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.
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/
NPV is indeed an indicative financial tool, but it's used 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
Jiving on the other board has done a good job of arguing the theoretical/technical basis for accepting NPV.
I think - for the above 'real world' reasons - that investors shouldn't set too much store by it....though I'll be delighted to be proved wrong and see my expectations exceeded.
Meanwhile, we'll just have to agree to disagree.
GLA and ATB
NPV is an indicative financial tool and by definition highly punitive in discounting the future value and return. I agree with you fully MM. Strategic investors looking over decades project life time (Saudi, China etc) are highly aware of long term and strategic value.
Extrader - that is massively and demonstrably not the case.
The NPV discounts future earnings into the present (Net Present value) at a cumulative 10% per year. That 10% per annum cumulative accrues back to the new owners as time progresses.
For example, 2030 Zanaga production is currently discounted into the NPV by 6 years of 10%pa , or something like 47%, to just 53% of the actual revenue.
Come 2030 the strategics would receive 100% of the revenue (no discount) an increase of 89% on the NPV value (53% up to 100%).
These compounding effects are even more exaggerated as we progress out along the curve.
Furthermore, and in addition to the unwinding of the discount factor, there is the very likely increase in the Reserve size (perhaps as much as 10x), and any long term rise in iron ore prices.
Thus the NPV represents a discounted bargain for the Strategics who chose to invest for the long term.
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 should not expect anything like the implied per share 'value' numbers being calculated.
All things considered, I think my 200p per share entry in the 'charity sweep' is well under-pinned.
GLA and ATB
The bottom line...
Today's RNS gives NPVs of $3.681bn for Stage 1 and $7.357bn for Stage 2
At this morning's $/£ of 1.2550 and 645m shares issued we get SPs of:
**£4.55/share for Stage 1 and £9.09/share for Stage 2**
Now, we aren't told what iron ore price was used beyond, 'Note: Iron ore prices based on AME Group's long term real iron ore price forecast for 65% Fe IODEX.'
Checking the longest dated futures contact on SGX for 65%FE Fines, Dec 2026, we see = $109
https://www.sgx.com/derivatives/products/iron-ore?cc=M65F
> This is where it gets interesting. With a falling dollar, rising commodity prices, geopolitics, and reserve diversification I would expect that long term iron ore price to progressively firm.
>> If the Strategics are making the same calculations then they will want to get a shuffle on.
Good point, MM. An issue for both GLEN and BHP would likely be funding.
Whilst GLEN is distracted/constrained with processing the Teck corporate acquisition/restructuring, BHP must to some extent be distracted/constrained by its $ 27.5Bn gross Brazil dam settlement (along with Vale, of course).
https://www.theguardian.com/business/2024/apr/29/mining-firm-bhp-brazil-dam-vale-samarco
What price a GLEN/Gulf consortium bid for AAL (= no complicated breakup/divestment), with Zanaga thrown in for good measure ?
GLEN++ get control of major CU assets; GLEN gets critical mass in iron ore (hitherto lacking, as your link notes); GLEN continues with its cashcow coal backstop. Its Gulf partners /bankrollers get proxy investments that suit their pocketbooks/strategies : for Manara, a 'lower-in-the-hierarchy' minerals complement to its Vale acquisition; other GCC an increased portfolio of 'hard' assets', in Qatar's case in consortium and/or via its existing investment in GLEN.
The Chinese do a lot of the heavy lifting for any of the consortium's infrastructure needs globally,(without too much need for funding) and get a lot of opportunity to 'win friends and influence people', at both in-country and international levels.
Meanwhile, coming back to ZIOC, I note that the new study covers .."direct and indirect cost estimates ... updated to current market pricing using Chinese major equipment and contractor pricing for both phases of 12 Mtpa....and 18mtpa projects, inclusive of buried concentrate pipeline AND PORT INFRASTRUCTURE."
AIUI , the wayleaves/permissions for a back-country slurry pipeline should not be an issue, under local State property rights.
However, the port study surely has to be in co-ordination with Abu Dhabi (PN concession 'managers') and C-B (land etc , whether inside or outside a SEZ).
I wonder how 'in the loop' Abu Dhabi and C-B are?
Interesting times!
No probs, alwayshoping : given todays news, some extracts from the article headlines are appropriate :
..'analysing the contenders'...'sprint showdown'....
Hereshoping!
GLA and ATB
Well they came through & the figures are stunning. First take, they are almost twice the 2014 FS figures:
12m pa NPV = $3681m IRR = 26%
30m pa NPV = $7357m IRR = 28%
This is what we have been waiting for & this is going to be the basis for any buy-in or buyout partners.
