Member Info for 99icecream

IMHO nobody wants to put more money into HZM. So I suspect the large shareholders will secure their investment against Vermelho.

Note that it not just a case of raising money, but also ensuring that problems do happen again in the future. So expect the large shareholders opinions to be respected however money is raised. Also, Glencore will have a particular interest in the outcome as it holds an off-take agreement in addition to its shareholding.

There would need to be a shareholder vote to give permission for any large share issue, so the large shareholders (who have 60%) cannot be diluted unless they consent. The same would go for any large disposal (e.g. selling Vermelho).

BTW - Lots of high grade in Scandinavia (e.g. Kiruna).

It is a stock market requirement that "issuers must notify without delay new developments that may affect their business if the development may lead to a substantial share price movement".

So, HZM had to issue an RNS as soon as they had realised that there was going to be a significant overspend. Obviously, at that point they did not know i) How the overspend would be funded and ii) What the overspend will be (with any degree of precision), iii) Management implications (e.g. changes in leadership etc.), iv) Implications for the costs / time scale for L2 and Vermehlio.

So, the RNS must come out at the point at which most things are uncertain.

If they don't find Ti (usually as FeTiO3), then Magnetite (Fe3O4) is likely.

I cannot see anyone (lenders or "corner stone" investors) putting more money than is necessary for L1 into HZM at this time.

L2 would be funded by cash flow from L1. There is only one thing would move the date for the start of L2, that would be if the price of Nickel were to rise substantially - which would increase the free cash flow.

It will only get to Brazzaville if they build the bridge from Kinshassa.

Denis Snr is 80 this year and will be thinking about succession. Denis Jnr is being given high profile / "good news" roles to raise his profile in Congo.

He is a cousin - but Denis is his son

For me the key phrase in the recent RNS is this:-

"The Company is working on a plan with its various financial institutions together with the cornerstone shareholders for a financing solution to complete construction."

Essentially HZM cannot raise more money without the support of its existing lenders and major shareholders (4 of whom own 60% of the equity).

They will want to ensure that the company is put on in a much better position, so that loans etc are repaid an schedule and their shares become much more valuable.

As I have said previously, part of this will include strengthening the management team to give us all confidence that problems will not happen again.

I am happy to be buying at prices near 20p as I am confident that when the management changes / financing solution are announced the share price will be significantly higher. Just how high will depend on what the financing solution is.

IMHO we are not in line for a share issue as there are plenty of sensible alternatives. But the risk of a share issue is why HZM is currently near 20p.

An alternative is to raise more against Araguaia (obviously subordinate to existing loans). For, example by selling a royalty deal (incidentally they cannot do a streaming deal as Glencore already have the off-take).

However, raising more against Araguaia will further delay the point at which the project becomes cash positive causing further delay to L2 (and a lower new share price).

So perhaps the best bet is to utilise the value of Vermelho. It could be sold, borrowed against or floated under a new (separate) management team.

Indeed, but you need a larger discount rate etc. for HZM.

I guess it has something to do with the confidence investors have that a project will be done on time and near to budget in Canada.

Horizonte has now badly missed budget twice - (2021 the Cap Ex budget was increased by 46%).

Captain - IMHO there are better options than your 40% sale at Araguaia as its value 100% underpins the HZM share value. However, 0% of the share valuation is supported by Vermelho as its development is too far in the future.

Theorist / Captain

Perhaps it is also worth saying that, IMHO, there will not be a share issue at this time, indeed it is not necessary to issue more shares to solve the problem, HZM will have other options in the future.

The recent RNS has resulted in a loss of confidence in the current management. At this time HZM cannot raise additional funds in anyway. There is an investigation to determine what has gone wrong, what it will cost to fix and who was at fault.

It should be obvious to HZM the cause of the problems and who was at fault, so I anticipate that in November we will get, not only, the report on the cause of and cost to fix the problems, but also, new appointments to "strengthen the management". The Chairman should be talking to the key shareholders to get their views on changes they will want to see.

Theorist

I have to disagree with you there. It is possible to issue shares below 20p and it does happen in similar situations. What happens is they issue replace each share with new shares (say A and B) for example each 20p share results in one A Share of 1p denomination, and 19 B Shares of 1p denomination. The A shares have full rights (to dividends and voting etc.) the B shares have no rights to anything. The B shares are then cancelled and we can now issue at a price of 1p or more.

It is now common for new companies to issue shares without a nominal value to avoid this issue entirely.

Simandou still Delayed Awaiting Funding - would be a more accurate headline ! (not Simandou Surges Forward).

The deal is subject to obtaining a " waiver of Rule 9 of the City Code on Takeovers and Mergers" - i.e. they don't have to bid for the balance of shares.

I guess everyone will have different opinions about price and their strategy. At some point I will sell enough shares to cover purchase costs and keep the balance.

The market size in EEE is currently 100,000 shares. So you should get that price (or better) when you trade at best. Over 100,000 shares you ask for a bid or offer and decide if you want to trade.