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"How could any company, especially one which hasn’t been too good recently for SHs write off one of the largest Iron Ore resources on the planet. "
It is just an accounting thing. When they wrote down the asset they took a loss and reduced their tax.
Not weird. Look at the ZIOC mcap. Simple answer.
atg,
"Without huge investment it has no value.." bit of a weird statement as extraction of all commodities require huge investment. The balance is drawn upon the ROI ..... The ZIOP will provide the new owner a massive returns for +30 years.
Also, in terms of investment its not always measured in $$, strategic to name but another.
In my view, ZIOP can offer both.
Answer. Without huge investment it has no value.
How could any company, especially one which hasn’t been too good recently for SHs write off one of the largest Iron Ore resources on the planet. I’ve held and traded Glencore quite successfully in the past, though I wouldn’t want to be a potential LTH there.
Hi 99icecream,
Thanks for the link...and good to see that the CFO sees things the same way as Ivan !
ATB
Sorry 2nd line should read - in the case of Zanaga !
The Zanaga investment has been written down to zero by Glencore that is correct. Glencore is a miner and a trader, but in the case of Simandou I suspect a sale will still be the prefered option. Developing Zanaga with partners (fortescue etc.) is always going to be a practical option and one that they will use to get a full price from a buyer.
https://www.businesslive.co.za/bd/companies/mining/2017-12-14-glencore-could-buy-if-the-price-is-right/
Glencore currently has a market cap of about $ 20 billion, so a sale would make a big difference to them and (in my view) will be very carefully managed. Their reference would obviously be the prices bid for Simandou last year. I don't see them selling cheap.
Hi 99icecream
.."Glencore, because it will want a higher price than it could get currently..."
Not sure if you're talking about (1) iron ore or (2) Zanaga here.
Re (1) , GLEN's a trader, so would hope to make money whatever the spot price;
Re (2), it picked up Zanaga as an afterthought that came with Xstrata and has probably already been written down/off (as ZIOC has done - down that is).
So , if (2) anything it gets for Zanaga goes straight to the bottom line/into cash coffers.
Which may, if this is correct, affect its attitude to 'sorting' Zanaga...and timing, esp. if it is of a mind to be de-leveraging, which is supposedly the case.
ATB
The spot price of Iron Ore has improved, partly due to supply issues (Vale) and partly due to China promoting infrastructure spending to support their economy. However, in the US and Europe the picture looks challenging to say the least.
Buyers of these iron ore mines care little about the current iron ore price, its the forward price that matters. As a reference consider the futures price for 62% iron ore October 2020 is currently trading at about $120 and December 2023 is about $75.
As the world economy improves, we should see that futures price improve significantly, and with that many of the minging deals should follow.
From the point of view of Glencore and China my guess is that neither can deal now.
Glencore, because it will want a higher price than it could get currently. On the other hand China is happy to pay a large price, but would not want to buy at what might be the top of the cycle.
Hi 99 icecream,
Good points !
But...and there's often a 'but'....one could argue that - as the macroeconomics have improved and the s/p hasn't, that the asset has been 'gettting cheaper' for some time...
And we're not talking about 'the market' in general but about some perhaps increasingly motivated 'strategic investors'....
;->
ATB
"Serious, sophisticated potential buyers will recognise that there's a misprice"
If we agree with Extrader then we have to consider that - "the market can remain irrational longer than you can remain solvent" (Keynes) and the corollary to Keynes - even if we (the serious sophisticated investors) know that an asset is cheap, it can get even cheaper!
Hi Veteran10,
.."How can someone offer £1 when the sp is 5p. The DO need to talk the price up..."
Serious, sophisticated potential buyers will recognise that there's a misprice ( Buffett's 'voting machine vs. weighing machine') - esp. when they run the numbers - because of ZIOC's minority status and lack of control over its destiny : the complex, co-ordinated infrastructure development needed to monetise 'value', in a challenging environment.
As to 'talking the price up', by saying what ? People are already moaning that AT's 4-6 monthly updates are 'same-o, same-o', do you really think breathless monthly ramps would help ?
And remember, PI's are only relevant at the margin : Elphick probably only needs a handful of the principal shareholders to be able to strike a deal : an ability to 'deliver' /remove uncertainty that itself is worth a fair bit.
IMO
ATB
Hi Longlad,
Thanks for the feedback.
Re Ivan's track record at GLEN, his limitation (from thi armchair critic) is that he's a 'trader' not a 'digger' (indeed, his and Mick Davis's nicknames) and has generally preferred trading to mining, so GLEN had no competitive edge on iron ore, which has been one of the big turnaround stories since the merger/takeover with Xstrata...and the lead times / delays inherent have meant that it's too late now (if he's retiring soon) to change that.
I have idly wondered whether - as a 'dealer' - HE might do a bit of private enterprise and put in a cheeky bid for ZIOC in a personal capacity, with a view to flipping : he knows GLEN, he knows the market, he knows the likely players...and could act as 'honest broker' in a deal... £1 a share , £ 300 million, would be 'chump change' : the recently-passed GLEN dividend alone would have been worth £ 180 million to him.
Re US/China relations and relevance, whilst both sides now appear to agree that China is a rival, not a friend (Thucydides trap), I think there's a difference in approach Biden vs Trump that might , for instance , put the Australians on the spot.....and affect the urgency (for better or worse) of China's search for replacement resources. And not just iron ore.
I think Africa is likely to be the locus of a lot of proxy competition, both for its resources and demographics, over the next couple of decades.
All IMO
ATB
Why do you say not talking the price up?
