going to be like, wow, this is crazy.

This thing is probably worth four times what it’s currently priced at. So what happened after that was sort of interesting. So after selling 50 percent of it to this Chinese company, both SBM and Lingbao sold 10 percent each, to a company called Kumal Minerals.

Kumal Minerals is a locally state-controlled entity. It’s basically the government investment arm for PNG. And part of the reason they did that was that they needed a mine extension to 2038.

So their permit was extended to 2038. The government got a stake in the project, so now they are stakeholders. So they have an incentive to make sure that it is very successful.

And also, it is my belief, and the company has not said this, that this tax issue is being used as a pressure tactic for the government to get this equity stake. And that is my working theory, and I’ll explain that a little bit more in a second. So what’s interesting about this deal is that although they sold 10 percent each to Kumal, it’s structured as an after payout interest.

So essentially, Kumal is carried through the expansion, and then both Lingbao and SBM get their 100 million dollars back through gold revenue, plus a commercial rate of interest. So you can kind of treat that interest as a carried interest. It wasn’t given away for free, but they’re going to get their money back.

So okay, so we discussed, wow, this is so cheap. Why is it so cheap? Well, there is a, similar to this other company I’m going to be talking about here in a second, there is a order book of people that have been in this business for a very long time that just want to get out, and they’re not on board for the new setup.

So what are the ghosts in this company? Well, back in 2019, this Nova Scotia asset, which we haven’t talked about yet at all, was bought for $722 million Canadian. So that’s right.

It was bought for double the current share price, and when gold was $1,300 announced. So that’s a statement on either the asset quality or the fact that they’d made a very terrible deal. I think it’s actually kind of both.

And we’ll take a look at this Atlantic asset in a second. But essentially what happened was when they purchased this asset, it produced for about two years, and then it went into permitting hell. Canada went anti-mining, and Nova Scotia went anti-mining, and essentially the mine got frozen out, not due to lack of gold, but due to permitting issues.

But what has happened recently is thanks to all of the tariffs that our great president has put in place, there is a trade war going on between Canada and America, and Nova Scotia and the Canadian government now have to make up large budget shortfalls. And the premier of Nova Scotia has made it a priority essentially to bring back industry into Nova Scotia, expedite permitting, cut red tape, and move forward with development. And as someone who has business dealings in Nova Scotia, I can personally attest to this.

This isn’t just the company telling me this. I can’t really get into it on this public call, but I am very confident on the statements I’m stating. Another issue they had was they originally were trying to buy out a company, and this company ended up buying out them.

So that’s called the Genesis Minerals Saga is what I call it. But essentially they ended up having a reverse takeover of their most profitable mine, which was used to clear out their debt and financial issues. And we sort of already mentioned this tax issue.

So in terms of New Simbari, the expansion is already occurring. It’s approved. It’s fully funded.

The mine already produces. So what you see is that the current production is in oxide. So for 2027, they’re expecting about 72 ounces of gold on an 8-8 basis.

They’re going to own 40% of this going forward, although they’re going to be collecting 50% of their revenue because of that carry until it’s paid off. The last quarter they made about 15,000 ounces of gold. So they’re already well on the way to getting to 70,000.

The current expansion is planned to be completed in the fourth quarter of 2028. And essentially what’s going to happen is at the end of 2028, the sulfide part will open and the production of this mine will grow exponentially. So what you can see on this plot is by 2029, basically, like I mentioned, will be two years from now.

The ASIC cost, which is the sustaining cost for production of the gold, will be going down to around $1,200 an ounce, and the mine will be producing 200,000 to 250,000 ounces a year. So quite a big development and expansion. So the Nova Scotia story is an interesting one.

So as we discussed, the permitting was stuck in this permitting hell, and the market basically does not believe this asset is ever going to produce again. However, what has become clear is the government of Nova Scotia has changed their minds on how things are done. The company has gotten restart approval, and they’re restarting their old mine.

The old mine has existing ore that has not been milled, and so their plan is to mill this ore that was on site, which is about 40,000 ounces over a 13-month period. It’s not going to cost them very much to do that. And then the plan is to move into the main development, which is 15-mile.

They’re going to relocate the mill to that 15-mile development and then start a hub-and-spoke approach to processing multiple mining arrangements throughout Nova Scotia. And so if you look at the growth and CapEx schedule, they’re not really spending any money in Canada, but they’re planning to get those 38 ounces of gold over two years in 2029. Once New Simbari is online, they’re going to use the New Simbari cash flow along with the existing cash to fund the mill move and restart on the larger asset, which will net them about 100,000 ounces of gold a year.

So what are the risks? Well, you have two builds over a three-year period. Clearly, CapEx and timing can always change.

The Nova Scotia permitting situation is improving. It’s not finished. I think the stock will start to materially re-rate once Nova Scotia comes online, and the real re-rate will be over the next 24 to 36 months as New Simbari and Nova Scotia are both in production.

Obvious risks on commodities, gold can always go down. And then as I promised, let’s talk about this tax dispute. So in terms of the tax dispute, if they do somehow lose it, part of it is going to be paid by Lingbao.

