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MM my guess is there will be an updated valuation based on the updated cost report. I think the cost report is essential to be able to do a proper valuation as there are so many factors on infrastructure to take into consideration
All and any views on how to value Zanaga much appreciated into here...
Duly recc'd and agreed...I especially liked the ref to 'green steal ' ...
GLA and ATB
In that time since the Edison report the development costs reduced from $7.6bn to $4.7bn. The most recent work on the FS was to reduced by around 20%, so we could be looking at a further $940m to come off the staged development costs.
In 2012 we had a huge increase in the mineral resource
Ā· 57% increase in the overall Mineral Resource to 6.8 billion tonnes at an average grade of 32.0% Fe
Ā· 74% increase in Measured and Indicated resource category to 4.69 billion tonnes with an average grade of 32.5% Fe
And my personal favourite:
Ā· Mineral Resource defined from only 25km of the 47km orebody identified
We could easily be looking at double the Edison figures when you start to factor in the above, let alone green steal and the move to higher grade ore..
That Edison value of $4.3bn is c.Ā£5 a share.
That is what the project was worth in 2011. It should/could be argued that itās worth more with the DRI capabilities of the mine.
Saying that Iāll be happy with a fiver š«£
I know you won't laugh MM š, but I can see a queue of nay say readers who go "no way", look at the SP yada yada. But as we know the SP is meaningless, it basically values Zanaga at ZERO.
It could indeed be higher the valuation.. but don't want to be accused of ramping š¤£
I don't, not at all! If anything I see w string of good reasons to mark us higher again.
It is funny looking at the old Dec 2011 ancient Edison report, a time when high grade iron ore and green steel were not in strategic demand...
"Our base-case valuation of the Zanaga project is US$4.3bn in current money terms (discounted to FY11 at 10% to account for the opportunity cost of capital). In our valuation we used a 10% nominal discount rate and applied a 25% haircut to ZIOCās attributable value to account for the lack of control, as the project is effectively managed by Xstrata. It implies ZIOCās attributable value of US$1.7bn or US$6.0 per share (Ā£3.8/share)."
So don't laugh at the Ā£4bn mcap figure!!
We're very much on the same page, Guffers. I am interested, though, in how investors reach their target valuations for any deal. There's the NPV, of course. Comparative deals don't exist for reference....or do they?
My own view, this worth mcap Ā£4bn easily, so either 20% buy in new investor (ie Ā£800m) or Glencore gives up marketing rights and Zanaga is totally sold, Ā£4-Ā£6bn? A big investor (China) will probably want it all ..??
We should be so lucky to get a total sale šš
When it comes to pricing up a deal, who has a methodology they would be willing to share?
If SASAC are indeed involved then a very large amount.
A plausible narrative, yes, we will see. What interests me more than who is the shape of the deal, ie what do we get out of it..
...this is the gameplay as I see it:
ZIOC and our Chinese EPC have completed the recostings and rewritten the 2014 Bankable Feasibility Study accordingly. This has met expectations sufficiently (recall the 20-25% costs reductions etc) to be passed along to what is euphemistically termed as 'peer review'. FWIW I consider this/ese 'peer/s' to be those that hold the investment purse strings and/or have the clout to authorise the substantial investment necessary. (There's also the geopolitics to be juggled).
Given their iron ore activities across multiple West African countries (Simandou being the headline example) coupled with their strategic imperative to secure ore ex-Australia I firmly conclude that said 'peers' are Baowu Steel and SASAC, Boawu's owners and ultimate Beijing masters. Of note at this point is that if this is indeed the case then the amounts involved must necessarily reach the order of magnitude of those employed at Simandou - $15-18bn. SASAC had to approve and sign off Baowu's involvement, including brokering finance from China Development Bank and the AIDB into the deal.
As of Wednesday last week Baowu chairman and execs were in Conakry, Guinea finalising Simandou's finances with Guinea's leadership. Thereafter, and perhaps even now given our by month end timeline, I expect Zanaga to be headlining.
Through 2023 Baowu Steel JVed with Saudi Aramco and the PIF on green steel in Saudi Arabia. Baowu's chairman and Vale's CEO, Eduardo Bartlomeo, also met at least twice and discussed tie ups on green steel and mineral investment opportunities. 2023 also saw Vale sign an MoU with AD Ports on Gulf green steel operations including pellet plants and infrastructure. The intriguing thing for us at ZIOC is that Vale and AD Ports also agreed to look at opportunities to own and manage VLOCs - the huge ships used to transport iron ore. AD Ports signed the MoU to develop at Pointe Noire, and their and Emirati infrastructure investment has been promoted to ministerial and Presidential levels just this month in Dubai. (BTW, did you know that Vale and AD Ports exec have just flown into Brazzaville from Dubai?)
The sweet spot of all the above factors and arrangements is Zanaga.
If the above really do all tie together, and they do all fit, then we could be looking at this dream team:
Vale, AD Ports and PSEI (EPC)
Baowu Steel
CDB, AIDB, PIF and ADQ.
