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Hi Both, 100% agree - I think flundra and GLR that your statements much better approximate what I was trying to say (i.e. how the back end comes together when all said and done), that maybe on paper it looks 40:60 but the end result is currently unknown and could skew either way due to those external factors. Thanks also for the Cotec presentation!
I think we can all agree on is that this is definitely a good step forward.
The RNSs says the US JV is called Hypromag US and is a 50:50 JV between Maginito Ltd and Cotec. Cotec now owns 20.6% of Maginito. MKA owns the other 79.4%. So Hypromag US is owned 60.3% Cotec and 39.7% MKA, so approx 60:40.
The Hypromag tech is being sublicensed to the US JV.
That's the basic set up. Presumably the various accountants and lawyers have advised this is the best way to structure it. Sure there'll be tax etc at JV and partner and interested party levels, and this and net returns will differ for each party.
Any Cotec shareholder loan would doubtless be on terms, with interest payable, plus conversion rights perhaps.
Sorry - read your second post again
'The JV is stated as 50:50 not 40:60, and whilst I see that it can be construed as 40:60 due to the 80:20 of the UK company'
Yes you are spot on, if/when we commence production, who knows who will end up with what. This is one of my concerns as I hope we manage to keep a large percentage of the US operation (I cannot see us obtaining more unless we structure a deal with Cotec to give them a larger percentage of the UK and EU) but the risk is should we need further funding due to the delays with the MDA (and any other costs before we become profitable, we may end up giving away more of the 'technology asset' - I hope not and costs do appear to be minimal at the moment.
Hi MyIPA
Cotec have a 60.3% interest in the newly established US subsidiary 'HyPromag US'
'60.3% based on the 50-50 JV right (CoTec-Maginito) for US roll-out, and 20.6% equity ownership of Maginito, leading to an effective interest of 60.3% in the USA'
It says this on the Cotec Presentation slide also
https://www.cotec.ca/_resources/presentations/corporate-presentation.pdf?v=0.193?v=0.049
I think it's best to keep it separate as the companies are in different countries. I dont see an RNS where the HyprMag US is 40:60, just what is being inferred here. The JV is stated as 50:50 not 40:60, and whilst I see that it can be construed as 40:60 due to the 80:20 of the UK company, the eventual split due to funding, taxes, costs, working environment etc are different and would be reported by each co separately in different parts of the balance sheets (also to account for $/£/CAD$ FX and so on if converting) and would not, in the end, be 40:60.
For example the taxes on this in the US could be set to 0%, but the taxes in the UK could still be corporation tax at 20% (for example) - and the mixing of all this won't make 40:60 so I think that's too simplistic. Could go either way - could be higher taxes in the UK but more research rebates in the UK mean the skew moves to MKA, or vice versa it skews more to COTEC.
Just want to make sure it's understood that the final split after tax and profits etc it isn't as straight forward as suggested that's all.
HyProMag US, the JV set up to proceed in the USA, and get access to funding (via CoTec) is 40% MKA and 60% CoTec.
Ah I see what you have done. You've confused the US JV to be equatable to the UK and GmbH arms of the business which it isn't, and thrown in coupons and whatever else into the mix.
The only funding stated here is responsible by COTEC, for the US JV, and imo most of that will be US government funding which can only be obtained by a company that has filed US tax returns in the previous 12-24 months which MKA has not - so COTEC is the natural owner of the US side of the funding especially the critical US government funding (also as alluded to by Crumbs a couple of days ago RE Undersecretary of State for the Environment going to the MKA/COTEC(20%) sponsered event in London. Any further funding from shareholder loans would come from COTEC (and their shareholders), and perhaps a shift in the 50:50 of the JV over time, matched by MKA in which case stays 50:50, or as you say some form of interest paid by the JV as a whole. none of that was clarified however.
Still. Nice to see this - and potential US government funding on the horizon!
Sorry not sure I get that ESDUK - your numbers seem very odd plus what's this about a coupon - nothing stated about that at all. I assume any funding COTEC provides is raised from their shareholders to be a part of the JV (be it CLN, dilution, US government funding, etc etc which makes sense as to get US funding you need to be a US company which MKA is not - so they bring that to the table). If funding is raised by MKA then why would it state thata COTEC is responsible for finding all the funding?
Also, not sure how you get 40% to MKA and 60% to COTEC when the JV is 50:50 and MKA own 80-90% of the UK and GmbH entities respectively:
HyProMag Ltd ("HyProMag") is a wholly owned subsidiary of Maginito Ltd ("Maginito"), which is 79.4% owned by Mkango and 20.6% owned by CoTec.
Maginito holds a 100 per cent interest in HyProMag and a 90 per cent direct and indirect interest (assuming conversion of Maginito's convertible loan) in HyProMag GmbH [...]and a 100 per cent interest in Mkango Rare Earths UK Ltd ("Mkango UK") [...].
