Rainbow Rare Earths Phalaborwa project shaping up to be one of the lowest cost producers globally. 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.
Good morning, everyone.
I suspect there're five obvious impacts for Savannah here:
1. Our NGN cash pile is fast becoming monopoly money and we can expect another fx accounting hit in the financials.
2. The fabled debt restructuring will only occur once the Nigerian banks are fully confident that the devaluation process has reached an end. They'll be directed by Abuja on this.
3. We will receive significantly more NGN for our contracted TOP USD receivables going forward, but this may mostly be based on the existing (and now apparently highly sage) credit guarantees being triggered. This looks very good for Savannah.
4. Adding new customers will be tough and absolutely must be credit-enhanced.
5. Other Nigerian domestic acquisition opportunities may arise as existing operators decide to leave or find themselves in distress.
https://twitter.com/JavierBlas/status/1758025761611559345
By the way "The World For Sale" by Javier Blas and Jack Farchy is a corking read.
Caution - I must say I am surprised that we haven't had an update on Nigeria at the very least, guess we will have to all wait till Q1 2024 update in April.
CYB - thanks - agree your 5 + 1 points. Naira represents a Challenge & opportunities indeed!
TIL - thanks for all your interesting posts over last 14 days or so - pls keep sleuthing and sharing, it’s all much appreciated!
On your recent response to CYB: I agree and suspect we get a ‘kitchen sink’ update prior to the next deadline including an 2023 Operational Update, as well as guidance to your point on Q1 24. I’m guessing they’re waiting to send this pending developments…
I’d expect no news on the ICC Arbitration Award(s) within this kitchen sink update until publication of the Award(s) which on average for these cases, by my research & my personal guesstimate would be Mar-June 2025 - although this case of *direct* expropriation AND the new ICC rules allow for virtual meetings to take place could mean (a) the case is very straightforward so should be very simple and with limited contentions, and (b) is heard (by zoom) & therefore published sooner. Damages also should be straightforward to calculate. Successful enforcement and a special dividend of 1-2x Market Cap to follow (I hope) within 6 months thereafter. Chairman & CEO are aligned with shareholders on this special divi approach, I would think!
Back on the update: I suspect that the SS AD plus these updates are already drafted and ready to go - just awaiting close out of the SS workstreams.
I’m also rather hoping for a Gabon SPA RNS to follow(?) .
TIL your helpful posts on this lead me to believe there are solid reasons for all the potential protagonists (Carlyle, Gabon, Vitol & Savannah) to explore & potentially progress this deal.
Sequentially, Gabon following Op update and SS AD would seem the ‘right ‘ order, to avoid dual Suspension regulatory discussions(?), but with the onshore and offshore key protagonists on the Gabon deal being highly motivated, coupled with perhaps a less complex single deal (vs many for SS), it may be we hear on Gabon first.
Here’s hoping either way on this sunny Friday, with my rather ‘rose coloured’ sunglasses that we hear positive news end Feb/early March!
It would be awesome to have deep sources of $ cash from outside of Nigeria that could swiftly repay the Nigerian $ loan, so we can crack on with other Nigerian investments using Nigerian revenues to fund same. I know the company policy is to keep every country P&L separate but Domestic Nigerian $ loan is an albatross around SAVEs neck even with the structure of the GSAs. Places a lot of pressure on domestic buyers & save’s GSA contracts. Credit insurance is mitigant but pressure can make for uncomfortable outcomes in EM.
And of course the SS (and Gabon?) $ in due course could be used to develop Niger for an optimized / rich farm out.
DYOR & all the best all !
The currency devaluation is a major concern for me. I’m surprised no one seems to comment on it. We get paid in Naira yet repay loan in $? Everything else is in $… The whole Nigeria’s economy is a big concern.
Our gas contracts are paid at a rate fixed to dollars, so revenue isnt affected by the naira devaluation. Any oil and gas revenues received will also be in USD. The main negative effect is on the pile of cash Savannah hold locally at Nigerian banks denominated in Naira to pay local costs.
Thanks Scotpak - from what you say, does this mean that the further devaluation of the NGN should have no impact in SAVE’s endeavours to refinance the debt. To be honest, I do struggle to get my head around this part of the business.
And why does AK constantly mention the ‘true-up’ process, inferring that it’s a very good insurance process which works in our favour against any currency fx swings?
The reason the nigerian central bank is devaluating the currency is to bring it more in line with the street rate (i.e. to close the FX gap). They do this to ensure currency is at correct value. This will make foreign investor more willing to invest USD into the local economy. Often the IMF push countries to do this as a pre-condition to giving them more loans. Post these recent devaluations Nigeria's FX flows should improve, and it may actually help get save's deal refininanced (given FX gap is closed). In terms of devaluation being a good thing. This is definitely true and not just mgmt talk. As revenue are in contracts fixed in USD, this means when the local currency devalues, and local currency costs are paid, this will generate an FX profit. Currently local costs likely consist of wages, and costs of local contractor. The main problem SAVE has is that there biggest cost is the USD interest paid on their $300m bank facility. Once this is refinanced into Naira, SAVE will be in a much better position, given stonger Fx offset.
With every extension in my mind I always think if we don’t get anything with 2 weeks to go till the extension deadline that we are at the same place so for this extension in my mind I have put 15th March as the date if we haven’t made any progress or received news from the company than we are in the same place probably looking at a further extension.