Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
London South East prides itself on its community spirit, and in order to keep the chat section problem free, we ask all members to follow these simple rules. In these rules, we refer to ourselves as "we", "us", "our". The user of the website is referred to as "you" and "your".
By posting on our share chat boards you are agreeing to the following:
The IP address of all posts is recorded to aid in enforcing these conditions. As a user you agree to any information you have entered being stored in a database. You agree that we have the right to remove, edit, move or close any topic or board at any time should we see fit. You agree that we have the right to remove any post without notice. You agree that we have the right to suspend your account without notice.
Please note some users may not behave properly and may post content that is misleading, untrue or offensive.
It is not possible for us to fully monitor all content all of the time but where we have actually received notice of any content that is potentially misleading, untrue, offensive, unlawful, infringes third party rights or is potentially in breach of these terms and conditions, then we will review such content, decide whether to remove it from this website and act accordingly.
Premium Members are members that have a premium subscription with London South East. You can subscribe here.
London South East does not endorse such members, and posts should not be construed as advice and represent the opinions of the authors, not those of London South East Ltd, or its affiliates.
Great find PP & Nickle at US$19644.64 we could see a rise & maybe a big bid by Glencore for HZM ….. Who knows but bodes well for us !
Interesting article on where Glencore are up to with Nickel production. I wonder where they could find some more?
https://www.proactiveinvestors.co.uk/companies/news/1031355/glencore-cuts-full-year-nickel-output-forecast-as-last-year-s-strikes-still-weigh-1031355.html
(With thanks to Troajan on the Glencore message board)
Are you planning to drop in at the site to see what's actually going on?
I don't want to cast a dampener on things but the forecast for Araguaia is rain every day for the next 14 days. Which wouldn't duly concern me but I'm off to Brazil a week on Monday!
Agree, and looks like they are reading these boards too!
Apologies for jinxing the mini rally 🙏
If you were going to buy here, you would sit on the bid price or lower to stop market makers moving up the price & making you buy higher. Especially in an environment lacking buying momentum. Think about it.
They will all be buys. There is more than one market maker offering and bidding more than one price, the spread indicated on here is very rarely the actual buy and sell price.
More interesting is the price starting to edge up a little
Very strange that all trades are showing as "sells" even though I brought 12000 at the "sell" rate indicated - any ideas?
Some reports indicate a drought in the area expected to last to December so perhaps rain won't stop work which may help matters.
Https://horizonteminerals.com/uk/en/press-releases/2023/construction-update-for-the-araguaia-nickel-project-3/
If you have a look at the Press release with Picture you will see
"Management discusses the Araguaia Water Storage Reservoir with Senior Lenders and the independent technical engineers."
La Mancha have a seat on the HZM Board and are completely understand the changes in funding and Capex.
The best possible outcome for All Shareholders is that is largely debt and some Equity at a high price so the share price shoot back up to 90p
With respect to A, however there are a few things to consider:
- at this point Orion and La Mancha lose $200-250m they have already put in. So IMHO only, they don't sell for less than this unless it is them doing the buying (which has been highlighted as a risk). They don't own 100% of the shares so there is a base value somewhere where the company doesn't get sold below because existing shareholders will not vote it through (unless of course there is no alternative because their shareholding goes to 0 otherwise).
- in terms of who could bid, lots of suggestions majors would be interested, for example Vale, or Glencore. The best case if it gets sold is of course a bidding war.
I still think a funding solution involving the existing stakeholders is the most likely outcome and between the 3 of them (La Mancha, Orion, Glencore) they hold enough shares that a third party can't force a sale at a price which doesn't suit them (they own >50% of equity here).
Mv01 you don't sound like a rookie. Your questions make sense ;)
I have no expertise in question A. I assume shareholders get all of it distributed equally among all shareholdings and from pickedpeck's calculation it would be a lot more than $100m even in a distressed sale....and hence a lot more than 16p.
It really depends what price you got your 200k for. I got my 600k for >£1/sh (on average, probably, as been adding in the last year or two a lot) so a 50p sale price is not that great for me....
Wasarunner thank you!