The low price is the problem and why a deal has not been done already imo. ZIOC are prob getting cheeky offers. How can someone offer £1 when the sp is 5p. The DO need to talk the price up.
Extrader
In a recent post you mentioned that Ivan Glasenberg might want to leave a ‘clean desk’ at Glencore. I was looking at some charts earlier, glen shareholders have not done well under his stewardship, not sure he will do much now.
Regarding forthcoming US elections, whilst boardrooms will be awaiting the outcome, I’m not sure wether the result of the election will change the current trajectory of US-China relations, as it seems to have support on both sides of the aisle. Worth remembering that it was under Obama’s stewardship that the pivot to Asia was introduced.
Hi all,
A couple of things that might have prompted AT to do an unsolicited (?) interview, mentioning a not-quite-RNSable increase in approaches from 'strategic investors, Chinese and Western' :
- next week sees the US election, in case no-one had noticed ;-<, outcome of which may have some bearing on US/China relations and the extent of the various unnamed investors' interest or otherwise in Zanaga; and
-this Friday is the ZIOC AGM, which will presumably include sign-off/details of the Management Team Retention package for 2020.
This is what they RNS'd last year, 3 days before the AGM :
.."The calculation of the Retention Fee for each Team Member in respect of the 2019 calendar year is due to take place in October 2019.
Each Team Member has agreed with ZIOC that he will use the Retention Fee due to him in October 2019 to subscribe for new Ordinary Shares in ZIOC at the market price of such shares at the relevant time. The number of the new Ordinary Shares so subscribed will be equal to the number of Reference Shares notionally attributed to him for the calendar year 2019. ..
The arrangements for the payment of a Retention Fee for 2020 are broadly similar to those for 2019 described above, except that the amount of such Retention Fee will reduce pro rata if the Team Member's arrangement with the Company ceases before or during 2020. The total number of new ZIOC shares which could be issued in 2020 is yet to be determined and further announcements will be made at the relevant time..."
It'll be interesting to see the size of this year's retention fee (last year 2.8m shares, 1% of shares in issue) , for now, though, AT and co have a vested interest in NOT talking the price up , IMO.
ATB
Personally I don't think this is the same-old-same-old guff that we have had previously. For the first time ever, as far as I can recall, AT confirmed in the last update and with enhanced information in the video that they ARE talking to various third party investors (China and Western).
We have never had direct confirmation of large investor interest before, other than the very general co-operation agreement with Coidec.
That to me is a huge positive, and an indication that things are finally moving. Let's hope the re-pricing exercise is completed sooner rather than later, as its clearly vital to all third parties.
My only concern is no mention once again of even considering a possible project sale, although obviously if anyone came in with an offer it would have to be looked at. Maybe once the repricing exercise is done, the project would be more saleable anyway?
Very funny veteran. It certainly feels like it when Trahar rolls out the same things in each 6 monthly interview. No point selling now though. I don't think we'll go back to the dark days of lockdown where the SP broke 4p. We appear to have found a pretty strong base at 5p so unless the world gets a lot uglier I think it's worth sitting and waiting. I'm keen to hear more about the re-costing of the main project. I think this is something worth doing and certainly worth promoting if they can get Stage 1 below $2bn, and delivered by a reputable 3rd party. If the IO price stays high then economics of the project would be incredibly attractive. Only issue is these things cost money. AT mentioned we have another £400k in the coffers, which means they've closed the first tranche @6p. If they can get the second tranche away for a similar price then I'd hope we're financed until the end of next year, including the new costing exercise. Sadly though I think there's a good chance we will hear the same thing from AT this time next year. I simply cannot understand why Glen haven't put up the for sale sign. Glassenberg is no mug, so there must be some reason why he's reluctant to do it. Maybe he hates Elphick. Who knows.
If I wasn’t a long term holder and just randomly came across that interview, then looked at the market cap etc I’d be inclined to throw a few grand in n took away. I’ve sold almost 200k shares over the last couple weeks, I am notorious for timing exits terribly wrong. Let’s hopes these talks are advancing.
I can assure you there is no risk of me getting carried away.... Investing here is like being stuck in a lift with the Go Compare singer for 5 years.
A very positive update from AT however he stresses twice that the market should not get carried away.
Nice to hear that 11 months on from the COIDIC news, as far as I can see nothing has happened. They may build a SEZ which we could possibly supply some iron ore to if they decide to develop a steel mill. Old news. zzz
It is great to hear the potential financial rewards for whoever stumps up the cash. If they can find someone to commit to the project, they could quite feasibly buy us out, build and get capital and return within 10 years. That would be attractive to a lot of miners, especially eco-focussed ones.
It is time to deliver now ZIOC. Good luck.
Hi atg,
.."Glen are in no hurry. They will be quite happy to sit on this for another 10 years just for 'option value'..."
Options suffer time decay, obviously. More to the point, the Congolese, prompted by China would likely say 'use it or lose it'.
Carrying on with the sharedealing analogy, I think it's at least possible Ivan will do a 'fill or kill' : if he can't take the credit for closing a good deal (leaving the actual implementation to his successor), he'll settle for a cheap deal, (a) to leave a clean desk (commendable); and (b) to deny his successor an 'easy win' (less so).
I'm hoping that (as a significant shareholder) , he 'll do what's best for GLEN (and, likely, by extension -but not for certain) for ZIOC.
But - as we're always being told - 'hope is not a strategy'. In any event, I don't think GLEN will do nothing.
ATB
Glen are in no hurry. They will be quite happy to sit on this for another 10 years just for 'option value'.
Aberdeenman What you think copl ?