The latest Investing Matters Podcast with Jean Roche, Co-Manager of Schroder UK Mid Cap Investment Trust has just been released. Listen here.
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The MSM and industry press has yet to join the dots from Green Steel to Zanaga, but when the spotlight does finally shine on Zanaga the resulting SP rise will be truly spectacular.
What will be the trigger? Just a snippet of news that connects any of the Strategics will do it - Baosteel, PIF/MM, whoever.
Marty name-checked 'green steel' in the RNS, and I'm now certain the company are going to major on that in upcoming PR. Then the media will join the dots...
'...This clash of big dirt and high finance suggests that Anglo harbours something worth fighting over. Its big mines indeed tick all the right boxes: high quality and low cost, with the potential to expand. They are also extracting the right stuff at the right time. One of Anglo’s main products is copper, which is in high demand, particularly as tonnes of it will be needed for the electrification of transport and power in the green-energy transition; the red metal’s price has risen by 15% this year. ANOTHER IS HIGH-GRADE IRON ORE, WHICH IS IN DEMAND FOR ITS USE IN FORGING GREEN STEEL...'
https://www.economist.com/business/2024/05/02/why-does-bhp-want-anglo-american
Delayed report of larger buy:
11:15:56 500,000 shares bought at 7.843p
Wipes out the selling account - LOL
They're just being polite...what the company are really saying is that it's time to put up the money:
'The Company believes these positive results provide much greater confidence in the Project's economic feasibility in today's market and cost environment, and with this, provides a key catalyst for potential strategic investors to consider funding of the next logical Project phase, being the front end engineering and design (FEED) program ..'
1. The FEED program has been defined as part of the CapEx for the staged development. Therefore if the FEED is underway the staged development is underway. For that the project has to be owned and hence invested in. No investment, no FEED.
p.31, ZIOC presentation Nov 2019; https://www.zanagairon.com/wp-content/uploads/2019/06/ZIOC-IP-28.03.19.pdf
2. The updated Net Present Value (NPV) has been calculated using a pretty harsh Discount Rate of 10% - (at the limit of typical 4-10% for all mining projects). That's the biggest discount Strategics are likely to get on any mining project anywhere. The Discount Rate is designed to specifically account for all the risks of a project, i.e. 'Congo'. The FEED stage of a mine development is tasked with mitigating some of these risks. A successful FEED program reduces risks, and hence the Discount Rate would be lowered, and hence the NPV rises. The Strategics would be expected to fund the FEED stage. If not then the NPV would be recalculated *AFTER* the FEED program when the Discount Rate would be lower and the NPV higher.
The company say as much in the RNS, '...the front end engineering and design (FEED) program to further define the Project's physical elements and risk abatement strategies.'
3. Thirdly, the Strategics are subject to NDAs, under which they received the full FS update not made available to us lot. If they want to continue to receive privilege information on which to base their investment decisions (info that we don't get to see) then they now need to start paying for it. After all the FEED is progressing the Staged Development via CapEx spend and risk reduction. If a Strategic doesn't want to do this then that's their choice, but then they are outside the tent and at a severe disadvantage.
Thus the company's '...to consider funding..of FEED' is just being polite in public.
Now the Strategics have to show their hands, and open their wallets.
Further to my comment .. 'AT has been communicative. I understand that all the Strategics have received the full FS report and recostings *but* under NDAs as you might well expect. Of course this makes them insiders and hence they cannot buy ZIOC shares - at least not yet...'
The quid pro quo of any potential Strategic Investor being an insider and hence, for example, receiving the full FS which has not been generally released is that they'll be expected to now fund the FEED works.
If they don't now start paying for the privileged info and works that furthers their intended investment, then they could find themselves outside the tent and hence at a major disadvantage. ZIOC do have cards to play.
It's all go in Brazzaville, and Motsepe will be needing a new mineral port for his phosphate project just 40km from Pointe Noire...
