I am acutely aware that we are attempting to define something that likely cannot be defined. It is merely fun to try to work out so my post shouldn't be taken too seriously.
I am certainly of the opinion that this i all about Lombard and that their actions of holding the price around the 50-55p mark would at the very least put off other potential warrant holders because the return on their warrants would simply be too limited to justify giving it away and having to commit t paying for them.
They are a free carry on the drill and until they deliver a healthy return I do not believe they will be introduced. Even the 40.7p ones were 'only' circa 30% in the money, which for me is the sort of minimum threshold we should expect. However, if so then where are the declarations. We haven't had a single one to date.
This is possibly because as I say they are a free shot at a very high return if the drills come in, so why waste them in and around 50p unless you are someone like Lombard who has a very large pot that was acquired at levels well beloe this and so can book circa 35-40% profit and not lose anything along the way.
Whatever the case I am sure this particular process will end abruptly and the SP will spike at some point because as I say the current price is very attractive and the closer we get to the drill result the more interest the chasm between the two points will drive.
@sankeys Appreciating it is all just opinion and no one but Lombard can really say what their strategy is, I would offer this.
To date since Lombard took ownership of 6,058,407 shares on 10th June for their £3m commitment to the junior funding, they have sold 2.02%, which equates to 1.89m shares.
Less than 1 month prior to this date (13th May) Lombard were increasing their holding to 13.14%, which was the position they were at when they committed to the additional £3m in funding to help get the junior facility over the line.
Given that they will have known that the drilling was due to commence by at the earliest mid July, it would be a little strange for them to be increasing if their intention was to then start dumping what is a big holding once the spud on what is a short drill period, began.
What that says to me is that they are more likely simply de-risking the £3m investment, an investment they clearly never planned to make, by either clawing back the £3m in order to leave themselves with a free carry element or by offsetting the £2m of warrants they gained for their funding.
For case 1 the target could be the £3m and the desire could be to achieve as high a price as possible in order to maximise the free carry share element. 1.89m at circa 52p average sale price (the evidence shows that the majority of sales have come above 50p) delivers around £981,000, so they are potentially one third of the way there.
If so and they keep to their strategy then there are another 3.88m shares to go at 52p average. That may seem a lot but as the drill result date moves closer it is not unfair to expect that the buying pressure will increase. If the drill takes the full 30 days, then there are around 18 trading days to go until the result, which is on average 215k of shares a day, which is nothing in the grand scheme of things.
In the second case the £2m of warrants at average 48.1p would be equivalent to 4.16m shares, which would mean they have circa 2.28m shares to sell over 19 days = 120,000 per day.
Of course their strategy may be a combination of both but in the case of the warrants it is a no brainer because they can sell 4.16m shares now knowing if the first drill is successful they can acquire them back at a guaranteed price, which they know doubt will, likely shortly after they have sold them for a tidy profit.
So for me the minimum target is 4.16m with circa 2.28m to go pre-drill, with the possibility that there is another £3m to go from the placement, but as I said before their apparent comfort zone was 13.14%. 4.16m shares equates to 4.59%, which when taken from the 17.92% = 13.33%. So not far away.
Who knows?There are many options and only Lombard truly knows. What I am certain of is that as a minimum they will sell those 4.16m shares because they don't need to take the risk when there are warrants guaranteeing them that stake later down the line.
@Rosannan With all due respect there is no merit in comparing previous unrelated strategic reviews and their affect on valuations with AMER and attempting to establish a direction. None of them from what I can see even received an initial offer.
Each situation is unique as I indicated in my earlier post. Hence why I only focused (fairly loosely) on the average timescales it takes to review a public listed AIM company.
You are entitled to go in any direction you wish but in my view it is energy wasted.
Looking more closely at the Takeover rules I see that my thought process from earlier cannot be entirely right.
Even though M&P never made a formal approach their communication to the BOD that they were considering a possible offer was enough to trigger the Takeover process and would have required them to make a Put Up or Shut Up offer within 28 days of the initial announcement.
The commencement of a formal sales process by the AMER BOD interrupted this process and means that the Put Up or Shut Up rule (28 days) has been removed from the equation.
However, an announcement is required "when a firm intention to make an offer is notified to the board of the Target by or
on behalf of the Bidder (Rule 2.2(a))."
Furthermore, an announcement is also required when "the Target is the subject of rumour and speculation or there is an untoward movement in its share price and there is reason to believe the Bidder's actions have caused this"
"The financial advisers involved in the takeover offer will closely monitor both the Target's share price and sources of information relating to offers (such as newspapers and 6 newswires). The Panel must be consulted whenever there is a significant movement in share price over the relevant period or rumour and speculation about the possibility of an
offer, so that it can determine whether an announcement should be made."
So whilst the negotiations will remain behind closed doors, what each bidder cannot do is avoid a firm offer being made public. Therefore, the process has the potential to unfold far more openly. It will be interesting to see how that plays out in reality.
