Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
I'm counting warrants. I've just redone my calcs & I must admit my data was a bit old so my new number fully diluted = 543m shares.
From the ACP website, total issued shares = 471,810,359.
From latest Block Listing six-monthly return (https://www.investegate.co.uk/armadale-capital-plc--acp-/rns/block-listing-interim-review/202012170700059200I/), Balance under scheme(s) not yet issued/allotted at end of period = 43,205,750 + 27,777,778 = 70,983,528.
Total shares = 542,793,887
I understand a fair whack of the outstanding warrants are with Matt & friends & family and they'll be exercising as part of the eventual financing package in order to minimise dilution. If every warrant was exercised that would amount to about $2.5m so should form a reasonable chunk of the equity element of said financing package. If you called it 600m shares post finance, that ties in with my valuations in my previous post. Any way you cut it, with finance and decent off takes, we should be in the vicinity of 15p IMO.
I prefer to use the fully diluted valuation (620m shares) and agree that a trebling would be about right for 20% NPV. I only disagree in how much the NPV will be once the dust settles.
IMO there is absolutely no way the price we sell our graphite will be anywhere near the base case of $1112 and so our NPV is likely to be significantly higher once the true selling price of our graphite becomes clearer - off takes, which have likely already been agreed whilst we wait for the mining licence will give clarity to more realistic pricing. Baring in mind that when that base case price assumption was made; it was conservative even then, the CSIRO study has confirmed ultra pure battery grade graphite, the Chinese EPC test work has been successful & of course graphite prices have increased significantly since then.
An achingly small increase to $1334/t would increase NPV to $588m whilst a not unrealistic price of $1500/t would have us at NPV $655m/IRR 138%. And that's of course only for 25% of the resource.
Assuming fully diluted price (approx 620m shares) 20% of NPV at $588m (£425m) would be 13.7p, $655m (£474m) would be 15.3p.
Mining licence + decent off-takes (basket prices ~ $1400-1500) + project finance = somewhere around mid teens (eventually, once the traders are out).
Important thing is the basket price of the off-takes, that transforms the entire economics of the project from very good to seriously amazing.
Have a look at this Twitter thread to see how the basket price transforms the economics.
https://twitter.com/themoneysponge/status/1336295571901063170?s=21
If you have a spare three minutes and 20 seconds and want a lot cleared up listen to Matt on the July conference call from 11:10-14:30.
https://youtu.be/_W4uUEUFzFA?t=11m10s
Matt kicks off with an interesting statement about the FEED study, “it’ll be done in conjunction with the next round of funding. If we get the funding in place to build the mine we do that study as part of the construction process. We wouldn’t commence that until we had funding.”
I’ll repeat that again, “We wouldn’t commence that until we had funding.”
Clearly today’s announcement speaks volumes.
Next he talks about the Mining Licence (from 12:45). He mentions the fact that the process shouldn’t take that long as most of the work was done in 2018/19 but they wanted to include the new data from the updated DFS so resubmitted the application with the extra stuff included. He goes onto say that delays that used to occur have now been eliminated since the laws changed in 2017 so everything is now much more streamlined and now everyone knows what the government wants. Note also that Armadale has employed a specialised consultancy firm to drive that application process to minimise delays. Add on the very recent announcement from the President (http://www.tic.go.tz/firstNews/137) and you’ve got to think we’re very close to the rubber stamp and issuance of the licence.
Rahee, that is of course a possibility but I gather from Matt that things have changed a lot since then. Indeed since inauguration the President has vowed to speed things up further.
http://www.tic.go.tz/firstNews/137
To enhance efficiency, President Dr John Pombe Magufuli announced that the investment portfolio has been moved to the President’s Office from the Prime Minister’s Office.
He said that investors have been complaining of unnecessary bureaucracy and most of them are discouraged to invest in the country due to unnecessary delays of permits and other documents.
“I want any investor willing to inject finances to get all the necessary permits and certificates within a fourteen (14 days) and for that reason I have decided to move the Tanzania Investment Centre (TIC) from the Prime Minister’s Office to the President’s Office so that I can personally deal with all those causing unnecessary delays,” he said.
Tones, agree 100% with both your posts and particularly the tone in the one at 13:25. Likewise have a lot invested here and don’t appreciate the changes in wording and thus guidance. Was hoping for far more comprehensive update even though the FEED news is obviously fantastic to hear and implies that the ML is in the bag, otherwise why risk spending the money now on such a study.
