Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
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IMHO - these valuations mean little unless you agree with how they adjust for risk.
In July 2022 SP Angel came up with a "Risked Valuation" of 5p because they assumed that Kore might need to double their shares to get the funding.
In May 2021 Align had an 11p "Risked Valuation" because they assumed funding was provided without significant dilution.
Then we have the "Risked Valuation" basically you value the project then you say (for example) this has a 50% chance of occurring, so our Risked Valuation is 50% of the Projects Unrisked Valuation. In the case of the Align valuation it means it becomes 22p if it happens (and 10p for SP Angel if it happens after the issue of many more shares).
Lastly we have the NPV discount rate which is another way of adjusting for risk. Kore used NPV(12) in May 2021. NPV(10) would be 40% higher (15.5p Risked / 31p Unrisked).
Contrast the following. Emmerson (EML) use NPV(8) in their Potash project in Morocco. Horizonte (HZM) also used NPV(8) for their Nickel project in Brazil.
So even NPV(10) is conservative when you consider that Kore will have the parent guarantees in place c.f. HZM where costs have been revised dramatically up on two occasions.
The below extract is from a June 2020 Research Note on KORE, by ALIGN; obviously things are different now but the extract I copy assumed that DX would be financed first, making then things easier for KOLA (you can find it on KORE's website, under Research Notes).
"It has to be pointed out that once the finance has been successfully raised for getting DX into production, then our valuation for the company is likely to change substantially. With DX going into production we would substantially reduce our risking of the project from 65% to just 10%. DX is seen to unlock the whole district play and make the financing of Kola then possible, allowing us to consequently reduce our risking of this project from 85% to 55% which more befits a project at the DFS stage which is development ready. Using the attributable NPV(12) figures employed earlier, the valuation for the company on this basis would be US$500.33 million. We estimate that at that stage there is likely to be 4,686,361,624 shares in issue on a fully diluted basis post raising the equity portion of the funding for the pre-production capital expenditure at DX and which would equate to 8.41p per share."
So, 4 years ago they almost got the Shares' number correct; for me, more important is the valuation at USD500mln or GBP400mln (appx) WHEN KOLA is up and running; even at a 50% risk discounting, that would still give a £200 mln valuation (roughly equal to all the money spent so far on developing Kola). Maybe this is wishful thinking, but I think everyone understands the potential, IF things proceed smoothly.
All IMO, we will know in a few more weeks if optimism is justified.
LT.... If your right x10 soon...
Tnx for the correction, even better! at £0.11 it means the mkt cap was almost £100mln i.e. 5x today's. Book value is even higher, about 8-9x. April-May will be interesting months, if things fall into place.
Kore listed at A$ 0.20 per share (= £ 0.11 at the time).
6 Years exactly !
Plus, since 2018, another $20mln (appx) has been added onto capitalised exploration expenses - so, further Value added.
Just to liven the BB up, back in March 2018, when the Co was floated (5 years exactly!), the SP was 10p and no of shares 860mln appx; therefore the Mkt Cap was 86 million. The EPC was supposedly 1 year away (or so). Today, 5 years later, with EPC almost done, + extra Optimisation Study done, +further engineering design works by POWERCHINA, why is the Mkt cap just 20mln?
The EPC is 6 weeks away, should we expect an SP uplift when announced? And if yes, to how much? Would going back to 86mln be unreasonable to expect i.e. 4-5x uplift?
All comments welcome! GLA
But no Heavy Buying either :) -- for now!
Thanks for that LT - not "Heavy Selling" then !
Both my BUYS this morning, one appearing as a SELL!
Anyway, not much movement expected until April unless DX project starts moving too?
There is no heavy selling or buying. Little happening at all. The dealers screen prices are guaranteed for 75,000 shares (£450 worth) so mean very little. A real (or dummy) trade will reveal the real prices to be between 0.55p and 0.60p.
They did say "end of April", which may explain the hiatus; but hopefully, we will have news about the EPC before then, maybe even regarding DX?
Yes, I did wonder about that too, 99. Despite 8million plus sales, the share price hasn't budged.
Very weird. Hopefuily we aren't too far away from news that will clarify matters.
The price bid / ask prices are misleading. They have been trading 0.55p to 0.60p for a while - I bought some yesterday just below 0.60p - but was shown as a sell
Over 8 million shares sold in the last seek in batches of 200k to 500k.
Some heavy selling the last two days, which is not good news bearing in mind KPs's past reputation for leaks in the Brad era.
As per this RNS, on 31 Oct, https://www.lse.co.uk/rns/KP2/management-change-b2r4jrq5s65x9ai.html
"The process to reach agreement on Engineering, Procurement and Construction contract terms, and to receive a financing proposal for the full construction cost of the Kola Potash Project, is now near completion and is expected to be finalised during the first quarter of 2024 with construction contractors scheduled to be mobilised during the first half of 2024", we are only (thus far!) 1-2 months behind schedule (Re Q1), but this delay can be shortened IMO as we approach June 2024. In any case, if things go well, we have EPC signing in April and financing in May.
There are two things outstanding, raising the Finance and signing the EPC. As previously outlined (18 Jan RNS) the signing of the EPC comes first (was end Feb) and then the Finance (within six weeks of "Finalisation" of the EPC).
Obviously, the EPC is redundant if the Finance is not raised, so they may wish to sort the Finance first. Alternatively they may make the Finance a "Condition Precedent" of the EPC (i.e. regardless of when signed, it only comes into effect when Kore prove they have the Finance).
IMHO - this does not signal weeks of negotiation.
Mitch,
It's also important to remember that the project was scaled up - at the outset 5 years ago - because the 2 cornerstone investors (Oman Inv. Auth. & the Chileans) were interested in annual offtake quantities of MoP 1mln tons i.e. almost half of annual capacity; this also makes financing less risky for the banks etc. IMO
We need to remember we are dealing with the Chinese here - and they never move quickly, or even in accord with previously suggested timetables.
As LTb says, it will be another 2-3 months before things become clearer. The key is not just the EPC - its the financing proposal. And I really do not think the Chinese would have taken things this far if they weren't 100% sure they could proveide the financing.
It will be the terms though that will be key for shareholders like ourselves.
And for anyone thinking the CEO leaving was someone deserting a sinking ship. You are wrong. He departed because he was holding back the entire project.
2-3 months of more negotiations, before signing; at least the RNS did not mention any issues with the Proposal, nor the final cost.
More time to average down?
Hopefully that will happen after April ?
Is today’s RNS enough to draw the crowd over and get the SP moving up ( even a little bit ) ??
RNS before the end of the week - LTBeliever was right! I think there is light and potash at the end of the construction tunnel