Now I see the light on B. I guess being a total rookie i had to grasp it explicitly. If all debt options fail, than maybe issue more shares to raise the monies that way, then that's how the 30% 50% quotient to the max-old-monies prospect comes in. I think I now get it.
What about question A. Anyone wanting to venture an answer?
The hypothetical and undesired scenario is set to this:
No deal is made to bridge the gap. and we default.
Some buyer comes in, offers 100mil(is that even possible a price?) to buy assets and assume all liabilities and we get delisted.
question2: how much of that 100mil would end up as a special dividend?
Thanks!
In terms of why the shareholder value destruction - you are right, if $200m could be found simply via debt, in the grand scheme of things over LOM and the revenues expected, it's not a biggie. We wouldn't be talking 50% or 33% of prior valuation.
The problem is, nobody wants to lend debt right now without equity. Even the second round finance here of $80m debt would have been much more desirable than a 40% dilution, which is nevertheless what we got. So the reason we're valued at 16p right now is the market is betting/pricing massive dilution (or equity wipeout) because if it could be financed by debt the shareprice wouldn't be 16p right now. If the deficit whatever it is can be funded via other means, likely bounce to a much higher level of course.
>>Then you have 80% of NPV at GBP valuation of $1.3bn
Sorry that should read £1.3bn mcap (GBP). Damn $ key is next to £ key on my keyboard.
Hi mv01 pickedpeck did a nice summary of what a (distressed) sale value might look like he might repost it or scroll back a day or two. I'm hoping that's worst case scenario in that - distressed sale sp is still < worst possible outcome dilution here.
My projections for £4.50 were for c. 2025/2026 where:
330m shares were in issue
Agaguaia 1 and Araguaia 2 were producing nameplate $29k/t with NPV north of $2bn.
Then you have 80% of NPV at GBP valuation of $1.3bn which is around £4/sh, then obviously this is sensitive to nickel price, % of NPV valuation, and also Vermelho was the second project with upside.
SImply put, I'm hoping now worst case we end up with 1bn shares, better would be 660m shares fully diluted. This would give me £4.50/2 or £4.50/3 at the equivalent stage, and the equivalent stage has gone back 6 months or so so maybe late 2026 - one concern I do have is that whatever financing solution lands makes Araguaia 2 much longer to realise (and indeed, its own capex may have increased) in which case the £4.50 point in old money may take a lot longer to reach.
I had around £3/sh down for Araguaia 1 at full production so by the same metrics £3/2 at nameplate production or £3/3 post finance deal still gets you £1-1.50/sh but that only gets us back to where we were pre disaster RNS and the timescale on that would be by mid 2025 at nameplate production.
If it's worse than those numbers then its bad for me as my average now is probably north of £1, but obviously can still be a very good outcome for people buying 16p/20p etc.
Folks I have a huge punt in this, and I openly declare that I am a foolish ignorant when it come to investing period. But I am being honest in my declaration that my holding is north of 200k shares.
I want to ask a few questions, if addressed in the way posted, might help me understand a thing or too on this.
A.
First and foremost, given that already more than 400$m been spent on site; and if for argument's sake we were to assume that there won't be a a deficit agreement, then what is the worst worst worst possible situation here? I mean if someone were to come in and buy this, what would be fair price? Assume that that is again for arguments sake 100$m where buyer assumes all debt, assets, liability: here's 100mil give me EVERYTHING.
then how much of that 100mil actually pays a special dividend on share? [Amur minerals mechanism say?].
B.
This dilution arguments. Folks earlier mentioned that they even had projections [prior to the devestating RNS] in 6-7y for for the share to have risen to 3-4.50GBP. I am just curious as to the mechanism that now slashes that to 30%-50% of that projection on assumption that some finance deal will be found now, and the mine will say operate for 20-25y as projected. I guess what I am completely honestly and naively scratching my head about here is this:
Sure we are in some trouble now, and maybe will need some form of loan ingestion to say the tune of 100-200-250mil tke your pick. But let's further assume we gotten it, we are able to build a fully producing mine.
how is that 250mil comparing with the billions of the ore to be mined over a course of 25y. That is the persepctive that I am after: why would a hiccup now of 250m put on top of say 2-3billion that the mine stands to make actually has such a terrible impact [of 50%] on the full potential of the stock price?
i just don't get the ratios of how 250mil / 2-3Bil =====> -50% on max stock potential.