Extract from RNS dated 8th September:
“ The ESIA application for the Project was submitted by Tanzanian based, registered, and certified environmental consultants to the NEMC in Tanzania. Armadale’s geology staff and its environmental consultants visited the Project area in late August to prepare for a field visit by NEMC, which has been confirmed will commence on 14 September 2020. This is expected to be the final step before the granting of the Mining Licence.”
Almost two and a half months later...
I agree tones, there was an opportunity to provide a lot more detail. Matt was confident when he applied a few months ago that ML would arrive prior to the election on the 28th Oct. He has subsequently said that the site visit back in September (I think) was the last stage before the licence would be issued. We’ve had nothing since until today. I’d like something a bit more robust from him given the slide in timings.
Also, as you mentioned, some clarity on CSIRO would be welcomed. Given its an Australian institution doing the study they should be able to supply an update on where they are and when the study should be complete.
Off-takes and finance will follow those two hurdles so I’d like to know what is going on with butte CSIRO and ML and are we we weeks, months or quarters away?
Thanks for taking the time to contact Matt and relaying his answers back here. Appreciated.
Once those MOUs are converted we, along with the investors who will ultimately provide the mine finance, will have greater clarity as to the selling price of the product once production is underway. Remember the base case providing the NPV of $430m and IRR of 91% is for a ridiculously low basket price of $1112 p/t. Given the purity of Mahenge’s graphite as well as the flake size a mere 20% increase in the basket selling price would provide a more realistic NPV of $588m and IRR of 118%.
I’m expecting the analysis from CSIRO to be released prior to any conversion of MOUs as that data should demonstrate the purity of the Mahenge graphite and support higher off take prices.
Assuming binding off takes do support a basket 20% premium to the base case price of Mahenge graphite thus justifying that $588m NPV, together with issuance of the mining licence and reasonable mine finance that would translate to:
10% NPV = $59m - 8p
15% NPV = $89m - 12p
20% NPV - $118m - 16p
25% NPV - $148m - 20p
Pick your NPV and corresponding share price according to what you think is reasonable once those milestones have been accomplished. I’m entirely comfortable with mid teens, high teens if the off takes surprise on the high side.
Added 370k myself today quite early to take myself to a similar 2m shares. The RSI is a little high but that wasn’t going to stop me buying. News could drop anytime and the re-rate will be dramatic. Won’t be long now...
So tones77777, from the latest RNS:
“As previously referenced, the Company has been involved in progressive funding discussions with a range of other parties in regard to moving forward with project development funding, these discussions are continuing positively. The Mahenge Graphite Project is exceptional in its outstanding economics and represents a very attractive opportunity for financiers who wish to gain exposure at a crucial inflection point in its development. The Company hopes to be in a position to provide further updates on developments in the near-term.”
I was thinking ‘near-term’ would mean anything from late-September to the elections on the 28th October and was dismissing anything happening over the next four-five weeks or so. I take it your vibes have it closer to a couple of weeks... ??
Bobby, completely disagree. If you’re convinced your company is going to make it and you’re going to dedicate a few years of your life to making it happen as well as get a load of investors to stick their hard earned into it then I’d expect them to stick a sizeable amount in. There are plenty of companies where this is the case. Look at ARS, PDR, HMI, JAN just off the top of my head where the CEO has a significant and sizeable holding and draws a minimal salary. Their interests are aligned with shareholders.
Same rule does not apply to investors. Obviously you should only invest what you don’t mind losing.
2050 - every board has an idiot like JustSaying. You can't argue rationally with them, they don't deal with facts. They always seem to have some agenda, which is not aligned with that of a genuine investor and crucially they are never shareholders.
That is why BBs are dying (I rarely visit anymore or bother posting) and twitter is where it's at. I don't do facebook or any social media stuff but the discussion groups on twitter are genuinely useful and would encourage any genuine investors to sign up and head over there. Just reply to one of 2050's posts and someone will find you and add you to a group. Martina, Oiltap or anyone would be welcome.
If not then it's the filter button for the likes of JS, I haven't seen any of his posts for ages, not because I don't mind a contrarian view, I just don't like posters who pursue an agenda and refuse to counter any points with rational, evidence based arguments.
Shame, I find it makes the poster a bit more transparent and civilised especially since they’re part of a group and have to be invited to join. The EUZ group is very polite and some useful reasearch gets posted. If you change your mind....