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Apologies in advance for long reply, and again, I'm no expert…but I would argue a chunk of the market has...so the PIs who are sitting on a fair proportion of the company between them, buying in early in the story and awaiting development, taking the higher risk along with the potential reward.
If you actually mean, why isn’t the SP higher, reflecting what many believe is the fair valuation, that could be a number of reasons, the obvious one being lack of current significant buying pressure, allowing as seen so often on AIM, the price to fall on small volumes.
As to then why buying pressure isn’t higher, that again has multiple angles, from risk appetite of larger institutions, lack of understanding of the company’s wider story/business model beyond high Vanadium price = good, low = bad, deliberate attempts to lower the price in a low volume market by selling and/or shorting, PIs waiting to get the very best price of a cycle, investors waiting until their specific targets have been delivered (Vanchem purchase driving revenue/reducing risk, Mokopane license adding massive scale/opportunity, electrolyte production beginning, first battery order), etc, etc…and yes, some may even be waiting for dividends; although I would say they would only represent a small part of the whole, and are presumably the most risk-averse, as they are waiting for the end game, rather than the growth story. Ultimately, all these investors will be swayed by continued solid delivery of profit...and it certainly looks like we are well into our second year of doing just that, and all being well, will deliver considerably more in time - and I expect the SP to reflect that over the longer term, under- or over-shooting along the way.
Again, just my novice viewpoint, and more than happy to hear a counter argument as to why dividends alone are the be all and end all. And by all means, wait to buy in once the company is distributing dividends, and the SP reflects that...
Because it's profit from one source only right now. We are seen as simply a one trick pony...a miner with one kiln. Profits last year came in on the back of high V prices...but V prices have gone down and that's all they see...if prices go down then our profits must be going down. BMN has kindly put timescales to various major events taking place, but that in itself may have encouraged some shorting to take place too. As has been said many times on here, we need to diversify to hedge (sorry for the pun) our risk and that is what the company is doing right now. The Vanchem deal is not a done deal yet and we don't have the Mokopane Licence approval yet and we don't have the Electrolyte factory built yet and we don't have Eskom orders yet and we aren't paying a divi yet...this is what the market is saying to itself. Once we have the Vanchem deal completed, everything else will then start to fall into place. It will be the moment in time BMN becomes a fully fledged adult and becomes big league player. It will also be the time when those new customers, sitting on the side lines, worried about continuity of supply will no longer need worry. It will also be the time when II investors should start to wake up to the fact BMN will, overnight, have become a multi-income stream company and that divi's payable will become more of a reality.
At the moment, we are also right in the middle of peak holiday mode, Brexit, talk of global recession etc etc...all of which I'm sure are not helping our situation.
Vanchem will add value to BMN (not just asset value) and so will the other parts as they become reality...Afritin, BE and Lemur will also add value...Electrolyte Licencing deals will add value...etc etc and that is why SP Angel has their Price Forecast and it's just that, a forecast based on what is projected to happen but it hasn't happened yet so the SP isn't reflecting that Forecast Price yet.
Finally, for what it's worth, SA has exchange controls and a dual listing may have more benefits for ii's - unfortunately this won't necessarily be so true for SA pi's but I'm sure most will just be happy to invest/trade locally anyway.
Fyoz, "The statement regarding the priority of allocating capital is quite clear. Return cash to shareholders after achieving 10,000mtv".
Under company corporate governance rules dividends can only be paid out of the percentage of profits transfered to a distributal reserve account. Dividend payments are not allowed to be paid out from capital.
for the same reason it did not 'see' it at the end of 2018
https://www.thebushveldperspective.com/slides/slide/bushveld-minerals-in-a-minute-50
"Surely 'profit' is the profit the market is looking for?"
So why is 'the market' not seeing it at the moment?
@Fyoz with all due respect I believe you are over simplifying things.
As it stands the capital outlay to achieve 8,400 mtV actual production (10,000 mtV production nameplate capacity) will, in the case of Vanchem, take up to 5 years to execute. This decision was clearly taken in order to respect that same vanadium price cycle that is referred to under item 3.
Even on reduced earnings, which will highly unlikely remain the case over a 5 year period, the company is going to generate more income than it requires for the $45m refurbishment of Vanchem. It is therefore, as is the case with the majority of public listed companies, going to set aside a fair and reasonable cash balance that has sufficient additional leverage to ensure that this goal is indeed reached along with items 1 and 2.
Over the course of those 5 years there will come a point when the cash flows outstrip that amount. This is particularly true when one includes the additional staged production increases that will be achieved at Vanchem plus the additional revenues that a fully operational electrolyte plant will deliver. Therefore the situation will be one of expanding income and fixed (contingencies respected) capital investments requirements. Hence why the dividend will at at the appropriate time run hand in hand with the expansion to 10,000mtV nameplate capacity.
As time passes these dividends should grow and act as a means to demonstrate to the market that the company is expanding thus driving higher valuations.
If as I do you to date trust the management of BMN then any decisions on further acquisitions, whilst worthy of review, should be taken within the context of that trust, BMN's desire to build a substantial business and what that acquisition would mean for where we will have arrived.
After all they hold the rights to over 440m tonnes of vanadium and at 10,000mtV nameplate capacity will be the 3rd largest vanadium production company in the world and the largest outside China. So if they then decide the demand is there to expand further beyond that level of production then it will mean that the energy storage market has been realised and is large enough to cope with it. If so then by that point BMN will be at a higher enough valuation that any further acquisitions or indeed investment wouldn't take the shine off this story, whether there be dividends in play or not.