The 50:50 US JV is thus as it says. 50:50 of the US arm. UK ownership is still 80/20 to MKA/COTEC, and GmbH profits are what 72%/18% (with remaining 10% indirect interest (assuming conversion of Maginito's convertible loan) MKA/COTEC.
So, what's this about 40% MKA and 60% COTEC?
Aren’t Cotec responsible for fully funding the development costs including building the four new facilities (3 recycling vessels and one magnet manufacturing plant)? So financing shouldn’t need to be arranged.
Yes the US JV will likely/hopefully receive some grant funding from US government, but Cotec are responsible for any remaining funding requirement and Mkango get a free ride for chipping in the tech. Mkango effectively own 40% of the US JV given we now own 80% of Hypromag, so we get a free ride to 40% of the JV profit.
The JV RNS says Cotec will fund the development/construction costs through shareholder loans, which will have a coupon payment (I assume), so alongside their 60% share of profits Cotec will also get a return on the funding they provide for development/construction.
Good RNS
We finally get visibility on the economics
35% EBITDA or thereabouts vs $10m revs per plant per annum
CAPEX at least $30m (lets say $45m) however for the financer, it could be half of this as it may be backed partially or in full by government grants, so very attractive
$30m capex
govt funds 50% (hopefully)
EBITDA of 35%
$10.5m EBITDA per annum
Payback without funding = just under 3 years
Payback with govt funding = just under 1.5 years (now that's fast!)
What I liked about this RNS is the figures are realistic, we all know the songwe DFS is very much out of date in terms of pricing and economics, this is much more realistic and almost negative in some ways. Ofc should RE prices drop I suspect a lot of our material costs / input costs will drop too as it will likely be an overall market impact vs just one product. There are also proposed tax breaks etc unsure if these have been taken into account
I like the update but IMHO they haven't really said anything new.
Good to see Neodymium prices rising again though. Great to malawi mine numbers as well as recycling profitability.
Yup 2023 for first production in the UK.
What I like about MKA is that whilst waiting for the mining development agreement (and even since the DFS) is that they haven't sat on their hands drinking tea, they've got up and built this new segment of the company so we have a complete lifecycle for rare earths. good stuff
Get a grip. This board is not aggressive. Positively civilised compared to many out there.
First production of rare earth magnets from Tyseley is targeted for this year.
Their marketing and PR should make the most of this and the international angle and potential. TV pix etc of those magnets rolling off the production lines please. Huge green story just weeks away now.
Man. This board is always so aggressive.
Strange question. Its right there in the RNS. More good news as the juggernaut continues to gain traction.
Have a read of the RNS. They discuss a hub and 3 spoke model.
How many planta in usa is this based on?
Great update, put into context mka mcap currently 18mill. Potential revenue if 50mill at least per annum from US.
No consideration for other territories or malawi. Won't be long before people wake up to the low rating.
Or at least if not overdue then due this month all things being equal.
I would definitely agree that the MDA is overdue
Sorry, typo on DFS year, not 2023 it was 2022:
For MKA:
DFS on 05/07/2022, MDA Final Review 26/01/2023 with the ESHIA approval "The Malawi Ministry of Justice has appointed a London based international law firm with mining expertise to carry out a FINAL review of the Mining Development Agreement ("MDA") and we are hoping to shortly conclude an agreement that is a win-win for both the Nation of Malawi and all of Mkango's stakeholders."
So this looks like we have our 'final' as per GBE as of Jan 2023 so then we are looking at 9 months or so. I put that squarely in October 2023. I would say the MDA is overdue.
Apart from other news sources (thanks Sharminator - this led me onto GBE below analysis of the MDA below):
https://miningtradenews.net/?s=MKANGO
I have been trying to find out the timelines on the MDA, which can depend on the project of course. The below are from Globe Mining and Metals (ASX: GBE)
GBE: udate on MDA: 22/7/22: https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02544448-6A1100664?access_token=83ff96335c2d45a094df02a206a39ff4
MDA approved: 29/3/23: https://announcements.asx.com.au/asxpdf/20230329/pdf/45n4cjcnd7bywn.pdf
For GBE it appears to be about 7 months from DFS to MDA Final status, then 9 months from MDA final update to Approval.
For MKA:
DFS on 05/07/2023, MDA Final Review 26/01/2023 with the ESHIA approval "The Malawi Ministry of Justice has appointed a London based international law firm with mining expertise to carry out a FINAL review of the Mining Development Agreement ("MDA") and we are hoping to shortly conclude an agreement that is a win-win for both the Nation of Malawi and all of Mkango's stakeholders."
So this looks like we have our 'final' as per GBE as of Jan 2023 so then we are looking at 9 months or so. I put that squarely in October 2023. I would say the MDA is overdue.
Thoughts?
Interesting website - also spotted this (apologies if posted before as it is a month old):
https://furtherafrica.com/2023/09/07/rare-earth-projects-to-watch-in-africa/