11:49 AM · May 1, 2024
Mining: the Hinda phosphate plant will be launched in May 2025
The exploitation of the deposit, which is located 40 kilometers from the Congolese coast, will allow the creation of nearly 1,000 jobs, including 500 direct jobs.
https://twitter.com/brazzanews/status/1785607397693686048
MINING: HINDA PHOSPHATE PLANT TO BE LAUNCHED IN MAY 2025
Thursday 25 April 2024 - 18:56
The investment in the phosphate mining project in Hinda, Kouilou, was at the centre of the meeting on 24 April in Brazzaville between President Denis Sassou N’Guesso and South African businessman Patrice Motsepe. The actual launch of the plant is scheduled for May next year, the South African billionaire announced.
Negotiations around the phosphate extraction plant and other fertilizers in Hinda have begun since August 2022 with meetings with the ARC management team. Located about 40 km from Pointe-Noire, the Hinda site is renowned for its high concentration of nitrogen and potassium, both of which are part of the composition of the phosphate.
https://www.adiac-congo.com/content/mines-lusine-de-phosphate-de-hinda-sera-lancee-en-mai-2025-156831
I am still intrigued by the daily trickle of persistent sells. All very odd, but I am of course heavily biased..may be some people just don't get it?
My general feeling is that the company have been working very hard on the nitty gritty of getting the Feasibility Study reworked. Also that there has been substantial behind the scenes marketing of Zanaga wrt to grade and future market demands. The company see Zanaga as being in the Top 5 global producers of high grade by 2030. That's direct.
I get the sense that we are now waiting on some externals, perhaps such as the ratification of the Congo-UAE FTA (CEPA) which would confirm investment conditions and hence AD Port going ahead with the mineral port.
If the company do go ahead with some kind of investor call this is where I would direct my questions.
It does also mean that we could be pleasantly surprised by events progressing outside of any company timeline. We shall see.
AT was on WhatsApp and fielding queries on next steps PR. Marty's preferred channel looks to be LinkedIn where he was chatting. On that score Zanaga Iron ore now have a LinkedIn profile.
MM did you talk to both of them or on email? your general feeling?
Worth trying to engage AT and even Marty. They were chatty yesterday.
Thanks MM, that would be superb 😀
I understand that ZIOC plan:
An updated Corporate Presentation,
Proactive interview, and
A possible investor call to include Marty.
Yesterday's RNS produced World leading figures for Zanaga:
CapEx - down
OpEx - down
> NPV - doubled $$
> IRR - financially compelling, and then add in geostrategic imperatives for numerous Strategic Partners.
Highlights
Positive results received from the 2024 FS cost update study further underlines the robust economics of the Company's 30 Mtpa staged development Zanaga Iron Ore Project:
· 12Mtpa Stage One
o Capital investment of US$ 1.94 billlion
o Operating cost of US$ 31.5 / dmt FOB
o Net Present Value of US$ 3.68 billion
o Internal Rate of Return of 26.2%
· 18Mtpa Stage Two optional expansion
o Capital investment of US$ 1.87 billion
o Operating cost of US$ 24.9 / dmt FOB
o Total combined Net Present Value of US$ 7.36 billion
o Internal Rate of Return of 28.2%
If the Minister has misremembered Mitsubishi for Mitsui , the latter has an equity stake in Binding Solutions Ltd, the pelletising specialist where Trahar Senior (ex AngloAmerican CEO and then Chair) is a shareholder and was a Director for a while...
I believe that ZIOC did some work with them about 6 years ago
https://www.lse.co.uk/rns/ZIOC/pellet-test-announcement-ivf3a91en5p15hw.html
https://bindingsolutions.uk/2022/03/03/binding-solutions-secures-equity-investment-from-leading-asian-
conglomerate-2/
BSL's 2 most recent news shows they're progressing their cold pelletization technology at pace.
These are the other shareholders
https://bindingsolutions.uk/about-us/#strategic-partners
The largest shareholding is an opaque offshore co, Concord Atlantic, probably represented by Director Julian Treger ex Anglo Pacific (as was, now Ecora)) : AP has a small stake, Tregere has 'significant influence or control'.
The Director Belleau comes from Champion Iron, where GLEN has a stake and Jyothish George (former Head of Glencore Iron Ore Marketing) is a Director.
'Maybe, baby..?'
Did anyone hear about mitsubishi investing in the past in zanaga? #3 in the link
https://www.linkedin.com/pulse/top-5-japanese-companies-investing-africa-fabio-scala-cav-osi-p5gxe/
Thanks for that, extrader. The conversations and different points of view have been useful for me today. Helps balance out my own inbuilt biases 🙂.
