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Old Town Hat,
Yes money is relatively cheap at present. Hopefully we can get some of “Negative Interest Rates” the ECB are so fond of. Lol.
Seriously though, the cheaper the better for maximising profits.
My hope is banks agree to roll the loans potentially (or extend) at the point we are ready to build Stage 2. That accelerates Stage 2 - banks are fully derisked by then as we are producing, they get slightly more interest for their money over term and we get to build Stage 2 as quickly as possible from an engineering standpoint. We go from 0t to 29kt in the least possible time. Being a 29kt producer in a strong nickel market let the bidders come but the price then will be bn+ (don't really care if $ or £).
FAO North
"So yes it’s good to see a bigger mix in the funding as this will hopefully drive a lower interest rate and/or term length on the debt element."
Money is cheap cheap cheap now - borrow now on the back of the DFS.
How come the Sierra resource isn't often mentioned? Does it fall under Araguias stage 2 ecpansion?
Yep, use initial cash flow to build Stage 2. Means you can pay off existing debt or restructure it to take on stage 2/develope Sierra DT or Vermelho.
Nice to see buying today in the 4p zone.
Hi Nthoftheriver yes I guess not much discussion around loan rates here but for me that becomes moot if we see the kick ass Nickel scenarios predicted by the time we're online. By some calcs Araguaia can pay down the debt in about a year and a half if it works out that way! So interest rates become less important. Also I expect not all of the loan has to be drawn down up front so the term you are running for includes a lot of production time to pay it down.
The credit export agencies is interesting because my understanding is they fund on longer term and lower interest rate. The long term is attractive because in years 3+4 instead of paying down loan we can be building Stage 2 with the cashflow. Obviously the initial focus is Araguaia phase 1 but for my money the real value to be had here is in getting Phase 2 done pronto (if we are still independent). We then become a cash generating monster and can pay down the debt without really any hastle whatsoever.
wasa,
When I asked JM/Simon Retter last year on the Bank funding spread they said it would probably end up with a lead and say three/four others. So yes it’s good to see a bigger mix in the funding as this will hopefully drive a lower interest rate and/or term length on the debt element.
I only state 7p because for me it is 'base case' and it works with <50% additional shares - i.e. 1.5x what we have now. It assumes some further offtake/royalty. I do a 'worst case' calc like this just so I am happy my investment/average is safe. I am of course hoping for a higher raise price and a lower proportion of equity. It should be very achievable with the 2 assets to play. If Horizonte can get Araguaia financed without encumbering Vermelho and without significant company level dilution all the better - hopefully it is possible.
My actual calcs are done at 10p and look rather good (when looking at future cash flows/dividend scenarios).
An interesting thing I've spotted in the presentation is we have 5x tier 1 banks all prepared to commit $65-$85m. Now I do understand this will be a syndicated loan but even the lowest end gives 73% of capex covered if all banks loan to their appetite. Does this mean their loans will be capped by the debt ratio and not their appetite? Otherwise we could end up with higher % debt than the target 60-65%. That's without the Brazilian banks or Credit Export Agencies.
Anyway lots of ways this can go and agree with posters absolutely no way todays shareprice is going to factor in the raise price because if that was the only way it could get financed you might as well put the assets on the market at 300m (gbp or usd) and invite highest bidders. I think in a firesale scenario 15-20p is minimum really. So you wouldn't really want to issue (much) equity anywhere less than the 7-10p range against that.
I think to sleep easy at night you have to do the worst case scenario estimate. For me this is equity raise at 7p vs firesale at 15p. Because both are very comfortably above my average (now around 3.2p) I sleep easy. GLA.
Yes indeed, all sort of options are in play, JM has consistently said he wants to limit dilution, and so far has always been a man of his word so we can expect this aspect to be one of his priorities- his share options are a natural incentive too.
Lots of speculation but the exciting thing is it wont be long until we find out....
If a transaction is done at the asset level for one or both of the projects, whether a sale or a JV the current share price would be irrelevant to the pricing of that transaction and would have a knock-on impact on the share price which could then be a reference point to an equity transaction to fund the other.
For example a JV on Vermelho could provide the cash to fund HZM's share of capex but would also demonstrate what the value of that asset is, the stock market currently has no reference. One would expect the shareprice to increase to recognise the value shown by that transaction (plus the existing value it attributes for A). Funding for A could be raised at that new price.
There are loads of ways this could be cut but just funding based on the current pricing would be ridiculous - it would be better for everyone to just announce that the board is seeking offers for the company
Isn't the elephant in the room here the cost of acquiring the equity portion of the required capex.
By cost I mean the cost to existing shareholders. Whilst the project is tier 1 on paper and the nextdoor project could become tier 1 on paper it does not change the share price today and the difficulty of raising capital for a junior miner in the present market.
In all likelihood the project will be taken forward and the partners are going to be driving a hard bargain.
JM indicated he wanted to be concluding a deal with a Mkt Cap pre existing of £100m - double roughly what it is now.
Orion has been mentioned with off take royalty agreement and also likelihood of Teck partnering.
I hope JM can generate some bargaining power to drive up the strike price for the equity portion of the funding else dilution of £100m will be eye watering at these prices.
Any thoughts out there on this?