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Wasarunner thank you!
Now I see the light on B. I guess being a total rookie i had to grasp it explicitly. If all debt options fail, than maybe issue more shares to raise the monies that way, then that's how the 30% 50% quotient to the max-old-monies prospect comes in. I think I now get it.
What about question A. Anyone wanting to venture an answer?
The hypothetical and undesired scenario is set to this:
No deal is made to bridge the gap. and we default.
Some buyer comes in, offers 100mil(is that even possible a price?) to buy assets and assume all liabilities and we get delisted.
question2: how much of that 100mil would end up as a special dividend?
Thanks!
In terms of why the shareholder value destruction - you are right, if $200m could be found simply via debt, in the grand scheme of things over LOM and the revenues expected, it's not a biggie. We wouldn't be talking 50% or 33% of prior valuation.
The problem is, nobody wants to lend debt right now without equity. Even the second round finance here of $80m debt would have been much more desirable than a 40% dilution, which is nevertheless what we got. So the reason we're valued at 16p right now is the market is betting/pricing massive dilution (or equity wipeout) because if it could be financed by debt the shareprice wouldn't be 16p right now. If the deficit whatever it is can be funded via other means, likely bounce to a much higher level of course.
>>Then you have 80% of NPV at GBP valuation of $1.3bn
Sorry that should read £1.3bn mcap (GBP). Damn $ key is next to £ key on my keyboard.
Hi mv01 pickedpeck did a nice summary of what a (distressed) sale value might look like he might repost it or scroll back a day or two. I'm hoping that's worst case scenario in that - distressed sale sp is still < worst possible outcome dilution here.
My projections for £4.50 were for c. 2025/2026 where:
330m shares were in issue
Agaguaia 1 and Araguaia 2 were producing nameplate $29k/t with NPV north of $2bn.
Then you have 80% of NPV at GBP valuation of $1.3bn which is around £4/sh, then obviously this is sensitive to nickel price, % of NPV valuation, and also Vermelho was the second project with upside.
SImply put, I'm hoping now worst case we end up with 1bn shares, better would be 660m shares fully diluted. This would give me £4.50/2 or £4.50/3 at the equivalent stage, and the equivalent stage has gone back 6 months or so so maybe late 2026 - one concern I do have is that whatever financing solution lands makes Araguaia 2 much longer to realise (and indeed, its own capex may have increased) in which case the £4.50 point in old money may take a lot longer to reach.
I had around £3/sh down for Araguaia 1 at full production so by the same metrics £3/2 at nameplate production or £3/3 post finance deal still gets you £1-1.50/sh but that only gets us back to where we were pre disaster RNS and the timescale on that would be by mid 2025 at nameplate production.
If it's worse than those numbers then its bad for me as my average now is probably north of £1, but obviously can still be a very good outcome for people buying 16p/20p etc.
Folks I have a huge punt in this, and I openly declare that I am a foolish ignorant when it come to investing period. But I am being honest in my declaration that my holding is north of 200k shares.
I want to ask a few questions, if addressed in the way posted, might help me understand a thing or too on this.
A.
First and foremost, given that already more than 400$m been spent on site; and if for argument's sake we were to assume that there won't be a a deficit agreement, then what is the worst worst worst possible situation here? I mean if someone were to come in and buy this, what would be fair price? Assume that that is again for arguments sake 100$m where buyer assumes all debt, assets, liability: here's 100mil give me EVERYTHING.
then how much of that 100mil actually pays a special dividend on share? [Amur minerals mechanism say?].
B.