As we mentioned previously, they sold part of the asset to a state-owned entity to get them to be less aggressive on this issue. If you look at the actual dollar amount, most of the cost is related to penalties and supposed calculation errors. So if you talk to the company, they believe only 20% of this claim dispute is even potentially valid once you take out penalties and calculation errors, although they think it should be a zero tax dispute.

And most importantly, the new PNG Internal Revenue Commissioner has already revoked the previous tax assessment, which is where that number came from, and they’re supposed to reissue a revised tax assessment, which is pending. They may never do that. They may do it at a much smaller number.

So I think they’re just going to drop the issue or settle on some sort of minuscule amount. So what’s the trade? Well, you have a company which is selling a cash that’s going to be making 200,000 ounces of gold a year by 2030.

It has 5.4 million ounces of gold and 7.6 million ounces of silver at a very low ASIC cost. And unlike all of these junior mining companies you’re dealing with, these are reserves that are going to be developed, and they’re not just holes in the ground. So they are already producing out of one of these mines and working on the expansion, and the other one should be back in production starting first quarter of next year.

So that is asset one. Now let’s talk about Energy World. All right.

So in terms of Energy World, they are an LNG developer. Well, we’ll call them an LNG developer, but they are a failed LNG developer because they’ve never actually finished developing a single facility. They are currently selling their gas turbines to a U.S.-listed power company for basically double their market cap, and you’re getting a nearly complete LNG terminal thrown in for free. So their stock price is around 5.8 cents. The net cash they will have after this turbine is sold is 12 cents, and the turbine sale is for 350 million U.S., and they also have zero debt. So what’s the trade?

Well, once they’re done, you’re basically going to be owning something of 50% of cash. So this one’s a lot more easy to understand. So your upside is the escrow funds will clear, the board’s going to return some capital, and they’ll sell their LNG terminal.

The downside is they continue to burn cash, and they continue to make terrible financial decisions on terminals that don’t make sense. So in my belief, you know, if you look at the history of this company, it’s pretty awful. You know, I say, why did you invest in this former dumpster fire of a company?

I like to say former because I don’t believe it is currently a dumpster fire. They have done a lot of things over the last 18 months that have shown me that they have found some sort of religion, and the first thing that really impressed me was that they had $442 million of debt. They swapped that debt for equity, but they swapped it at $0.88 a share against a $0.02 share price when the stock was $0.02. So they converted the debt at a 40 times premium to the stock price. I have never seen that happen. I think that’s very strange and highly unusual, and as a result of that, the company has no debt left. In terms of the turbines, the Halidor is a listed company, which I’ll talk about in a second, so I’m not going to talk about them too much in this slide, but we’ll get to it in a second.

They are purchasing these turbines for $350 million. They’re also spending $100 million to move them. They are paying four times the price EWC paid a decade ago.

That is thanks to AI. There is a five-year backlog on turbines right now, and so the price of turbines has increased exponentially, and if you look at their contract, it doesn’t have financing contingencies. There are cure provisions that are very short in terms of them missing payment dates and any payments that are paid they can’t take back.

So who’s Halidor? Well, they are a coal producing company. They’ve been around for decades.

They’re converting to gas for AI. They have around a $780 million market cap. They have an order book of over $2 billion, no bank debt, secured lending facility, lots of revenue.

They’re in a very good financial situation. The only thing that is a little bit concerning, of course, is the $450 million they’re paying versus their market cap. It’s a good chunk of their market cap, but they have the order book to support it, and it’s very clear they’re going to be closing this because, as their CEO said, until you have equipment, you don’t have a project, and you can’t have a power project without a turbine, and those are, like we mentioned, five years backlogged.

So what’s the milestone schedule? Well, there’s four tranches. The first two have already been paid.

The third tranche is due on August 31st or delivery of the gas turbines, and then the final tranche is due September 30th or upon final delivery, conformity, and basically testing to make sure they’re good. The company recently put out an update as of last week that they are already moving the turbines. They have two teams working, and the $35 million is already available.

So that’s the latest update on that. So as far as the bed is concerned, I feel fairly comfortable this hallowed ordeal will close, short of those turbines somehow having been destroyed by sitting around. I think that’s your main risk.

All right, so let’s talk about the two projects, which are, one is interesting but needs a little bit more capital, and the other one, which is the cause of the dumpster fire, in my opinion. So the first is an LNG terminal in the Philippines. Originally, it was an LNG power plant combination.

So they were building the LNG terminal, having a transmission system, and then also building a power plant. So it was an integrated power project. Well, now the power part is gone because the turbines are no longer there.

So now it’s a terminal to nowhere, is what I like to call it. There aren’t pipelines nearby. The good news is the LNG terminal is 80% built, so they only need $30 million to complete it.

It’s not a huge LNG terminal, but it can be materially large enough to handle a decent amount of gas, 3 MTPA. The latest update is they’ve signed several non-disclosure agreements, and there’s exploring business opportunities with regional traders and infrastructure operators, investors. I don’t know what that means.

Could be a bunch of fluff, or could be them actually trying to turn this into a real business, which the Philippines does need gas. So I think there is a good probability if people are rational to make money on this one. Indonesia, that’s a complete voter disaster.

