The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
London South East prides itself on its community spirit, and in order to keep the chat section problem free, we ask all members to follow these simple rules. In these rules, we refer to ourselves as "we", "us", "our". The user of the website is referred to as "you" and "your".
By posting on our share chat boards you are agreeing to the following:
The IP address of all posts is recorded to aid in enforcing these conditions. As a user you agree to any information you have entered being stored in a database. You agree that we have the right to remove, edit, move or close any topic or board at any time should we see fit. You agree that we have the right to remove any post without notice. You agree that we have the right to suspend your account without notice.
Please note some users may not behave properly and may post content that is misleading, untrue or offensive.
It is not possible for us to fully monitor all content all of the time but where we have actually received notice of any content that is potentially misleading, untrue, offensive, unlawful, infringes third party rights or is potentially in breach of these terms and conditions, then we will review such content, decide whether to remove it from this website and act accordingly.
Premium Members are members that have a premium subscription with London South East. You can subscribe here.
London South East does not endorse such members, and posts should not be construed as advice and represent the opinions of the authors, not those of London South East Ltd, or its affiliates.
If PIs do get to be involved in a raise then it would be at the back end of any other finance.
Therefore the SP would already have jumped significantly.
Even with any discount offered I think you’ll be paying a lot more than today’s SP for them, so better buy now if you’re wanting to invest more.
VV yes you are saying the same thing. Dilution matters (a bit) but nickel price matters a lot more. As the participants, including the Strategic partner here, all have their expectations of the higher nickel price, they can weight their 'negotiations' accordingly. The BOD know what they're selling, the buyer knows what they are buying. 'Strategic' investor IMO pays 'strategic' prices for their investment. It needs to be good for both seller and buyer. If you interpolate between today and 5 years time, there is an awful lot of room in there for a good deal for existing shareholders. Like you, I want it yesterday but if it can't be yesterday, lets have it in the next 3 days (or failing that next 3 weeks)!
You're absolutely right to point out how leveraged we will be as a producer to the nickel price;
A1 npv8 rises by $120.5m for every $1000 rise in nickel.
A2 by 67.5m and Vermehlo by a whopping $177m per $1k nickel. All from the hzm calculators.
I have a spreadsheet that rubs to 2027 when I believe A1,A2,Vermehlo will be producing. I run it on 3bn shares at todays exchange rate. In it the nickel price grows as EV demand increases.
For example in by the end of 2025 I have nickel at $28k, the mcap reflecting 100% of A1 npv8 (as producing then), 50% of A2 npv8 (as under construction), and 20% of Vermehlo npv8 (as JV underway and under construction). This throws out a SP of 89p. If I change the number of share to 2.9bn the SP rises to 92p. So just 3p per 100m less shares.
Given the size of the mcap gain that is possible here, I am totally relaxed on the dilution front. Lets just get this on!
Wasa - You answered clearly. 2p divi would give me a lifestyle I can be happy with, but also a 35 % premium or more to the 2025 share price would also suffice. This is my retirement cornerstone.
Maybe I didn't answer the question clearly. I expect there never to be a dividend. But for good reasons :)
dividend is super hard because of course, as the company is developing the assets, it can spend its own cashflow or fund via other means (which might dilute or offer less good terms). So I suspect dividend not for a good while yet because as shareholders we prefer the 10p/sh year in value add over 3p divi the company could shell out but then not produce the 10p/sh value add it can with the money.
So sadly, I am holding for 'no dividend' policy till 2026 and that's how I've planned my other finances. With Vermelho and Araguaia producing then they will be paying off capex (the structure of the finance for Vermelho is of course really unknown if this comes from the senior partner coffers) but by then it should allow the introduction of dividend.
I'm expecting a much bigger dividend than 2p eventually. But well before that I expect the company to get sold so it is moot.
Wasa, given the number of "pessimistic" caveats in the two posts I cannot disagree with anything you wrote. Could you offer up a pessimistic date for when I will get an annual 2p dividend per share ? .
as an addendum, there is a serious risk that investors (me included, to date) focus on the equity raise and equity raise price excessively. Yes, it matters ( a bit) both short term and long term. But so much more important to the long term valuation of this company, and by implications - its shareprice - is:
- the price of nickel. We are hugely leveraged to the price of nickel which will by almost any study be in serious deficit in the second half of the decade
- the market valuation of companies which supply commodities which are in deficit! We know that during these cycles, the valuations can reach multiples of steady state or bear market valuations. This is of course what we are anticipating later this decade for nickel producers.
So for my money we should focus less on what we have been obsessing over - the price of equity - and focus more on the future for the commodity and the company. And that brings me full circle to the last thing I believe to be very very significant here - instead of the equity price taken by the strategic investor, the entity of the strategic investor is hugely more significant. Because it will tell us a lot about what is in store for the company itself and the development timelines of its assets.
Every which way I turn it, I struggle to come up with a number under 50p in 4 years time, taking the calendar year and as the milestone - e.g. December 31 2021 being the datum. I am trying to construct an equation which gives me 10p share price appreciation per year every year from the end of this year, and I pretend in my calculation that finance isn't yet in at 31/12 but we are 10p. Of course, finance will be in, and I do believe we are above 10p.
So the below looks pessimistic to me:
Oct 21-Mar 22: 10p (Araguaia becoming financed)
Oct 22-Mar 23: 20p (Araguaia midway through construction, Vermelho DFS is being progressed, licenced)
Oct 23-Mar 24: 30p (Araguaia 1 has been constructed, Vermelho is DFS complete)
Oct 24-Mar 25: 40p (Araguaia has a solid year of production behind it, Vermelho has a JV and has financed)
Oct 25-Mar 26: 50p (Araguaia stage 2 financing done and Vermelho is being built)
The reason I think this is pessimistic is as follows:
- Vermelho should add more value to the valuation earlier in the lifecycle, as it is such a huge project with massive economics
- nickel price upside. The above is probably possible at $20k/t. I am increasingly of the opinion that in the timeframe we care about, we really should be thinking about $25k-30k (or more)/t
- Vermelho WILL be accelerated once the partner is onboard. So actually on the above I think the timeline for Vermelho is pessimistic as well as the value add
So where does this bring me? At the risk of sounding like a stuck record, my thesis is as follows:
IF an investor can keep their money in this stock. And IF the company doesn't get sold. A 4 year wait will result in a minimum >5x upside.
I have absolutely no control over whether the company gets sold, but I have full control over how many shares I own and retain in this company. When I look back at what I did I spent basically best part of 2.5 years straight accumulating, to a peak holding >25m shares which at the time was around 1.5% of the company. Since then I have de-risked and inc family retain ~20m shares. However, in the last 6 months, I have ensured absolutely and without any further doubt in my mind that I can achieve all my other goals in life in the next minimum 4 years and not have to touch these Horizonte shares.
The real value I believe will come 2025-2030. The only prediction I make is, if we are still independent in that timeframe, our SP will be north of 50p because I cannot for the life of me, based on my own expectations of the nickel price and what I know about our assets come up with a lower valuation by that point.
For some people 5x on a 4 year view might not fit their investment criteria. They absolutely fit mine, particularly as I think we will be substantially de-risked in the next 0-2 years. GLA