This dilution arguments. Folks earlier mentioned that they even had projections [prior to the devestating RNS] in 6-7y for for the share to have risen to 3-4.50GBP. I am just curious as to the mechanism that now slashes that to 30%-50% of that projection on assumption that some finance deal will be found now, and the mine will say operate for 20-25y as projected. I guess what I am completely honestly and naively scratching my head about here is this:
Sure we are in some trouble now, and maybe will need some form of loan ingestion to say the tune of 100-200-250mil tke your pick. But let's further assume we gotten it, we are able to build a fully producing mine.
how is that 250mil comparing with the billions of the ore to be mined over a course of 25y. That is the persepctive that I am after: why would a hiccup now of 250m put on top of say 2-3billion that the mine stands to make actually has such a terrible impact [of 50%] on the full potential of the stock price?
i just don't get the ratios of how 250mil / 2-3Bil =====> -50% on max stock potential.
I want to understand this things...
Good Luck All.
The appointment of Fernando Marino as Ops Directors would seem a good start in getting it to nameplate as quickly as possible, he did it at various mines including Onca Puma. where they reached record production under his guidance
He was appointment in August I wonder if he's had had a hand in all the extra costs?
https://www.lse.co.uk/rns/HZM/operations-director-appointed-for-araguaia-project-6ibvncc8siak6zf.html
"The 'gap' (pun intended) in the article is that from commencement of production to nameplate production was expected to take up to a year."
Shouldn't take a year. Onca puma took 3 months.
....and I maintain, still: if the amount needed to raise was < $100m this could have been done in a very short period of time using a mechanism similar to last time (which raised $80m). So it is likely to be bigger than this number. That said, upside from 16p, definitely.
I agree with the article that 16p is cheap
I agree with the article that Horizonte will (likely) find finance (as the key stakeholders haven't sold and the banks haven't walked away)
The 'gap' (pun intended) in the article is that from commencement of production to nameplate production was expected to take up to a year. During this time, unless you know the precise trajectory of production, you have to finance your ongoing opex. Horizonte _had_ to have raised this money as you can not assume that during this period opex can be met by production/sales. So if the cost overrun is due to additional cost (and we don't know the split between additional cost, and the schedule delay, of the 35%) I find it safer to assume that you need the additional capex cost of 35% but you need to retain the original amount of funding raised for the ramp up intact.
A lot of people are ignoring the period between 1st metal and nameplate production. There is a metric shedload of cost during that period which has to be financed. The period is scheduled to take up to a year.
This article was shared on the twitter group, I found it really interesting.
I know many have added the maths regarding the funding gap and estimates varied wildly and but until reading this I hadn’t but two and two together regarding where those differences came from, I guess I’m not the only one
THE TAKEAWAY IS THAT HORIZONTE HAD MORE THAN ENOUGH MONEY TO BUILD A1 SO THEY DON’T HAVE TO FIND ALL THE INCREASE!
An original capex of 537 million increased by the provisional 35% cost rise is 725 million
429 million has been spent already, HZM still has already agreed loans in place 131 million yet to be drawn and 93 million in cash allocated to the project for a total of 653 million.
This means that while the increase is around 187 million the gap is somewhere around 72 million.
Horizonte has an additional 13 million for the daily running costs and 16 million to fund continue developing Vermelho, we are hardly at the looking down the back of the sofa stage and the lights will be staying on for a while yet.
Apologies to those who already know this, it wasn’t until I read the article that it really clicked for me and the 180 million banded around was scaring me a little.
https://investingstrategy.co.uk/mining/horizonte-minerals-trick-or-treat/
So - we have Theorist 30p-50p in a few years....nothing guaranteed..... and billyr 30p-50p in the next few minutes take your bets ladies and gents etc.etc. the horses have left the gates and HZM is frontrunner.
My view is something inbetween. The first news and next news isn't going to be good, it's going to be a shedload of dosh needed with perhaps hints at options to finance it, perhaps not at that stage. So I definitely don't expect 'good news imminently'.
Then we need the management team to earn their bread and having had 4-6-8 weeks from when they were already no doubt talking to the senior stakeholders as the bombshell landed, deliver us something that (fingers crossed) keeps us with existing shareholdings in the game.