Excuse my obvious ignorance...how are dividends the 'clear proof of the profits' the market wishes to see? Surely 'profit' is the profit the market is looking for? Dividends are a function of profit (ie if you have profits, you can pay a dividend, if you are not allocating that profit to further growth plans, as agreed by the Board and its shareholders), not the sole indicator of profit in their own right...dividends come traditionally from mature companies, after their growth phase, and investors buy into them largely on the stable basis. Aim generally, and BMN specifically are surely growth businesses, in expansion phase...if you're looking for divis right now, try the FTSE...
But stand to be corrected, as just my view.
But how does it achieve it's true value (Mcap via SP) if this fickle market wants to see clear proof of the profits (dividends). The statement regarding the priority of allocating capital is quite clear. Return cash to shareholders after achieving 10,000mtv
My concern here is that Fortune may have his sights set on more acquisitions that continue to demand the full amount of cash generated, and as such it will be a very long wait for dividends. Sure, we'll all have shares in a behemoth, but will the SP reflect that? Because it certainly isn't at the moment
I thought 10000mtv was the nameplate capacity but the production would be 8400mtv
@Fyoz Nowhere in my last post did I refer to dividends. My post was centred around the company achieving closer to its true value once it becomes fully integrated and can demonstrate the revenue streams that come with that.
That aside the list you have enclosed refers to an order of priority but I have never believed that the company means one item needs to be completed prior to the others being activated.
In the end it will all come down to cash flows and that will be enhanced along the way by more production, alternatives sources of income, or indeed higher vanadium prices. The company's plans will have a fairly robust set of calculated costs against them. Once revenues start to exceed a level that gives the company security of its position on items 1-3, then item 4 "return cash to shareholders" will be activated and not before.
Fyoz - will the long wait to 10,000 tonnes production be before or after we start producing solar panels ?
Thanks again BBN
However, you say "To achieve it the company need only complete on a good percentage of the plans it has in play. It doesn't need to be operating at 8,400 mtV but it would certainly help enhance their offering." But the company have said they won't pay dividends until they reach 10,000 mtv. (see below extracted from the full year accounts) Not picking an argument here, you're much better clued up on the business than I ever will be, but 10,000mtv could be a long wait
To reflect Bushveld Minerals' maturity into a producing Company, the Board is aligned with a consistent and disciplined approach to capital allocation to manage the funding of several capital expenditure items in the near and medium-term. In order of priority, the Group's capital will be allocated to:
· Maintaining existing operations and ensuring maintenance of stable and efficient production across all our operations;
· Supporting a strong balance sheet that is resilient through the vanadium price cycle;
· Investing in the Group's growth projects, either through organic growth or brownfield acquisitions, to achieve 10,000 mtVp.a. production nameplate capacity and downstream integration in the medium term; and
· Return cash to shareholders.
Thank you
I'm fine with the SP stalled whilst I accumulate!
Vanchmem Acquisition RNS dated 1st May 2019
"The Company plans to finance the entire Consideration and associated capital expenditure from the Company's existing cash resources, future cash flows as well as, to the extent necessary, debt facilities which are currently being negotiated."
I'd like the declining SP halted. I think a dividend payment would do that. I'm prepared to sit it out a while longer now BBN has graciously explained why it's not the right time
@Fyoz When BMN complete their plans and morphs into a fully integrated vanadium based energy storage business and the VRFB energy storage market is even in part there to have received it, then today's valuation will be a mere fraction of the true value that will be witnessed.
I would be so bold as to say that even those that deem this stock worthy of shorting at this time, if they do indeed exist, would agree with the above statement, and have merely taking advantage of the market fundamentals as they have existed here of late. But even that play like all others runs its full course eventually.
If as I do investors believe that the energy storage market will be there and that BMN can achieve their goals in a 'timely' manner and within their means, then great unknown catastrophes aside, that true value or something close to it will be witnessed.
To achieve it the company need only complete on a good percentage of the plans it has in play. It doesn't need to be operating at 8,400 mtV but it would certainly help enhance their offering. It doesn't need to develop Mokopone but again it would bring yet more enhancement to the table.
They just need to get the platform and the associated relationships in place and drive the market opportunity. That takes time. Energy storage is still just a baby right now and needs time to grow. However, it is a baby that is well fed and can grow quickly but it is about the fact it exists and will grow that truly matters.
The end game for me will happen and i have the necessary time to wait for it (I appreciate others may not) because it will in my view be worth it, which means this period right now, as dark and as questioning as it is, means nothing if I believe that said end game will be achieved and achieved by some margin.
I just need to remain patient and continue to check, review and even re-read the story as it unfolds in order to ensure that I remain focused on where it is going and not on where it has been or indeed stands as I speak.
so invested 6 years .. that was all I was clarifying ... then why so bothered about a div when all cash can be usefully employed generating much bigger future value and revenues.
I am not having a go .. just curious as so far the only people who regularly clamour for divs or buybacks look like traders
" I don't really care"
It seems that you do :-)
Great post, thanks.
Question to anyone that knows the answer - has it been communicated or confirmed that BMN will use debt financing to cover the funds needed ($68m according to BBN) or is that just speculation?
Could the possibility of a placing or other means of raising equity be a cause for the depressed share price?
Thanks
"just checking @Foyz .. 6 years you said .. only been on LSE 4 years .. just checking what you mean"
I used to use iii before I found the LSE bb had much better discussions regarding BMN
Next . . .
well you claimed 6 years ..you could just answer or not .. I don't really care
"they why are you whining about dividend payments and buyback .."
You don't moderate this bb. Start your own discussion group if you want to control the content
just checking @Foyz .. 6 years you said .. only been on LSE 4 years .. just checking what you mean
Thanks BBN for your reply, I don't profess to be half as intelligent as some on this board yourself included and I'm sure Fortune knows best how to invest his profits, what sometimes appears a no-brainer perhaps isnt! Thanks for your view on the matter.