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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.
Hi Jiving,
"ZIOC has complete flexibility in funding obligations
• Takeout at NPV; or
• Dilution at NPV during construction "
That statement was used to support/justify the price of £ 1.56 at IPO stage, in the context of the then NPV. There's a lot of 'hope value' built in.
And I can't see PI's getting a free carry and / or monetising anywhere near the revised NPV.
A project creates value for its owners only when its cost is less than NPV, that's the whole point of the exercise, which is undertaken to determine the most efficient allocation of capital.
The increase in NPV is very welcome, but ZIOC shareholders at our level should not expect anything like the implied per share 'value' numbers being calculated.
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.
GLA and ATB
I hope at some point we get more detail on this, but it is currently very low on specifics. For example what discount date is used for the NPV. Is it the project NPV or the NPV attributable to shareholders (Congo have a 10% free carry). What have they assumed on the Iron Ore price and margin for Pellet grade etc. etc.
Good news on the costs, but we need more detail.
As a recent investor in HZM I can easily see why institutional investors are reluctant to take the risk.
So npv figures have no effect on shareprice whatsoever!
Like other AIM companies you can publish out of this World NPV figure but without a committed investor they mean nothing.
The big questions are
1-Why ain’t Glencore interested in taking on the project themselves -buy the other half out for circa a billion and they have a multi billion NPV project,They are supposed to create longterm profit streams and capital returns for their shareholders.
2-Are the directors going to sit on this for another 10 years or actually create shareholder value year -better to accept a £1 billion offer than get nothing and see the company die
Or as our broken market sees it, every $7bn is worth 8 pence a share. Roughly £50m mcap 🤣🤣🤣🤣🤣🤣
Total joke!
Just a quick take on how to translate NPV into share price.
Every $1b of NPV = £1.23 per share
(At £/$ 1.25; 652m shares & unexpired options)
FEED work is expensive (last presentation $25m as I recall). So strategic investor has to commit soon otherwise Zioc will run out of cash... something will have to give.
The NPV now is mind blowing and supports the valuations that some of us have outlined here ( take note beardozer, this is worth multi billions!!! 🙂😁 So excited!!
I like the " During recent engagements with RoC Ministries, communities and potential strategic investors, the burden of being the first mover in the region of high grade, low impurity iron concentrates for green steel production, is strongly supported and makes for an exciting future for Zanaga"
Seems to me they could potentially be very far in the plans and nice to see the strong support from RoC officials/ministries.
lets see