I expect the latter announcements relatively shortly after the funding needed, maybe 2-3 weeks. And probably all to happen in November. It is simply unsustainable for the company to continue building the mine longer term with a large funding shortfall which isn't understood, documented, and resolved - anything else and you can't have 1000s of contractors on site working with no clarity of when or if that suddenly stops. So for my money this all gets wrapped up in November or failing that first couple of weeks in December. It's exciting, but sadly for all the wrong reasons.....unless you're a new punter at the races and like billy's odds he's offering.
Billy.... ever the optomist.... But we all hope you are right...
It’s coming……
Very interesting post Strow. You could understand why La Mancha does not want to see another Brazilian nickel mine. Neither do I! I agree with wasarunner, the banks and Orion/La Mancha are in so deep they have to see this through. I think it would be difficult for the company to persuade shareholders to waive pre-emption rights although the AIm rules are limited and the company could seek to push through an emergency placement to Orion/La Mancha/Glencor, which at 20p is going to be highly dilutive but not absolutely terminal for pi's. Obviously the shares would never recover to pre-crash levels however a year or two could see 30p to 50p depending on the nickel price and depending on there being no more overruns. My forecast is based on the old NPV numbers less the increased debt, maybe increased royalties depending on the structure, the range depending also on the pricing and size of the raise. A rights issue at 20p underwritten by La Mancha/Orion would make life interesting? As wasarunner said, the debt needs to hear the equity and the equity needs to hear the debt, some negotiation that is going to be!
When a company is in a financial difficulty are they asking Investors or Creditors for more money?
Let's see what they come up with but nothing is ever guaranteed.
Did you guys see this ?
Was posted on ADVFN
https://lamancharesourcecapital.com/wp-content/uploads/Termination-Announcement-PR-20230929-VF-1.pdf
Shows money is potentially available even from 2 of our cornerstones
Just depends whether they want to use it or not
Bebeto, this might be true but here we aren't talking about about firat tranche financing on a go/no go decision to build a mine. If we were, Horizonte might today struggle to raise the $630m or $700m required to get the project off the ground (the amount they already raised).
No we are talking about Orion and La Mancha saving their existing $200-250m invedtment to date, and completing a mine which might already be c. 75% built. I would say the odds of Horizonte not being able to finance the rest are minimal, however, the million dollar question remains what does that do to (our) existing equity.....
It's immensely difficult to raise funding in this climate for the majority of companies out there, it will be a narrow spectrum of potential offers to raise what's required but we will have to wait and see.
I'm on the sidelines waiting to what the developments are before committing to invest.
It is a disadvantage at the moment that Horizonte have to solve this problem and only have Araguaia to play with. The obvious solution here would be to sell something of Vermelho to help get this funding sorted but it isn't worth anything yet, or rather, it isn't worth anything like it could be worth so that makes no economic sense right now. It's always the big risk with a junior developing its first mine that the options are very limited if it runs into cost issue and it has to be solved with current shareholders.
Hi Strow - maybe 40% of my shares are in SIPP and I turn 50 will be able to access the money in around 7 years. That is my timeframe (from now) on that portion of the investment and like you, I envisaged dividends, further mine development (Vermelho) etc.etc. It was always my intention to hold some of these stocks through the energy transition because, in time, we obviously hope nickel $25k/t and $30k/t and not the current pricing.
Right now this is a big setback but we should (and I say should as I don't know the $ needed or the precise options available to get them) get through it and the investment will still be worth, hopefully, a lot more than we paid for it. When the news broke I decided I can absolutely live with 50% of my envisaged return, and if it is 33% then so be it. For reference my goals were around £4.50 with Araguaia 2 producing which for me was my first planned exit point. Of course, if Horizonte delivers vermelho that should all add to the eventual valuation. Now for me 50% looks like ~£2+ and 33% looks like £1.50. For the SIPP and if we stay independent I hope for more but still feel a T/O somewhere around A1 producing is more likely.
