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I encourage everyone to read extraders comment here.
In my opinion there's great interest here but everyone's interest and leveraging tactics are different.
Glencore has its interest, options and leveraging tactics, the chinese have interest, options and their leveraging in terms of infrastructure build as well as being the biggest consumer, CongoB have their interest of the mine as wider development with China and debt issues with Glencore.
Poor old ZIOC stuck in the middle lol perhaps that's why trying to go for the EPP whilst the bigger boys sort out their complicated leveraged options.
Extrader, thanks for your thoughts. Interesting scenarios that you've described. For clarification the 'sealed bids' scenario I fully expect Glencore to drive given they are in the driver's seat. It's why I ask are Glencore holding up a sealed bids option (why I have no idea), or is ROC somehow scuppering this from happening on account of the Chinese and their role in building out the country's infrastructure...? Glencore could easily call for sealed bids and obtain a massive payday. It's a guaranteed sale, at a time that will leverage the value of the asset given whats happening in the market - Low supply + High price of high fe content, diplomatic row between Aus / China, Simandou sale etc
Extrader - good post
"All of which makes my head hurt" - very likely making GLEN, ZIOC, COIDIC, FMG, etc heads hurt as well! Seriously complex, and seriously large prize at the end of it. This will take many, many months (years?) to conclude, but we don't really know when potential interested parties were first engaged. Concluding RNS could land next week, or next year. Doesn't really matter - I get to retire six years early if they sell for a low ball amount. GLA
Hi allthatguff/G_G_G,
I think the 50 % +1/-1 is a complication. ZIOC is a single project promoter (interested in maximising its return), GLEN has multiple fish to fry : as oil trader /creditor in C-B and as major commodity trader with China (largest supplier to seaborne coal market, just spent $ 3.7Bn on coal mines in Oz; already an iron ore trader (65 mtpa), mainly to SE Asia; might want to be an iron ore producer but doesn't like 'greenfield'; so maybe let FMGL take the mining risk in exchange for a long-term offtake agreement ?).
So GLEN may look at the bigger picture/wider relationship issues and have a different price/strategy for Zanaga than ZIOC does ?
Another wrinkle is that AIUI from RNS 13 Sept 2013, GLEN has 'right of first refusal' over ZIOC's share in Zanaga, see :
…"The pre-emptive, change of control, call option, and tag-along provisions have been modified, reflecting the changes in ownership since the JVA was signed in 2009:
· The call option which Glencore had over the ZIOC shares in Jumelles has been deleted
· The existing Glencore change of control provisions have been replaced by a change of control provision similar to the existing ZIOC change of control provision
· A transfer of the ZIOC shares in Jumelles is subject to Glencore's rights of first refusal
· ZIOC's tag-along also applies on a change of control of the JV Partner..."
So who does a potential bidder approach ? Depending on who it is - and how much of the Project they want - if they approach GLEN first, GLEN may seek other trade-offs as part of their monetisation of the (inherited) Zanaga asset; if they approach ZIOC first, the potential bidder risks losing to GLEN....who could then (quite conceivably) 'flip' the mine a short while later, either back to the first interested bidder or to A.N. Other. See how Glasenberg 'the dealer' stitched up Mick Davies 'the digger' in acquiring Xstrata for some other (unwelcome for us) ideas on what might happen ....
So with all of this, I'm not sure where the idea of sealed bids would fit in ? The mine by itself is only part of the equation (power, pipeline/railway, port (PN/FDSO), maybe that's where COIDIC come in ? But they're not going to want to risk a scenario where China Inc doesn't emerge as winner.....
All of which makes my head hurt.
Open to suggestions/corrections/clarifications !
ATB
NDA’s or not, shouldn’t there be a flurry of big trades going through prior to any deal?
People involved giving their mates a heads up.
I always envisaged that the eventual offer for the Zanaga iron ore asset would be for the whole asset, not just ZIOC's 49.999% share. That means GLEN's share also or at least an overall controlling share.
I've been saying this for years and still think the Chinese will buy the whole lot with some sort of trading deal for GLEN. BUT, now they'll have to stump-up more cash because there is a feasible route to market for competitive bidders.
I've never been so bullish on this and I think the end-game is closer than some think.
NewKOTD not sure.
Don't they get 10% of the mine when its built. So effectively the new owner would only own 90% of the mine?
Open to interpretation, and that could be where the hold up is?
DGR,
"split as near as makes no difference 50/50...."
Don't ROC get 10% too, so it's 45/45
The offer will be for all of it when it comes.
Glencores half and our half. And then then that value will be split as near as makes no difference 50/50 as that one extra share glencore have will be worth (£1, £2, £12) or whatever
"Anything below $500m for our share would be derisory...."