Elphick "We look forward to presenting these results to the various strategic partners we have been engaging with and advancing our discussions further with them as we look to progress towards front end engineering and design of the project"
https://www.londonstockexchange.com/news-article/ZIOC/feasibility-study-update/16446302
The FT circles Zanaga with our realising it....
WHO ARE ANGLO AMERICAN’S POSSIBLE SUITORS?
“I think there could be a lot of interloper risk,” said one large mining sector investor. “The details of Anglo are sitting on every CEO’s desk, that I can assure you.”
GLENCORE
Many of Anglo’s mines would fit better in Glencore’s portfolio than with BHP, according to analysts and market insiders. Glencore and Anglo own 44 per cent each of the prized Collahuasi copper mine in Chile, meaning a takeover would give Glencore near full control.
Whereas BHP has asked Anglo to spin off South African Kumba Iron Ore prior to any takeover, Glencore would likely integrate it into its own operations in the country. The Swiss company has coal mines in South Africa and has long toyed with building an iron ore business. The company trades the metal but does not mine it. For the same reason, it would also be attracted to Anglo’s Brazilian iron ore project, Minas-Rio.
“It is a better fit than BHP,” said Ben Davis at investment bank Liberum, adding that Glencore “seem to have endless bandwidth for corporate strategy compared to other people”.
AND, AND GET THIS:
China has huge demand for copper and iron, and controlling producing mines is a critical priority for Beijing.
“I think it’s reasonably likely that the Chinese will come in,” Meyer said. “The question is which Chinese state-owned company is best placed to do it?”
https://www.ft.com/content/884d2bb0-57e8-4d82-b4b3-db314038e2a9
Whoops..apologies Ex and all. Multi tasking and sending out latest cycling news to my cycling friends.
It should have been this link. ....https://www.arabnews.com/node/2501256/business-economy
Then again, when we get the latest news/updates we hope for..... DEFINITELY TOMORROW...., we will all have the time and money to pop over to Italy and the Alps for a week or so anyway if you so wish
As usual...alwayshoping
Cryptic, even by your standards, alwayshoping !
" Giro d'Italia - top cycling stories to your inbox ?" Such as...
...Giro d’Italia 2024 - Analysing the contenders (?)
Cyclingnews (25 Apr.) ..
or maybe
..."Tim Merlier prepares for big-name Giro d'Italia sprint showdown (?)
Cyclingnews (26 Apr.) ..
Say more !
ATB
Little Den doubles down on the marketing...
Just released https://twitter.com/CooperationCG/status/1784957195370504211
.."Minister Denis
@ChristelSassou
Nguesso was also invited to share his vision on how the public and private sectors of the Republic of Congo can capitalize on this new era of trade and investment between Africa and the countries of the CCG. The minister took this opportunity to present the assets of the Republic of Congo, specify the reforms undertaken to create an environment conducive to business as well as the current and future measures to guarantee the security of foreign investments. He further indicated that the Congo is committed to carrying out other major actions aimed at promoting economic growth through the development of key sectors such as agriculture, industry, tourism, digital, special economic zones, etc..."
Meanwhile, BrazzaNews relays a report of ongoing brownouts in the capital, Brazzaville...
https://www.rfi.fr/fr/afrique/20240428-congo-brazzaville-cinq-jours-sans-%C3%A9lectricit%C3%A9-dans-la-capitale?
.."Just beyond the Centre national de radio et de télévision (CNRTV), all the districts of the capital of Congo-Brazzaville have become ghost zones by nightfall. You can't see any lights, like in this busy bakery, where making bread is no longer easy. Darel is one of the managers of this business: ‘For five days in a row we've had no power, and that's been difficult for us. Yesterday, we couldn't work for lack of electricity. And the generator consumes too much diesel compared to our profits, so it didn't work", he lamented.
Darel laments the fact that he cannot meet the demand of consumers who have run out of bread: ‘There is no bread in the district and people are condemned to starvation. It's really unfortunate", he added.
To cope with the lack of electricity, some businesses and shops are using generators, whose deafening noise is unbearable, as in front of this night pharmacy where sellers and buyers no longer know which way to turn: ‘If there are excessive power cuts, it's because the network has aged. There will always be an electricity problem in Brazzaville because the network hasn't been overhauled yet,’ they complain.
Fire
The company Énergie électrique du Congo explains the current situation by the destruction by fire of unknown origin of the high-voltage substation supplying the northern zone of Brazzaville. The scarcity of electricity is compounded by the lack of water. Water is flowing intermittently during this period of intense heat..."
Not the best of backdrops to your marketing, I'd say.
GLA