I want to understand this things...
Good Luck All.
The appointment of Fernando Marino as Ops Directors would seem a good start in getting it to nameplate as quickly as possible, he did it at various mines including Onca Puma. where they reached record production under his guidance
He was appointment in August I wonder if he's had had a hand in all the extra costs?
https://www.lse.co.uk/rns/HZM/operations-director-appointed-for-araguaia-project-6ibvncc8siak6zf.html
"The 'gap' (pun intended) in the article is that from commencement of production to nameplate production was expected to take up to a year."
Shouldn't take a year. Onca puma took 3 months.
....and I maintain, still: if the amount needed to raise was < $100m this could have been done in a very short period of time using a mechanism similar to last time (which raised $80m). So it is likely to be bigger than this number. That said, upside from 16p, definitely.
I agree with the article that 16p is cheap
I agree with the article that Horizonte will (likely) find finance (as the key stakeholders haven't sold and the banks haven't walked away)
The 'gap' (pun intended) in the article is that from commencement of production to nameplate production was expected to take up to a year. During this time, unless you know the precise trajectory of production, you have to finance your ongoing opex. Horizonte _had_ to have raised this money as you can not assume that during this period opex can be met by production/sales. So if the cost overrun is due to additional cost (and we don't know the split between additional cost, and the schedule delay, of the 35%) I find it safer to assume that you need the additional capex cost of 35% but you need to retain the original amount of funding raised for the ramp up intact.
A lot of people are ignoring the period between 1st metal and nameplate production. There is a metric shedload of cost during that period which has to be financed. The period is scheduled to take up to a year.
This article was shared on the twitter group, I found it really interesting.
I know many have added the maths regarding the funding gap and estimates varied wildly and but until reading this I hadn’t but two and two together regarding where those differences came from, I guess I’m not the only one
THE TAKEAWAY IS THAT HORIZONTE HAD MORE THAN ENOUGH MONEY TO BUILD A1 SO THEY DON’T HAVE TO FIND ALL THE INCREASE!
An original capex of 537 million increased by the provisional 35% cost rise is 725 million
429 million has been spent already, HZM still has already agreed loans in place 131 million yet to be drawn and 93 million in cash allocated to the project for a total of 653 million.
This means that while the increase is around 187 million the gap is somewhere around 72 million.
Horizonte has an additional 13 million for the daily running costs and 16 million to fund continue developing Vermelho, we are hardly at the looking down the back of the sofa stage and the lights will be staying on for a while yet.
Apologies to those who already know this, it wasn’t until I read the article that it really clicked for me and the 180 million banded around was scaring me a little.
https://investingstrategy.co.uk/mining/horizonte-minerals-trick-or-treat/
So - we have Theorist 30p-50p in a few years....nothing guaranteed..... and billyr 30p-50p in the next few minutes take your bets ladies and gents etc.etc. the horses have left the gates and HZM is frontrunner.
My view is something inbetween. The first news and next news isn't going to be good, it's going to be a shedload of dosh needed with perhaps hints at options to finance it, perhaps not at that stage. So I definitely don't expect 'good news imminently'.
Then we need the management team to earn their bread and having had 4-6-8 weeks from when they were already no doubt talking to the senior stakeholders as the bombshell landed, deliver us something that (fingers crossed) keeps us with existing shareholdings in the game.
I expect the latter announcements relatively shortly after the funding needed, maybe 2-3 weeks. And probably all to happen in November. It is simply unsustainable for the company to continue building the mine longer term with a large funding shortfall which isn't understood, documented, and resolved - anything else and you can't have 1000s of contractors on site working with no clarity of when or if that suddenly stops. So for my money this all gets wrapped up in November or failing that first couple of weeks in December. It's exciting, but sadly for all the wrong reasons.....unless you're a new punter at the races and like billy's odds he's offering.
Billy.... ever the optomist.... But we all hope you are right...
It’s coming……