Baowu - change of status.
http://en.sasac.gov.cn/2022/06/23/c_13896.htm
So SASAC have been coordinating Baowu moves into African iron ore.
We now start to circle Zanaga..
Aug 2023. Baowu and Vale met and 'discussed cooperation in investment in mineral resources', this after Vale signed in May 2023 an MoU with our very own AD Ports for green steel mega hubs plus VLOC management and operations- CLOCs being the very large ore carriers that would be needed to transport Zanaga ore to the ME and China.
Meanwhile Baowu are JVed with Saudi Aramco and the PIF on a green steel hub in the Kingdom.
1. CHINA BAOWU WANTS NEW MODELS OF COOPERATION WITH VALE - AUGUST 3, 2023
The worldās largest steelmaker China Baowu Steel Group Corporation has held talks with Brazilian iron ore miner Vale on potential opportunities for future cooperation, according to an update on its WeChat account on Thursday.
Hu Wangming, chairman of the group, held a face-to-face meeting with Eduardo Bartolomeo, Valeās chief executive officer, at Baowuās headquarter Shanghai. ()
Both sides also discussed cooperation in investment in mineral resources as well as the research and development of the low-carbon metallurgical technology, it said without giving further details.
https://www.mining.com/web/china-baowu-wants-new-models-of-cooperation-with-vale/
2. AD PORTS GROUP & VALE TO JOINTLY DEVELOP LOW-CARBON MEGA HUBS FOR STEEL INDUSTRY
Abu Dhabi, UAE ā 24 May 2023: AD Ports Group (ADX: ADPORTS), the leading facilitator of global trade, logistics and industry, announced today the signing of a Memorandum of Understanding (MoU) with the worldās largest producer of iron ore and nickel, and one of the largest logistics operators in Brazil, Vale S. A. (Vale), to develop a Mega Hub in Abu Dhabi for industrial complexes that produce low-carbon products for the steelmaking industry for both the local and seaborne markets, with a significant reduction of CO2 emissions.
The agreement will see an allocation of land and related services from KEZAD for the Mega Hub, in addition to the development and management of a state-of-the-art handling facility at Khalifa Port, capable of accommodating Valemax vessels with a handling capacity of up to 50 million tonnes of cargo per annum.
Furthermore, AD Ports Group will develop and manage conveyor infrastructure to transport iron ore and finished products to and from Khalifa Port and KEZAD, and will be exploring commercial collaboration with Vale on the marketing and sale of various bi-products of the manufacturing process in the UAE and the wider region.
The agreement also includes a maritime collaboration to explore opportunities related to management and operation of very large ore carriers (VLOCs) as well as other possible avenues of partnership.
https://www.adportsgroup.com/en/news-and-media/2023/05/24/ad-ports-group-and-vale-to-jointly-develop-low-carbon-mega-hubs-for-steel-industry
As of June 2022 Baowu Steel has a special status having been officially converted into a state-owned capital investment company by the State-owned Assets Supervision and Administration Commission (SASAC). This special status gives Baowu the role of reform and co-ordination in the Iron and Steel sector in China.
ZIOC investors should get themselves very familiar with SASAC who are, IMO, key to our immediate futures:
The State-owned Assets Supervision and Administration Commission of the State Council (SASAC) is a special commission of the People's Republic of China, directly under the State Council. ()
Significance - SASAC oversees China's SOEs in non-financial industries deemed strategically important by the State Council, including national champions in areas like energy, infrastructure, strategic minerals, and civil aviation.
The state-owned investment companies of SASAC serve as a mechanism through which the Chinese government can influence the market through the use of capital rather than government directive. - Wikipedia (1)
China Baowu Steel Group Corporation Limited is wholly owned by China's State-owned Assets Supervision and Administration Commission (SASAC) ...()...Baowu is fully owned by China's SASAC, which exerts control over the company's board and senior management and has strong influence over the group's major strategies and investment decisions. - Fitch (2)
6 Mar 202
CHINA SET TO APPROVE SIMANDOU IRON ORE PROJECT DEVELOPMENT
China's State-owned Assets Supervision and Administration Commission is close to approving the development of the giant Simandou iron ore project in Guinea, Bloomberg News reported March 5, citing people familiar with the plans. China intends to expand its footprint in West Africa and is interested in helping develop the deposit as it looks to secure more high-quality supplies of iron ore, sources told Bloomberg. SASAC has not formally approved the project yet and is working out the details of how to fund and proceed with the project, the sources said, adding that China Development Bank is likely to help with the funding, and the Asian Infrastructure Investment Bank is also being considered, Bloomberg reported. The commission is speaking with other Chinese state-owned enterprises to build port and rail infrastructure necessary to bring Simandou's iron ore to the market, according to the report. - SPGlobal (3)
> SASAC reports directly to the Chinese State Council, and overseas strategically important overseas industries. SASAC owns Baowu Steel, and it was SASAC who gave the 2020 go ahead for Simandou (before COVID intervened). SASAC was also involved in structuring finance with the likes of the Chinese Development Bank.
> I'm near certain that the Chinese EPC report has gone before SASAC and also BaoWu (the RNS's 'peer review').
