Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
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Although I’m sure Mr E doesn’t need me to defend his actions…
Realistically what the hell more can he actually do?
Think of it as “build it, and they shall come”, well the 2014 FS was well out of date(and nobody came anyway), so he’s trying “rebuild it, and they shall come” in a very pro “green steel” moment.
There was never a chance of us being able to develop the mine ourselves, so we have only ever had 2 options-
1) buyout
2) buyin
Neither option is directly in his hands to achieve.
He can only market us to the best of his abilities, which I believe he has done, by the restructuring & the re-costings exercise.
This whole process was never done with the consideration of the share price(and by extension us PI’s)(and of course the company doesn’t directly benefit from PI’s trading shares on the open market)(unless the company’s aim is to raise money through equity(impossible for a company with £50m MC to raise the billion odd needed anyway), it was aimed directly at investors/partnersf to do one of the two options listed above.
My belief is the company went through this whole process at the behest of a new investor/partner(s)
Guess we will shorty find out..
Gla.
Gargan Gupta and Abu Dhabi incoming is my prediction.
That went will didn’t it Mr Elphick?
Massive increase in project NPV yet the shareprice marginally down on the day -the market clearly thinks this is a repeat of 2014 (at least there was a shareprice peak then) when last project economics were announced and nothing happened.
Please consider a deal in that results in a shareprice circa £1 to £2 is better for Glencore,yourself and other shareholders than holding out for a higher price and realising nothing .
Almost double the NPV and we are down 0.39% (7.75p). Broken market.
Hi Jiving,
Agreed : every buyer will have their own view of what constitutes for it/him a 'risk-free rate of return' - as a baseline - and what non -financial factors to include (and with what weightings) when looking at each investment.
And I'm in absolute agreement with your concluding remark : ' Of course any investor is likely to pay a discount to NPV but it will be a discount to 2024 NPV not 2014 NPV.'.
Now that some numbers at least are in the public domain, let's see what happens!
ATB
Country risk is an important valuation issue, but in the modern world it works both ways. In theory African projects should be discounted for political risk vs Australia/Canada. But China for example wants to strategically disassociate itself from dependence on US allies for essential commodities, so in reality where can they turn for major projects but Africa? China therefore clearly accepts African risk, as it appears do the key ME investors from both public statements & financial commitments. I see even the Japanese trading houses are re-assessing their unwillingness to invest in African projects. Where are the other sizeable high grade iron ore projects that are in at such an advanced development stage they can move rapidly towards production - beggars/choosers.
We have waited a gruelling 10 months for these figures, and at an 80% overall increase in NPV they are way past my wildest hopes of around a 50% increase. They clearly mean nothing to today's market, but Clifford Elphick has made everyone wait for them for a purpose - they are the basis on which he will conclude a strategic investor agreement. Of course any investor is likely to pay a discount to NPV but it will be a discount to 2024 NPV not 2014 NPV.
.."A thought experiment for you extrader...be honest..has your personal notional target for the value for Zioc doubled on today's news ?.."
No, as I said, "I believe folk like us will be squeezed out pretty soon and -all things considered - I think my 200p per share entry in the 'charity sweep' is well under-pinned.." ie unch but more confident.
I think the country risk discount has got worse on various measures - succession; corruption; mis-management; popular dissatisfaction - and (paradoxically, BECAUSE the cake has got bigger) there's greater prospect of 'foul play'. I can't guess what form that might take, but the bigger the prize, the more incentive to figure out how to snaffle it....again, I'd refer you to the shenanigans over Simandou.
Maybe I'm just the tenth man.
https://insightbeforeaction.com/the-tenth-man-rule-principle-explain…
ATB
Hi atg,
.."Ps..if Zanaga was magically in Oz, you would use a different less punitive discount rate . It is implicit..."
You'd think so, wouldn't you?
However, per the April 2011 presentation (p17), ZIOC does its NPV calculation is @10%, see
" If cash offer is rejected by ZIOC pricing defers to independent valuation terms below :
- Feasibility Study technical assumptions
- 10% real discount rate
- CRU/AME forecast prices "
On the face of it, these NPV calculations don't factor in country risk premium (or discount).
AFAICS
Hence my 'thought experiment'.....
HTH
I suspect a large amount of those FEED costs are attributed to the infrastructure access. There's not much else that would cost anything that's listed. We've got the planning, approvals, licenses etc. Realistically, our strategic would need to come in at this point. Any 'deal' would likely include these costs during the FEED stage. That's part of the ramp up to construction.
In all honesty today’s updated costings doesn’t materially change anything from a share price perspective.
They were largely front run, and expected.
I can only hope(assume) they were a component that was wanted/required by potential suitors.
The question we need to know the answer too/asking is “ what is also needed prior to a deal being done?
Will the FEED need to be carried out by us(and thus paid for through issuing equity/loan), or can a partner/investor be brought in at this stage?
Will it end with us carrying out the FEED work, or will we need to proceed to development before it is de-risked enough for any potential suitor?
We hopefully will be getting answers to these questions soon(now the re-costings have been completed).
It is in my opinion that answers to these questions is what the market want, and will continue to call our bluff until they are received.
Gla.
Ps..if Zanaga was magically in Oz, you would use a different less punitive discount rate . It is implicit.
A thought experiment for you extrader...be honest..has your personal notional target for the value for Zioc doubled on today's news ?
I suspect it has not, thus you are discounting (lol) the NPV in your own head. Maybe you still subconsciously think, as many here do, this cannot possibly be worth that much. To good to be true etc..Our mental biases and illusions are immense.