Hi atg,
Oops!
On going back, I see that @10:11 you said 'NPV is an indicative financial tool and by definition highly punitive in discounting the future value and return. .." , and it was MM who challenged an assumed dismissive tone that wasn't there.
I agreed that it was a starting point before looking at other things, I said for example (1) country risk premium/discount and (2) that it was by definition vulnerable to the impact of any delay (in our case project implementation).
OTOH, I recognise that I'm looking at ZIOC's project from the narrow financial perspective of a lender and that the Strategic Investor(s) will likely have very different agendas and priorities, which we as outsiders can only guess at.
The number of hats in the ring may give us some clues.
Here's hoping!
ATB
".."NPV is much more than any old 'indicative tool'..."
ATG's comment, not mine."
For the record, that was not my comment.
Essentially this is being set up as a bidding contest. Existing interested strategic investors, & presumably any that surface with todays publication of the appetiser figures, will all have the same common figures on which to base their bids - an excellent way of bringing this to a successful conclusion.
Elphick may not be great at actually running mines (see GEMD share graph since IPO), but he is superb at marketing mining projects (see IPO prices for GEMD & ZIOC) & also all the tactical manoeuvers needed to create the optimum conditions for persuading bidders to pay top NPV based prices for projects.
Thanks, MM.
'The game's afoot!'
Thanks MM, thats important info from AT. Tactically he is using the full 2024 FS to draw out all interested parties, they have to formally approach the company to get the full report. Then sign an NDA & are then under lockdown until the report is made public - which is entirely in Elphick's control. Interesting he uses plural 'Strategics' - hopefully confirming we are in a competitive situation.
.."NPV is much more than any old 'indicative tool'..."
ATG's comment, not mine.
HTH
Zanaga Iron Ore Company has announced positive results from their 2024 Feasibility Study update, showcasing strong economic potential for its Zanaga Iron Ore Project with significant Net Present Values and Internal Rates of Return for its two-stage development plan. The updated costs and partnership with a Chinese engineering firm have provided a higher confidence level in the project’s viability, setting a solid foundation for future phases and attracting potential strategic investors. The company is also progressing with other key initiatives, including hydro-electric power and mineral port investments, to further enhance the project’s prospects.
https://www.tipranks.com/news/company-announcements/zanaga-iron-ore-optimistic-on-projects-future
AT has been communicative. I understand that all the Strategics have received the full FS report and recostings *but* under NDAs as you might well expect. Of course this makes them insiders and hence they cannot buy ZIOC shares - at least not yet...
P/NAV IS THE MOST IMPORTANT MINING VALUATION METRIC, PERIOD. - Corporate Finance Institute
NPV is much more than any old 'indicative tool'.
1. The decision on the mining investment is mostly related to the NPV of the project. A financial model construction needs accurate estimations of income and costs..
https://scielo.org.za/scielo.php?script=sci_arttext&pid=S2225-62532012000500011#:~:text=The%20decision%20on%20the%20mining,and%20costs%20includes%20many%20uncertainties.
2. Why is the concept of net present value important to mine planning?
NPV is the widely accepted tool for measuring the value of a mine project. It calculates the current value of the cash flows at the required rate of return of a project compared to the initial investment.
https://thenugget.prospectorportal.com/what-is-an-npv-mining#:~:text=NPV%20is%20the%20widely%20accepted,compared%20to%20the%20initial%20investment.
3. How important is net present value?
Net present value indicates the potential profit that could be generated by a project or investment. A positive net present value means that a project is earning more than the discount rate and may be financially viable.
https://www.investopedia.com/ask/answers/033115/what-difference-between-present-value-and-net-present-value.asp#:~:text=Net%20present%20value%20indicates%20the,and%20may%20be%20financially%20viable.
and
4. Mining Asset Valuation Techniques - Overview, Formula
Corporate Finance Institute
https://corporatefinanceinstitute.com › Resources
P/NAV IS THE MOST IMPORTANT MINING VALUATION METRIC, PERIOD.
https://corporatefinanceinstitute.com/resources/valuation/mining-asset-valuation-techniques/