My estimates may be pessimistic or optimistic we don't know until we see the finance package. But I do think this latest setback could have halved the eventual value of this investment, which is a shame, but it happens.
If I'm even remotely right though 16p is the bargain of the century to be buying though. GLA
Thanks guys
Very honest
I too never predicted this-It was almost impossible and I don’t set stop losses anymore after poor experiences with spread betting in the past.
I have for me a very significant amount of my portfolio in Horizonte and have held a long time.
For me it’s honestly an investment for my children so really long term and am planning to see it out to the end.Never ever thought we would see the equivalent of less than 1p.
It is priced to go bust when actually that is probably only a very remote possibility now.
I was lucky enough to persuade my wife to let me take a punt at this level and I have had to be honest with her about the devastation wreaked as it was obvious.
The gambler in me wants to buy more now but my guess is the price won’t gap up too badly at least initially on the announcement so I am having to sit on my hands very frustrated and wait.
As I said on the other thread there are always problems in mining-it’s about how they are solved and overcome in the most timely and economical way for all concerned.
I do believe in the management but lessons will I’m sure have been learnt which will make them stronger and more savvy going fowards.
I am also very excited about Vermelho despite the fact that no one wants to talk about it right now-roll on the bfs announcement there-very interested in the ideas that will be presented.
Horizonte has to be seen as a true long term investment imv and the potential is still enormous.
Good luck all,hopefully not too much longer to wait.
As a long term investor I invested here way back when it was considered an explorer before the main financial deals were struck. My investment strategy was buy then sit on my hands and wait until I got an income from the dividends riding the peaks and troughs. I didn’t think there would have been a trough this deep. I can only say it hurts badly at the moment. I have questioned my strategy and in hindsight it may look flawed due the the deep trough, however, I don’t believe it was. Some may say they predicted the crash. Good on them! The mine will be built, it’s just that I won’t get as bigger payouts as I’d hoped for.
Would I invest here now?
Well YES!
Why?
I’d invested here before the main financial deal because I believed, so why shouldn’t I invest now when the mine if 70% built and I can get in far cheaper. It’s actually far less risky now than when I bought originally.
Strow yes.I expect it impacts debt payback. But - they will be talking to the banks and negotiating that part for sure. It isn't lost from the npv but it does impact medium term cashflow.
Fwiw I think it will get financed at some dilution - exactly what remains to be seen but 16p is ridiculous imo and will not be the sp for long after finance.
Tricky Dicky
It was my post of 3rd October (19.30) about the RNS photos showing visual lack of progress.
If you revisit my post you will find that it was highlighting lack of visual signs of progress on piping, conveyors and E&I. As for my O&G industry friend he is a construction manager so is very hands on in the field at job sites and his experience was for onshore based plants and so reasonably comparable to the HZM onshore facility.
Welcome Strow,
The reality is on the funding gap is that firstly we don't know the exact figure and can only go off what the company has indicated with it's 'at least 35% of capex'.
If they had added the phrase 'half of which could come from existing resources' then we wouldn't be speculating about it, but they didn't so we are. Past experience of raises suggests they have generally been bigger as the banks and cornerstones demand additional contingency. You would like to think this is exactly what that contingency is for though so who knows?
Secondly they have us an indication in the last RNS on the some of the sources of cost:
'Electromechanical (EM) assembly: increased equipment and materials quantities have resulted from the completion of the critical detailed engineering, and the shift of more EM activities into the wet season given the expected delay to 3Q-2024. This represents a significant percentage of the cost increase given the lower productivity in the wet season and increased quantities'
The last RNS was rich in details but still didn't finalise the figure needed. Like Wasa I am expecting in the region of $200m anything less will be a pleasant surprise, anything more will be disappointing. I'm also hoping for a large part of the funding to not be equity at this ridiculous market price, if it is and everyone is painfully diluted then there will be a lot of disappointed cornerstones, institutions, and PIs.