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It is a big deal (not just metaphorically speaking).
At the moment, it looks like we are negotiating $120m piece, but in reality of course, the stakes are so much higher. We are negotiating about something that affects (if we assume co level equity), the birth of a $3-10bn NPV nickel PRODUCER. We are talking about getting $50bn+ nickel out of the ground and anybody who is going to be involved in the financing, offtake, JV, equity, is really haggling for a piece of that action. As PI's we are heavily focused on the COST side (how do we get the capex) but these financiers are looking at the downstream INCOME side - for every % of the equity they own, what is the 5-10-30 year payback.
That's why it takes 2 years to negotiate, in reality it isn't $100m that is being negotiated, it is $bns (in income).
Big deals take time. EUA investors (I was one of them :) jumped on board last November with 'deal by Christmas', then 'deal by March' then 'deal by the summer etc. The deal isn't done yet. I hope it gets done I hope it is a big one but the reality of how big finance works is, if you value things in the $bns, it takes time.
We have $bns of assets here. It is hard at times to stay patient but we need JM and co to keep a calm head and negotiate with these big boys knowing the value we hold, and the value we want. It takes time. It may even overrun end of this year then those of a nervous disposition may sell out on the cheap. Plenty of cheap selling going on as we speak. Hold for gold. GLA
Agree Institutional Investors will dramatically change the picture. Finance is key to unlocking value.
2e have 2 Tier 1 assets at low C1 costs not too many of those that are likely to be shedding cashing when in production with Nickel in the $18-20K zone.
Genuinely feel with Elon telling miners to pull there proverbial fingers out, Vermelho will get taken out or a big partner will step in soon to push us to fast track this project (with potentially p1&2 at once).
True - only around 25% are currently held by IIs. May well see that increase once funding is finalised and signed off and that possible risk has gone.
The big re-rate lets face it will come when insitutions invest. Apart from the odd 'add' like Cannacord recently, lets face it as a % of holdings institutions have reduced here in the last 3 years. I believe institutional investment is what is needed to push us up beyond 10-15p because those guys naturally look at the long view. Too many PIs with too short time horizon will never fully value a company like Horizonte correctly.
Agreed as a minimum with upside for less shares issued. I think they can do it for 2bn shares in issue (or less). There has to still be other avenues not yet released - govt debt (brazil and credit export), brazil banks etc.
2bn shares is 17.5p at £350m and could easily be valued higher say £400m to include the obvious potential of Vermelho 20p.
But all these valuations ignore what the market believes nickel price will be at production (as pickedpeck said yesterday). IF one of two things happen - nickel producers and explorers start to be rated on those expected pricing, or the actual price starts to track to those prices, say $18k+/$20k+ we should be valued a lot higher than £350m/400m?
Each project achieving a valuation of 15-20p in the next couple of years would do me fine so comulatively say 30p min. Lots of upside post production but will we get there?
If people are looking for a sharp exit say Q1 next year to sell their Horizonte shares they should see a decent return but with all the upside potential still to come I still think they will be selling out at less than a third of what these will be worth even on a 2 year view. GLA
Problem is that this share isn’t ‘fashionable’ with all the Telegram and Twitter groups etc! They would rather push some total junk that is easy to move and look for a quick profit, rather than trying to find companies which actually have potential based on fundamentals. It’s just the way the market is these days - shows how crazy it is when UFO can hit a similar market cap level off the back of a pump to rinse the warrants!
I find it hard to believe we are still at this SP with Nickel pushing $15,800, but then we are on AIM.
Appreciate we are focused on Araguaia at present but let’s face it the Press News is all EV as far Nickel is concerned at present.
Be interested to hear some views on what our SP should be after Finance is sorted.
Put this together to kick off some thoughts and base it on a SP of 7p ( crazy though that is to me).
(Assume our current cash is for preconstruction works).
Araguaia Phase 1 estimated construction cost $450M (£350M)
Current Market cap £100M
Shares in issue 1,450,000,000
Debt raise $325M
So assume need to find $125M (£95M)
So say £15M from Off take then need to raise £80m
If we were to raise @ 7p (personally feel we would be raising @10p, even if it’s a premium to the SP at the time).
£80M @ 7p say 1,150,000 shares
So Shares in issue would be 2,600,000 @ 7p = £182M MCap.
Yet the business would be holding £350M just for phase 1 Araguaia.
No value for Vermelho
Would suggest a minimum re rate to around 15p (Nothing for Vermelho) starting construction phase.
Any news on Vermelho and as they say all bets are off.