Member Info for 99icecream

Republic of Congo Minister of Mines lauds Kore Potash’s progress

.... IMHO - It would seem that the Minister now understands that his (empty) threats will impact Kore's ability to finance the development.

https://www.miningreview.com/speciality-minerals/republic-of-congo-minister-of-mines-lauds-kore-potash-progress/

allthatguff - You might compare with HZM Horizonte where Glencore is a substantial investor and has an offtake agreement.

Its been my opinion for a while, that Zanaga would be sold to Baowu Steel and developed by the Chinese. Under the new arrangement it might be the case that Baowu could take a stake in the equity with a Chinese group doing the development.

It has received little comment on this site but Baowu has recently been doing deals in Iron Ore with both Rio and Han****.

https://www.globaltimes.cn/page/202209/1275237.shtml

https://inf.news/en/economy/563737557ae82c7ec63fb2cf3ba7aa68.html

IMHO - allthatguff is correct the small scale development is a waste of time as the economics will be marginal at best.

However, if they want to develop at scale (e.g. 12 MT/annum 1st stage) then that can be easily financed. Part of the money would come from the the sellers of the pipe and floating dock (as export finance) typically about 70% of cost and the remainder can be borrowed against the offtake deal.

Very positive.

It is not a dilution. Our stake in Zanaga is halved but Zanaga will now own 100% of Jumelles (previously 50%). So we (indirectly) still own the same percentage of Jumelles.

A deal can always be done! - Absolutely

If you were to bring in Fortescue (or equivalent) as shareholder and developer, then I suspect they would want a the management contract as part of the deal as a minimum.

Well its only my view, but IMHO the price of iron ore going forward will depend upon the economic performance of China (the largest buyer by far). A stong iron ore price will be the best catalyst for deals in this sector.

IMHO The good thing about this deal is that there will be lots of different ways in which value could be realised from this point. My guess is that Glencore will not sell cheaply (e.g. for £1) but will stay a 48% investor until they can get significant value (from sale or development). Mr Elphick and Co may well have a much shorter view and may wish to sell to, or be diluted by, someone with the means and ability to develop Zanaga. I don't see Glencore being negative to any sensible changes, but they will be able to veto anything that might destroy value.

I would not expect to hear much back from Zanaga until mid 2023 - assuming time to see if China emerges from their slump and to talk to prospective bidders / developers. But maybe I will be positively surprised!

My answer is a no also.
Not invested here at all prior to May 2022. I did read the Align material before investing, but I also read many other things including material on EML and other miners and also lots of material on the market for Potash etc.
FWIW there is no problem with the Align risked valuation (of 11.2p). It is risked by using a 50% probability of success (so 50% x 22.4p + 50% x 0 = 11.2p). Obviously, in the real world this might turn out to be 22.4p or zero, i.e. its, as they say, a binary bet.
Align have a different take on research in that they do sometimes take significant positions in the things they invest in and in some cases where they have a large investment they have very been critical of poor management (e.g. Ironveld). I have not been tempted by anything else that Align have had as conviction buys.

The map on this link (click on the map for a larger view) shows why there is perhaps less logic to a link up with Sappro than you might think. If anyone has an up date on the progress (if any) on their rail link, I would be keen to see it.

https://www.africaintelligence.com/exploration--production/2019/03/19/transport-hurdlesand-power-shortages-can-t-hold-back-obambi-and-co-s-iron-ambitions,108349522-eve

IMHO it has always been the case that Glencore do not want to develop the mine, they want to sell it. Additionally, they are driven by doing deals and making profits, so they will not sell this key asset cheaply. If China emerges from Covid we might have the situation where Zanaga could be sold for a good price.

https://www.afr.com/markets/commodities/china-s-reopening-could-propel-iron-ore-to-us150-a-tonne-20221206-p5c42e

If I understand correctly Phildon is making the point that the Pointe Noire SEZ development is not relevant to Zanaga (at Pointe Indienne). Pointe Indienne is about 10km north of Pointe Noire and Loango is about 6km north of Pointe Indienne. I do not know the exact location of the SEZ, but it is described as being between Pointe Noire and Loango (so the distance to Pointe Indienne is not great). Also note that the Point Noire SEZ has two sites (Emprise A and Emprise B) Emprise A is the main site (27.9 Km2) and there is also Emprise B (2.4 Km2) located about 3km south of Pointe Noire near The Djeno Oil Terminal. Emprise B is planned for a new oil refinery at a more convenient location. Pointe Indienne could easily become part of the SEZ, if it was intended to process the concentrate in Congo prior to shipment (e.g. pellet production).

There is a Zanaga RNS dated 28 May 2020 where Zanaga outlines a plan for a Floating Port (Floating Dewatering, Storage, and Offloading port facility ). Much cheaper than a conventional port, (no dredging etc.) and can be sited at a point on the coast that minimises the length of the pipe from the mine.

Although China has no problem buying from Russia, there are huge logistical issues which make it difficult to ramp up imports further short term. In addition China has a policy of trying not to be reliant on one supply. They have secured leading supply positions in many strategic commodities, but not Potash (so far).

It is certainly a possibility IMHO. China uses about 10 million Tonnes per annum of which it imports about 50%. The recent boom in fertilizer prices was not down to Russia or Belarus, but China preventing the export of its own fertilizer as a way of promoting domestic agriculture. So it is a possibility that China would want to secure an off-take deal with KP2.

The key thing will be the broker valuations as they would bring in some new demand for the stock. Although they are the house brokers, they won't promote this to their clients until they are 100% sure its a winner.

Well, lets assume that all goes well. After the EPC, and Royalty / Streaming deal is done, the hose brokers (SP Angel and Shore Capital) will issue new valuations in order to market the stock to their clients. They don't need the 50% discount anymore and might assume $ 500 - so yes x 2 x 2 = ~ 40p. Now after 3 or 4 years the methodology changes to one based upon an earnings multiple (8 or 10 times EBITDA would be typical) so the valuation would rise further (easily reaching a £1 or so).

Of course if the EPC can't be done.......

From memory Align assumes $ 360 price for Potash and uses $/£ of 1.39, then it halves the valuation it gets (= 50% prob of sucess 50% chance of failure). So Align looks conservative anyway.

For valuation purposes SP Angel assumed that Kore would need to find a partner who would take 50% of the firm in return for providing the balance of the funds necessary for development (i.e. the funds that Kore intends to get from a Royalty deal or from a Streaming deal). This is the main reason the valution is half of the Align number.