Hi Jiving,
Thanks for quoting 'chapter and verse', setting out our 'theoretical entitlement', which I hope is realised.
NPV is indeed an indicative financial tool, but its use is as a starting point for capital allocation decisions .
As a thought experiment, would Zanaga have the same real world value if it were magically re-located to Australia ?
I suggest not, for obvious reasons.
And for a comparison, rather than a counter-factual, just look at Simandou : AIUI, Rio Tinto has already sunk more than $ 1 Bn in Simandou, no doubt on the basis of an attractive NPV, an exercise crucially dependent on timely project execution.
MM's 'magic of compounding' argument cuts both ways if there's any material delay. Again, the Simandou experience is instructive :
https://www.euronews.com/business/2024/01/09/why-rio-tintos-guinea-iron-ore-project-is-starting-after-27-years
I think - for the above 'real world' reasons - that investors shouldn't set too much store by NPV.
Perhaps I'm being too Eeyore-ish though : I'll be delighted to be proved wrong and see my expectations exceeded!
ATB
Market makers imo letting mates buy at mates rates
Following todays NPV value to barely move from around 8p is somewhat pathetic
Time for an ultra cheap Major top up .
One day we will wake up to red dot saying suspension following bid or sold
Imo “ one day Rodney we will be millionaires”
Yes. and marty said strategic investor while elphick said partners. i like investors more....
That’s my thinking also nibj. They must be closer to deciding on strategic partners.
There must be a plan in place in my view, or the third tranche would have been released by now
So how do we go from 8p to £xx?
We definitely won’t be able to fund development from a £50m market cap.
We surely have to sell, only problem with that is Glencore, and that they hold 100% of the offtake rights.
Complicated situation we find ourselves in.
Either Glencore take the project on themselves, or give up the offtake.
Short term we need to find £22m to fund the next stage(FEED), even that would be hard to do in these markets, again considering our current market cap(the market is pretty brutal right now)!
Perhaps Glencore loan the £22m, as it further increases the project value, and further entices potential buyers.
Seems all roads again lead to Glencore!…Please release us from your shackles.
Our news, sp rise and sell off cycle is becoming ever smaller and constricted and the small gains cashed in are getting ever smaller. This pattern is self limiting and should break soon..coiled spring, imo.
Hi Ex
The NPV statement in the April 2011 presentation was post-IPO, so it was a specifically forward looking statement referring to either a buyout or a buy-in - both of which were clearly intended to be based on the increased NPV that would flow from Xstrata's drilling programme. That increased our measured, indicated & inferred resources on that portion of our mining licence that it was focussed upon, with some 40% remaining essentially unexplored. The famous NPV clause in the JV agreement with Xstrata also clearly made the calculated project NPV the actual share purchase price between Xsatrata & ZIOC, should Xstrata wish to move towards full ownership. Again the critical valuation for a takeover recognised by both parties as being the prevailing NPV at a particular stage in the projects evolution.
Right across the mining industry pre-development projects attract in strategic investors based around the project NPV, that was certainly the case with the various blocks that have changed hands in the Simandou project over time, indeed IFC even built in a put option to sell back its stake on that basis.
The only way I can realistically see us PIs being 'squeezed out' is if there was a bid to go private arranged by Glencore/Xstrata, but frankly it looks like we are too late in the game for that. Aside from Glencore owning 100% of the offtake (likely swapped for a small royalty in a takeover), all shares rank pari passu & we will get the same takeover price per share as Glencore/Elphick & if there is a buy-in we will suffer the same dilutive effect per share & the same post-transaction market price as they will.
So all our discussions with strategic partners - both minority buy-in variety & full buyout - will be based on the new 2024 FS based NPV figures. Two qualifications - first, as per 99's post below, project NPV vs shareholder attributable NPV (I suspect the figures are project NPV). Second, potential strategic investors will of course seek a discount to NPV; the extent of that discount is IMO entirely dependent on the degree of competition between bidders.
As announced by Zanaga on the previous RNS, we are in the preparation stage. Although some of our initiatives i.e. engaging strategics, likely goes into the 2nd part of the FEED stage as links in with finance.
I assume a lot of the $22m would go into 'infrastructure access'. Basically getting the area set up to build-out the mine.
Big question remains, who is going to invest that $22m..
Front End Engineering (FEED) Stage 1 - $22m
Preparation for Front End Engineering (FEED)- 6 months
FEED (including finalisation of necessary licences & approvals, infrastructure access & user agreements, and financing) - 12 months
Construction Phase - 3 years
Hi extrader, just one comment to your comment "The increase in NPV is very welcome"
Imo, is absolutely fundamental and crucial, the pie size determines the return we get, even it is a portion of the possible value. Also, if this does still turn into a full buyout, then our potential percentage return increases hugely due to the NPV increase. We can be far too blasé as to what a monster investment this actually is..
Typo. one fourth of NPV
Ex, I agree with you, we will not get anything near the NPV. But the positive is that we are in same boat as Elphick and Glen, so should in theory get same opportunity to either pitch in cash for the project or sellout. In my personal view, I dont see 300P out of range here, with one third or NPV at 30MT. But would be fine for me
Agree completely 99 - all the key variables from the calculations are missing. It could be this is intended as the appetiser, if an interested party wants details they need to contact ZIOC management.
Regarding project NPV vs shareholder attributable NPV, the final Mining Convention gave ROC a 10% non-dilutive shareholding and a 3% royalty. In the event of a full buyout, my hunch is Glencore will swap their 100% offtake for a small royalty (they have done this before) so say around 2%. How do royalties deduct from NPV - no idea - so I roughly work on around 85% of project NPV being attributable to shareholders.