Charles Jillings, CEO of Utilico, energized by strong economic momentum across Latin America. Watch the video here.
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I am sure plan B won't happen because HZM will make more revenue from these assets than a major could. I believe, but I am not an expert, that this is because of carbon credits that the majors don't have? - if someone more informed elaborate, that would be great.
Hopefully we never find out the 'no deal' scenario because we will have the deal soon. I think I naively assumed you would always get a big amount for the assets but I do think finance is now the key - I dont want to find out the plan B. Thankfully at least $50m has been spent by institutions who would not see necessarily 1p of that money back if finance doesnt happen. It must now be entirely down to the banks - with the cornerstone engaged and offtake is easy (apparently) then getting the $325m or whatever signed off is the key pretty much as alluded to in the last rns. Then it will be spoils galore for all invested. Gla
Wasa I recommended ur post. But just to reiterate, the value is not in question, but I want you me and the others on here to enjoy the spoils, that is the AIM challenge.
Just wanted to thank pickedpeck for the ‘what if no deal’ post. I often wonder about this, but have never been able to put numbers to it. Seems crazy, but even if HZM packed it in and sold the assets, surely they’d still be worth more than the present value.
Next worse case, sell Vermelho to fund Araguaia (please don’t, but you take the point). Funny to think that just sitting here on the cusp of finance has us valued less than the failure to raise funds potentially would.
It’s certainly instructive. Also makes it very hard not to move more money in here. I don’t say that to ramp. I really struggle between the natural apprehension of the market and seeing this as a once-in-a-lifetime opportunity.
I'm down slightly in his main share holding of mine and all I can say this week is... I added more.
Was a you hit the nail on the head - Psychology
It's actually hard to look beyond the fact that $11k/t of profit at todays nickel price but the nickel deficit hasn't even started yet. Then you read that the likes of Glencore (who know their onions) think nickel demand is set to treble and you go - kerrrrrching. Best not to overthink why Horizonte is cheap and just buy, IMHO.
I think the key word is in this bit 'are expected to trade at ' and the word is 'expected'. So, if you believe A-D to be true, but the market values the company at 1/7th of what the market is expected to value it at, there is a 7:1 disconnect I am very happy to participate in.
Just for another contrarian thought if Horizonte was 35p a share now, would people be buying? Would they be looking at the NPV and going still upside from these numbers? I bet they would - just like people buy companies much higher in relative valuations. Sometimes significantly underpriced companies are not attractive to investors because they don't have confidence in themselves to invest - i.e. - maybe there is something in A-D doesn't stack up but I'm not seeing it. I think in the case of Horizonte - they're wrong - no red flags for me (or the company it turns out, on it's path to financing).
Just as a real contrarian thought, imagine finance does not get done, what then.
The obvious answer is sale of one or both assets. What cash valuation would be put on Araguaia, a tier 1 nickel mine project with an NPV of around $2Bn?
Wouod the company sell Vermelho to help finance Araguaia? When they bought it off Vale for peanuts nickel was less than half the price it is today, and the mine not economic as a result. Now it has a huge NPV and the asset value should have risen accordingly.
Even if they sold both assets for 10% of NPV that would be around 3x today's share price. The current mcap is about 3% of the combined project NPVs, stripping out the cash it drops to about 2%.
So even if the company can't get the current finance deal done, the down side for shareholders is hard to see from this price point.
Apologies for grammar, editing on a phone with hay fever (me, not the phone) is not ideal.
So...
A - lowest quartile cost peoducer
B - Capex $440m vs NAV iro $2Bn
C - JM is credible, the team he has hired have long CVs of delivered major programs, Bod all experienced and with representation from Teck in the form of Sepanta Dorri
D - Teck, Glen ore, Canaccord and by proxy Orion Mon Finance.
I would add
E - World class ESG credentials for a green commodity.
The market is not rational. The base proposition of raising $450m by a $150m mkt cap company is the obvious sticking point. If the cash plus assets are valued at $150m now what are you going to offer as security? Rationally that's a tough initi pill to swallow and is likely leading to some hard negotiated terms. The potential multiple returns are just too tempting, the market too compelling, and the amount of money in circulation too high for it not to happen.
So here we are, shareholders and others in doubt from delays to what is a rationally difficult finance proposition being delayed. A contrarian would buy at this point, accumulating when others are afraid.
I managed to read the tweet of Mr C as he calls himself on twitter using an alternate account I have since he has me blocked on my main account, most likely because I have said something negative about HZM on twitter and he doesn't take criticism very well (usual types living in echo chambers).
So basically he says that HZM is seriously undervalued since market cap is at 5% of NPV. The implication of course is that it is a bargain at these prices (he actually says "ridiculously cheap").
He also contradicts himself by presenting a slide that says junior resource companies are expected to trade at 35% of NAV if
A. The project economics are top quality
B. The Capex is much lower than NAV
C. The management team are credible
D. Strong shareholders have joined the register
Surely one of A, B, C, D is probably not quite right for Horizonte according to his axiom since HZM is definitely not trading anywhere near 35% discount to NPV
It's a very good stat - the challenge I see is that Horizonte's NPV ($2.9bn on the slide hence we are trading at 6% of NAV or whatever) is of course huge, but the capex relative to size of company is quite large and the company is not proven to be able to deliver a finance package or mine (as yet). Hence the huge discount. One hopes that once we have delivered the finance package, which by implication means the financiers are happy that Horizonte can and will deliver the mine, we should re-rate.
I don't know how that factors for Verlmelho. When I spoke to Simon Retter he said the market should value Vermelho differently (i.e. higher % of NPV) when Araguaia is financed. I guess the logic is - once the market has financed one mine, you have the credibility that you can get the other to the same stage, hence some of the risk has been removed. It would be really nice to see a bit of value in the mcap from Vermelho at some point. I'm pretty sure there is very little in there. About a third of our mcap is cash at the moment (unless they've spent much of the $25m).
I tihnk the size and complexity of the projects (and Vermelho is a large, and complex project) must affect the valuation metric somewhat. With a large and complex project there is less certainty that it is in the bag so I would maybe expect Vermelho to be valued slightly lower as % of NPV at the same stage as Araguaia. Araguaia one hopes is bread and butter with so many RKEF plants around the world. GLA
Interesting slide - suggests that quality assets such as ours could be valued at 35% of NPV, whereas we are currently at 5% - this implies our MCap could be 7 times higher than it is. (Note - I haven't worked the numbers myself, just take from the slide in the tweet)
https://twitter.com/prettydamocles/status/1407927842411778052?s=20