Maybe so, but whoever would want to spend that amount of money or more only to be held to ransom by Glencore. Imagine having to explain to their board ... yep we got a 50% - 1 share in the last remaining large scale quality iron ore mine on the planet, but we can not do anything with it other than take pretty pictures, maybe !!! The new owners of our share would still have the same issues we have. No, this project will need to be sold lock, stock, n barrel imo
If someone wants our share, the offer would reflect the Glencore's complication imo, so would not achieve anywhere near true value. I think this is where we are at the moment, moving towards lock, stock, n barrel .
aimo
I can guarantee Glasenberg is aware of this. He is the one that said "option value".
I am optimistic, the macro environment is now in a sweet spot for a sale and Glencore / ZIOC will get a good offer. Now or never, imo.
atg, Glencore Glencore Glencore you say. I can't disagree. In that case we are all f**ked because they may sit on this for another 10 years. I'd be surprised if Glasenberg is even aware of Zanaga.
One thing's for sure. While it stays like this no one benefits. Glencore and Zioc have an asset but not the cold hard cash. Chinese have a target but no mine ownership. Shareholders have a promise of future riches. RoC have a basket case economy needing fresh jobs and income and relevance.
So, why are the main players simply happy to let the status quo continue??? World's 5th largest iron ore deposit going to waste. Utter madness.
Glencore Glencore Glencore.
They control the future of this. Their terms, their time. Simples.
Anything below $500m for our share would be derisory. I'm hoping we can negotiate at least $1bn for our share when / if it ever happens. Crazy numbers given our current Mcap, but again, why wouldn't they do sealed bids if there's nothing stopping them from doing so. Especially given the $9bn offer made by FMG for Simandou. Hell if FMG offered half that number they could build the port, rail everything for ROC and still have spare change. It's why I keep saying there must be a roadblock to sealed bids. But who is blocking...?
In street talk, we are our partner's female dog.
But just imagine if it was written in an rns that we've had low offer.
Just at that the share will rocket as anyone who knows the iron ore industry knows Zanaga is not a 100 million asset.
Nothing to stop offers, indeed. But with a majority partner who has been happy to sit on this "option value", they can reject offers that do not excite them.
GGG, what would you or anyone else regard as a derisory offer?
We also haven't addresses the elephant in the room, which is funding. I asked this question the other day as well, where do people feel or much needed funding will come from - shareholder loan, or capital raise? This will need to be announced in the next couple of weeks so there's one piece of ATs news flow for June.
C'mon guys, there's clearly a stumbling block otherwise why not sealed bids. It ensures a sale, and at a strong price given Simandou sale value. Why f@ck about waiting, and pulling together all these 'conceptual port plans' or EPP plans (that no-one has seen). My view is ROC is blocking a sealed bid so it goes to China, who will build out all the necessary infrastructure. It's also my view the Chinese are dragging their feet and perhaps made a derisory offer, hence the RNS. But please, don't say kid yourself into thinking there's nothing stopping an offer being made. There's ROC / China, and there's Glencore. The reason why Simandou went through is because the government managed the process.
It all begins and ends with Glencore. Until this is not a toy on their shelf, nowt will happen.
atg,
"there is nothing to stop any company bidding at any time...."
This true, although there is no legal requirement to report that to the market either, if AT believes the offer materially UNDERVALUES the company, he simply tells them to go away !
Is this the reason behind yesterdays RNS ..... someone tried a low-ball offer, using the uncertainty of route to market. AT responds with official RNS with alternative !!! 'So come back with a real offer, but hurry !'
aimo
Don't see the need for sealed bids, there is nothing to stop any company bidding at any time. Do they want it badly enough??
Hi guys,
For some reason my posts asking for opinions on why we haven't progressed to sealed bids already were removed. I cannot fathom why this hasn't occurred unless there is a roadblock. The roadblocks I can think of are the ROC gov.t at the behest of China, or Glencore. ROC is easy, they're deep in China's pockets and may have said you sell to them or you sell to no-one. This would make sense in my mind as ROC needs China to build out the port, railways, energy plants, steel mills etc etc. Zanaga effectively pays for all of this. Glencore I can only imagine holding things up for the right price and/or they want some form of trading rights to the ore. Given the debt ROC owes to them there could be something in there as well. I definitely believe there's things happening behind the scenes, but cannot reason why sealed bids hasn't been pursued given FMG and Vale would be interested in participating (as they did for Simandou), and the price we would receive would probably be on par to that realised at Simandou, which is f'ing huge. Why wait around if you're free to do this...? End it all in the space of a few months, and do it cleanly. What could be stopping this?
Full disclosure, I currently hold 300k shares and my target is 750k, so definitely a buyer. I have been here for years (another handle - long story) and held up to 650k at some points so have seen this up and down too many times to count.
Extrader, I do value your thoughts, what do you think about potential roadblocks to sealed bids?