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Mike did however mention end user deals in his latest presentation.
The scenarios which would greatly benefit shareholders would be for Mike to sell Orom-Cross to an end user.
They, as an end user, would have their own graphite demand but also the option to expand to sell to others.
BRES would have to sell based on an absolute minimum of 25,000 tonnes per annum. So the buyer, as an end user, would be saving perhaps £13m per year but the would have to spend £20m for the first module of main plant.
Their [the buyer's] market is on their doorstep. It is themselves but it should not be too difficult to distribute surplus graphite when they already have a transport arrangement.
Pricing:
So allowing 1 year to set up, they would ideally look to recoup investment within 4 years. 1 year set up / 3 yrs on stream.
Sale price for Orom-Cross would be £39m and then buyer would spend further £20m for the plant.
That would be looking at a 20p share price for the shareholders.
If the sale was based on 75,000 tonnes per annum plant then the price would be higher.
It would be a shrewd move for an end user and a lovely outcome for the shareholders.
The snag is that you would have to put a gun to Mike's head to get him to sign the papers. There is no way he will jeapardise his position.
First thing Tuesday on the bell
"The graphite market is in a state of oversupply and existing capacities for natural graphite
exceed current and projected future demand"
Current suppliers will increase production. Graphite is already in oversupply.
Then there will be a price war with China. Oversupply pushes the price one way.
https://www.deutsche-rohstoffagentur.de/DERA/DE/Downloads/Studie%20Graphite%20eng%202020.pdf?__blob=publicationFile&v=3
Blencowe targeted 2025 because there is a theory that there will be a shortfall in graphite, more demand than supply. It is more likely that the current producers will simply expand production. Then further down the line newbie suppliers will be coming in and all of a sudden there is too much graphite. What happens to the price then, where is the market for new suppliers and who would bother investing £60m in a plant in that situation?
They were looking at 2025 for the main plant so I doubt there will be a JV or even a main plant fund raise this year and the off-take agreements will probably be known in 2025 when production is near reality. Mike gets paid one way or another :o)
Flash, Mike has said BRES is ahead of the game, 2 years ahead with the work already done and that other new mines would be playing catchup. The end user you mentioned could start their own mining operation, taking full profit and cutting out the middle man, even if it lagged by 3 years.
I think one thing that has not been considered is the current mines already producing. They know the market better than anyone. They know what is ahead and will have already being planning scale up of production - of course they would and they may well meet demand equally as it increases meaning their off-take customers do not need to look elsewhere.
Contango has had to sign an NDA and cannot reveal details of negotiation.
The company very recently commented: " Much of this progress has been commercially sensitive, however I am confident that we are approaching the stage that this progress can be widely communicated and that the real tangible value of the work we have done will be reflected in our valuation."
From an April 2021 article
"Contango..in discussions regarding a potential long-term offtake for coking coal produced at Contango's Lubu Coking Coal Project with the Zimbabwean subsidiary of a major Chinese industrial company and one of the world's largest stainless-steel producers (the potential offtake partner) [planning to construct a US$1 billion carbon steel plant in the country, with capacity of 2 million tpy of steel].."
"..Given the Lubu Coking Coal Project's proximity to Hwange, the company and the potential offtake partner have entered into discussions with the view to Contango supplying the coking coal for the coke batteries on a long-term offtake.."
Wress, I was thinking exactly the same thing. Tsingshan Holding Group could demonstrate compliance with the Zimbabwe competition act by outsourcing from CGO but, considering the enormity of the CGO resource and potential gold icing on the cake, CGO will surely be considered as a takeover target.
Approximately 1.5 metric tons of metallurgical coal are required to produce 1 metric ton (1,000 kilograms) of coke.
To produce a tonne of steel roughly 350 kilogrammes of coke are needed.
In other words, for the Mvuma plant, 2 million tonnes of steel requires 1.05 million tonnes of coking coal per annum.
Wress, I dug out a more recent article on the steel plant. It is a 2 million tonne-per-annum steel plant.
The US$1 billion Mvuma steel plant will be Africa’s biggest steel plant. It is scheduled to be commissioned in 2022 which means performance and operational qualification will require a supply of coking coal https://newscentral.africa/2021/08/22/africas-biggest-steel-plant-set-to-debut-in-zimbabwe/ .
Wress, I have not seen any update for that.
Last mentioned was 24March2022: "Discussions underway with several interested parties to negotiate coking coal off-take contracts for mid-2022."
As there has been a squeeze on coking coal, in my opinion, any company reliant on coking coal would maintain discussions. The product is good quality. It would make sense for the steel plant to at least make a small contract for supply. Time will soon tell. atb
With the wash plant on site within weeks we may get news soon of an off-take deal.
From RNS 21 March 2022
"The Company is now in a position to negotiate coking coal off-take contracts at spot prices and leverage the recent increase in the coking coal price. Discussions are underway with several interested parties and the Company will provide an update as appropriate."
-- Wash plant ordered and installation scheduled in Q2 2022 - so within weeks as expected
Production started as planned. Stockpile being built.
From the regulated news 24th March:
-- Planning and development of coke batteries at Lubu underway with installation expected in Q4 2022
-- Enquiries from both regional and European customers about the coke product
-- Discussions underway with several interested parties to negotiate coking coal offtake contracts for mid-2022 and coke offtake contracts from Q4 2022
-- Approaches received from potential domestic and international investors to support the future development of Garalo-Ntiela and a site visit as part of the ongoing due diligence of the strategic parties is scheduled for April 2022
Your maths is correct and the 5000 tonnes per month of coking coal is initial production. They are looking ramping to 5 times that amount.
I don't know much about their gold but they will have has aerial em survey and we should see news soon on a drill campaign intended to firm up the targeted resource of 1.8Moz-2Moz gold.
Jay they probably dropped about 30 quid. No biggie. Only a 2K deal but it is sometimes better to stay put - first decision, to buy, was probably the correct one. Flitting in and out whittles away capital. The chart looks poised for a big move upwards in the very near term.
lol, yes so they can't be putting much money into that.
The 2M raised will have covered the PFS. They say the extra £800 was to speed up the PFS along with nickle assessment. I think PFS was already a given and a small amount will expedite it. The bulk of the £800K will probably go on the nickle assessment. Mike seemed to intimate that it was a one-off outlay and they were going to give it a good shot - then either walk away or have big upside. I would have liked to see all of the money put into Orom-Cross and keep away from the nickle project and wee will soon see if it adds value or not.