Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
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CaneToad
The valuation will eventually have to reflect Saltend, Europe's first rare earth separation facility in a decade, designed to provide 5% global NdPr oxide demand, with space allocated to expand further downstream to produce magnet metals. Comparing Pensana to pure mining companies only tells part of the story.
The company's focus is to be Europe's equivalent to Lynas and MP, both currently valued in $bn's. That's what got this to £2 in March only to come crashing down as reality dawned that there were still a few hurdles to jump. The fall has been made worse by a mishandled delisting from ASX and a short attack from New York.
During this fall though the company has in fact made very good progress. Planning has been secured, groundwork commenced, long lead items ordered and the Bond issuer selected. Behind the scenes the board has been strengthened, FEED progressed, ATF progressed and offtake partners shortlisted.
At some stage this will bottom out and a valuation based upon fundamentals vs risk of failure/success becomes the measure. After weighing those up it then comes down to each investor to decide for themselves. One thing is for sure though - a simple mining company valuation model will never accurately reflect what this project is worth.
You are correct, absolutely nothing has gone wrong since they raised all that money at 120p. Even the director put funds in, no one is happy from that raise and want to see the price higher, just have to wait on the funding as PA is under serious pressure now
Metalhead
The first two financial outcomes will be in 4 to 6 weeks time. These include early research on the equity raise and likely bond interest rates and the result of HMG due diligence on an ATF grant or government guarantee loan. The ATF element has a likely value of $25M. The remainder of the financing being sought is for $400M. The 5 year bond at $250M is hoped to be finalised in December. The AWF is to take part in the equity raise so they may want to avoid being diluted. A number of major shareholders will seek the same outcome and additional institutions are likely to take part. Hope that helps. tony
@Metalhead: "Canetoad - I can’t see that the raise described would halve the share price. It would nearly double the shares in issue but the cash paid would also nearly double the company’s valuation, so should be SP neutral unless done at a big discount?"
My mistake, I misread the $ for a £. Clearly it's also going to depend on what price they do the raise.
We'll have to see what the market thinks re: dilution of the share price.
Ordinarily, if a company worth £100 has 100 shares (share price = £1) and did a share placement for £100 to buy an identical business, the new business would be worth £200 and have 200 shares, hence the share price wouldn't change. In the case of Pensana, it's a bit different. They'd be raising cash for capex, which doesn't have the same value as an operating business. i.e. if the company had to immediately liquidate that equipment, it might be worth half the price they paid. For that reason, I'd expect a raise like this to be dilutive. There are too many unknowns here to make any reliable estimate of the dilution, if any.
As I mentioned a few months ago, there was a lot of FOMO in the 200p price rise. As I mentioned (to much abuse), the market cap at that time did not make sense when compared to companies such as Rainbow and Bluejay.
@Joe: OK, thanks. I've been hanging back and keeping my position small, to scale-up after genuine news, rather than FOMO.
Thanks Astro. There certainly does seem to be a strong push downwards at the moment and I’m not planning to buy straightaway. I can also see that the 200p share price earlier in the year probably had quite a bit of froth in it. However, the fact that the company got a placing away at nearly twice this price only a few months ago (and, as far as I can see, nothing has gone significantly wrong in the meantime) makes this look an interesting opportunity to me. Question of timing, as so often!
astro999, completely agree that there have been some mistakes made in the communication from Pensana. I also think that they have been incredibly busy but don't feel the need to RNS every detail. Looking forward they seem to have changed comms strategy with a series of webinars, the first of which was a couple weeks ago - https://www.youtube.com/watch?v=8aWTFhtFeCI
Metalhead25, you're welcome.
CaneToad, the equity portion is an uncertain amount because it's the final part of the jigsaw, that's why I used such a wide range, looking again I expect it to be at the upper end, so $150 usd (£110m). It's always been the plan to fund with a mixture of debt and equity. No hiding the fact that there will be a big raise here but it will be worth it to complete funding, bring institutions on to the register and derisk the project - putting us on track for $500m usd annual revenue. My expectation is that when the project is 80% funded (Bonds, ATF, loans) and other news has been released the share price will be much higher than current making dilution less painful. Whilst the aim is to get funding completed in 2021 I'm of the strong opinion that they will hold off the raise if the share price isn't at an approriate level. Chairman has a lot of skin in the game and has always stated that he will aim to avoid weakening the share price with poor value dilution.
@metalhead25 if you are interested in this company just put in a small amount first. The fundamental of this company sounds great. But due to lack of communication on funding from the management has caused the SP to drop a lot since summer
I added too much in when SP was over 150,so that was my bad judgment and taken up the hype during that time.
Until something come soon SP will drip lower..... so invest in a small amount first... this high speculative stock
Joe, I meant also to say thanks for your nice helpful response. When considering whether to invest in a company it is encouraging to be able to go on the message board and get polite and constructive answers from people :-)
well guys we manage to make it below 70s...
Hi Joe, Canetoad
Joe - are you sure about your statement that the equity raise will only happen if the share price recovers? What’s plan B if the share price doesn’t recover??
Canetoad - I can’t see that the raise described would halve the share price. It would nearly double the shares in issue but the cash paid would also nearly double the company’s valuation, so should be SP neutral unless done at a big discount?
@Joe666: "The remainder, approx $100 - $150 usd is expeted to come from an institutional equity raise. "
Are you able to direct me to anything (RNS/website material/news article) where it talks about the size of the raise? At the current valuation, that capital raise would obviously halve the share price. I expect that it made more sense when the share price was at 200p.
Hi Metalhead,
Pensana have secured a 5 year, $250m usd bond issue (subject to FEED) with ABG Sundal Collier - the plan is for these bonds to be issued Q4 2021, (FEED due by end October).
Certain large and specialist items (kilns, crushers and the like) can be financed separately via a 3rd party acting between Pensana and the manufacturer, a very common arrangement for European manufacturers.
ATF will contribute (subject to government sign-off) expected $15-$20m usd.
The remainder, approx $100 - $150 usd is expeted to come from an institutional equity raise. This was planned to be completed by end of 2021 but it will only happen if the share price has recovered.
I hope that covers your question, and as always, DYOR ; )
Hi all
I’m not currently a shareholder but am interested in buying in when the share price stabilises. I have been trying to work out how the company plans to fund the development of Longonjo? The 31 August RNS is full of possibilities for financing Saltend but does anyone know what the plan is for the Angolan end of the operation?