So it’s an LNG export terminal with no gas, which is kind of impressive. It’s like running a farm and deciding you’re not going to grow any produce on your farm. I guess in America we do that.

It’s a form of corporate welfare, but in most parts of the world we don’t do that. So to finish this LNG terminal is going to cost around $140 million. The project is severely stalled because there was no feedstock and no tolling agreement.

There was a fairly significant change in Indonesia in terms of their government policy. They previously were planning to export gas, but then they realized, hey, gas needs to be used domestically to power power because we import a lot of diesel, and that is not good for the environment, and that is more expensive than natural gas. Very similar to the Saudis who were burning lots and lots of oil for absolutely no reason.

So they have a government policy now that they want to use gas domestically. So essentially, the project makes absolutely no more sense. It’s an export terminal with no reason to export gas.

So in best case scenario, they just zero it out, sell it for parts, or hand it over to some local operator with government connections and maybe get a small royalty. So that’s that one. So what are your risks?

There’s a controlling shareholder and a long record of destroying capital. LNG terminal nowhere. If they start spending money on Indonesia, that’s to me a major red flag.

And then obviously the closing risk with Halador, which is the main part of the thesis. If they don’t close, then this whole idea sort of doesn’t make any sense. I think that is extremely unlikely though.

So what’s the trade? Well, you’re getting, if everything goes right by 4Q, you’ll be owning something at 50% of its cash value. And the company did say in their most recent quarterly that the company determined that pros exceed their near to medium term capital requirements.

The board may consider returning surplus capital to shareholders. So in my view, given that if things work out in my very rosy, happy, good luck world, that if they stop spending money on Indonesia, spend the money they need to spend in the Philippines, they should at least be returning six to nine cents. So essentially you should get all your money back and also get a ride on everything else.

So that’s the end of my presentation. Here’s my QR code again, if you want to hang out and we got the golden girls. So yeah, thank you for being a friend.

Drop me your investment ideas. I always like to read them.

[Swen ]

And thank you for being such a reliable and always inspiring and informative presenter at various events that I’ve hosted in the past. Always a joy.

[Sara]

It’s always a pleasure. Thank you.

[Swen ]

We’ve got a couple of minutes left. And as I said, we’re a bit more flexible anyway, because we don’t have that many speakers left. Kent is asking, is the Philippines LNG terminal currently under construction or has it been dormant given their funding needs?

If dormant, could mid construction equipment be damaged and actually require much more capital?

[Sara]

Yeah, so the construction, to my knowledge, has been paused. They already had built 80% of it. They have, they got recent quotes on how much to finish it from their construction vendor.

So I believe that it is not damaged from my understanding. On the other hand, on the Indonesia side, I can’t say that.

[Swen ]

Okay, great. Next question. What are the listed $500 million of assets for SBM?

[Sara]

Those are just, it’s cash primarily. It’s all cash. Yeah.

I mean, the listed assets, like 16 or $17 million. It’s, they own a small equity stake in another minor, but 95% of it is cash. If you look at your Bloomberg, it might not show up yet.

So you’re getting the information ahead of everyone else, which is always a good time to get in.

[Swen ]

While we’re waiting to see if more questions come in, do you want to say a few words about your idea generation process? How do you come up with all these things? Because I mean, you have one of the most, one of the highest hit rates of genuinely original ideas on your blog.

And I think it’s interesting to hear how you do it.

[Sara]

Oh, yeah, I’d be happy to talk about that. So I have a lot of different things I read. So I read about 350 different news sources.

And I have an AI assistant who creates summaries for me every morning. So I can see which ones look interesting to me. I also have AI, basically searches that work every morning on my cloud desktop, based on criteria on things that I find interesting.

And I’ve trained it on my writing and my investing style for it to look for ideas that have similar potential. So there’s a lot of that people do email me ideas. I also look at live feeds.

And, you know, one of the ones that I like recently that I’ve been pimping out a little bit is Armando’s special situation digest.com, which is, I actually built an app on top of his app, which I now use. So whenever there’s a special situation occurring across the world, I get a little ding on my desktop, and then I can analyze it immediately. So unfortunately, my sourcing has now gotten over out of control, because I think I’m looking at close to 500 ideas a week.

So it’s been challenging to siphon those down.

[Swen ]

That’s nuts. And it’s great that in between you have time to speak to actual human beings. I mean, you mentioned Armando, who is one of our co-conspirators for a dinner that we have hosted in Austin in the last two years, where geographically, that’s about as close as many of us will ever get with Wyatt coming in from Colorado and you from further down.

No, you’re actually in Austin as well. Yeah, right.

[Sara]

I am. Although I may be in Colorado in two weeks after Wyatt sent me a picture of him enjoying the mountains, and I need to get up to Colorado this summer. So I’m ready.

[Swen ]

I know we have to host something there at some time as well. And that my plug here for the audience that we do occasionally host these Huzuki get togethers on top of these online webinars. I don’t think we’ve got any more questions and you finished perfectly on time.

So that’s great. Thank you again, Sara.

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