1. https://en.wikipedia.org/wiki/State-owned_Assets_Supervision_and_Administration_Commission_of_the_State_Council
2. https://www.fitchratings.com/research/corporate-finance/china-baowu-steel-group-corporation-limited-09-03-2022
3. https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/china-set-to-approve-simandou-iron-ore-project-development-8211-bloomberg-5743624
This from Friday (paywall unfortunately):
FINAL STAGES OF FINANCIAL CLOSING FOR SIMANDOU UNDERWAY IN CONAKRY
As predicted by Africa Business+ in January, the different parties involved in the iron project are close to finalising the financial aspect of the development plan for the deposit. A delegation from Baowu Steel is also expected to arrive in Conakry today.
https://www.africabusinessplus.com/en/818954/final-stages-of-financial-closing-for-simandou-underway-in-conakry/
The Chairman and execs arrived in Guinea last Wednesday for meetings with the country's leaders and to finalise Baowu Steel's investments into Simandou.
> I'm certain that Zanaga is now cued up pending Simandou's imminent completion.
>> Of note again is that Baowu Steel are 100% owned by SASAC, the CCP's State-owned Assets Supervision and Administration Commission of the State Council.
A series of confirmations here that China must inevitably and imminently make their pitch for Zanaga:
CHINAāS BIG MOVE TO CUT OFF AUSTRALIAN IRON ORE
Beijing is spending big in order to āde-riskā itself from Australia in a move that could cripple Aussies.
Itās remote. Itās inaccessible. Itās poor quality. But Beijing is determined to spend big on a Sahara Desert mine to āde-riskā itself from Australian iron ore.
China Railway Construction Corp Ltd (CRCC) is one of the worldās biggest construction and engineering groups. Itās controlled by the Chinese Communist Partyās State-owned Assets Supervision and Administration Commission of the State Council.
Now itās laying 6000 (sic) kilometres of new railway line across the North African Algerian desert.
Itās all about giving the Beijing-owned steel conglomerate Baowu control of the GĆ¢ra-Djebilet mine.
https://www.news.com.au/finance/business/mining/chinas-big-move-to-cut-off-australian-iron-ore/news-story/50eae131e0b7e6cb71966210dc78de68
1. No matter that the Algerian mine is poor quality (v. high phosphorous content) and remote (600km++ of rail needed), and part straddles a long running conflict zone, Beijing want the ore.
2. Any Algerian port is going to be a further 1,000km+ to ship to China than Simanadou in Guinea, itself a further 1,500km+ further than Pointe Noire for Zanaga.
3. Baiwu Steel - the world's no.1 steel producer leading China's Simandou involvement.
4. The involvement of SASAC, the all-important and powerful Supervision and Administration Commission of the State Council. SASAC is directly controlled by the CCP and directs strategic investments in ket resources amongst other roles.
> By my research, SASAC are very likely to be where our Chinese EPC's 'near-final' report into Zanaga is currently being approved. More on this as and when time allows later today.
Really? Oh. Moving on..
MM : For as long as GLEN seeks to extract value from the Marketing/Royalty arrangements, it will be associated with the Project...and with C-B.
The EITI people for one will be looking closely at the deal that (we all hope) emerges. As will a number of other ESG -focussed parties, whether we like it or not.
IMO, of course.
ATB
What a great post MM, at last someone speaking with some sense ;-)
Let's think about this intelligently for a moment.
The US are after a NY flat that was bought in 2014 from alleged 2013 misdeeds and which since has never been occupied. I doubt Big D and his daughter give a stuff, frankly. If anything it will push them further into the BRICS++ camp. China have extended an invitation for President Nguesso to pay an official visit to Beijing this August and, as chronicled here, the week before last Sheik Maktoum proposed a State Visit to Dubai for President Nguesso at some point. The invite was made by the UAE minister for cooperation who had previously dealt with little d over AD Ports and who again reinforced the opportunities of infrastructure investment by the Emirates. This in Dubai where Big D and Co keep a number of properties. So, as I say, I doubt Big D gives a stuff.
The sideshow has got nothing to do with Glencore at all. They've positioned themselves as a minority shareholder in a resource project which is very likely to be sold to and developed by 3rd Parties, leaving Glencore with no direct dealings with Brazzaville.
The world has turned.
Hi Driving,
Re the yanks, I think the situation just got more complicated ;-<
https://www.icij.org/investigations/pandora-papers/us-prosecutors-push-to-seize-apartment-tied-to-congolese-president-in-luxury-trump-complex
The US Gov filing 29 March is a civil asset forfeiture case against Big Den, with details.
Timing is 'unhelpful' - to say the least - and seems particularly a complicating factor for GLEN, who's working hard on clearing up historic issues on the ethics compliance front.
The 'reputational risk' stakes have got higher, which may impact GLEN's overall priorities in any deal and/or the structure of the transaction, AFAICS.
OTOH, this (or the likelihood/possibility of something similar) will have been a 'known unknown' for some time and a contingency that's hopefully already been factored in.
'Dum spiro, spero'
GLA