As it stands until there is a firm offer there is no deadline and the strategic review can in theory go on indefinitely.
@MadasaHat Thank you for coming back to me. I understand a little better now. Lets not over complicate things. September isn't all that far away so lets wait and see. I look forward to reading your updates in due course.
@Rossannan I haven't gone that far with it and do not think it would be of worth. Each process ran completely different to one another. each company was is a different position in terms of stability, stress, valuation to NPV etc etc. So it wouldn't for me add anything.
I merely wished to establish a rough expected timeline for the strategic review so that I can appreciate that within the context of where we are. It does look to me more than possible that all of the offers and counter offers will take place behind closed doors and it is the conclusion that we will see, be it to our exact liking or not.
After conducting a search of AIM companies that have completed similar strategic reviews and sale processes, I have thus far found 5 examples.
Company name - Strategic review start - Strategic review announcement - Time period
1. Netscientific - 26.11.2018 - 15.02.2019 - 2.5 months
2. MySale - 24.06.2019 - 20.08.2019 - 2 months
3. Realm Therapeutics - 29.11.2018 - 15.02.2019 - 2.5 months
4. EKF - 02.04.2015 - 18.08.2015 - 4.5 months
5. Frenkel Topping Group - 03.04.2017 - 27.06.2017 - 3 months
The comparison isn't perfect and the circumstances certainly cannot be declared as being the same, although there is some evidence of discussions with potential suitors. What is immediately clear is that the shortest time frame was 2 months and something up to 2.5 months certainly isn't uncommon.
AMER announced their strategic review on 19th July, so we are just 1 month into a process that is demonstrated as taking normally at least twice that time period.
It will be interesting how that times itself with the Indico 2 spud and drill result because from what I have read of the other strategic reviews, be they a limited list, the end of the review tends to deliver the result of how things will move forward.
One sizeable caveat is that AMER has declared more than one suitor that may or may not want parts or all of the business, which makes it more complicated.
The Frenkel Topping example was similar and their process took 3 months and ended with them accepting none of the offers put forward, although from what I have read of their review they look to have entered into the formal sale process in order to control the strategic review process and were not actually looking to sell out. AMER is clearly very different and look to be at the end of the line.
Still it sits as an example of how long a process can last when several potential suitors are involved. It also demonstrates that the conclusion of the review could signal the end of the process and deliver an offer(s) and recommendation from the BOD. Who knows? But for me another month or two should be allowed for before any anxiety over updates kicks in for sure.
@MadasaHat Apologies, I have only just picked up on your thread in full dating back to 21st May 2019. Firstly, thank you very much for your efforts and willingness to share your research and findings with us here.
You provide some very accurate timelines, which sits outside of what I understood them currently to be, which if true could improve the first production date that I currently anticipate for the plant.
Following the Q2 update searched high and low for the final EIA submittal without success. Do you have access to a document that can be shared here to verify this date?
Furthermore, how are you able to be so sure that the final sign off will be on or around 9th September? Please excuse me if these questions come across in a doubting manner, that is not my intention, I am a facts man that is why I always try to include documentation with my posts to verify my points, and so would always seek the same from others.
If you don't feel able to share this data then I understand. If we don't ask we don't receive.
Well that is certainly debatable.
In very simple terms if one looks at the current assets ($25.3m) v current liabilities ($26.1m), then there is very little to choose between the two. The trouble is the timing of the payments with the $11.5m outstanding payment for Coringa being the key headache.
However, on the positive side of things the company is holding nearly $7m in inventory, which potentially should gain some good value given gold prices are circa 15% higher. In addition, the company has another 6 months or so of earning potential prior to that final payment being made.
In addition, a good lump of the current liabilities is their outstanding secured loan, which going by the 2018 accounts, should also decrease by a good margin over the second half of the year. Therefore, their ability to re-negotiate or indeed replace this facility will have increased, particularly as they have now swung into profit and revenues are expanding.
That all said, I am not writing off dilution completely, but if it comes it should be fairly limited in comparison to the assets that it would be designed to acquire and the path those assets would then set SRB towards.
Coringa also requires development costs but again we don't know for sure how they intend to proceed, be it with a strategic partner or alone etc. What we do know though is that the PEA will confirm further sizeable resource, which can be employed as a security for further more expansive finance and this can only be helped by the increase value that higher gold prices will bring.
For me the gold price whilst perhaps seeing the odd correction along the way, will only strengthen over the next 12-18 months, which will fit very well with what SRB are attempting to achieve both financially and production wise.
So personally I do not have any concerns over dilution if it comes because the company's financial position looks solid and so the risk of the need to raise sizeable funds is limited, and the benefits of said finance far outweigh any loss of ownership along the way.
Good morning all,
H1 results demonstrated an average achieved gold price of $1,287 per oz @ R3.83 average = R4,954 per oz.
AISC was $1,085 per oz = $202 per oz gross profit = R774 per oz.
The Brazilian gold price over the last 9 trading days has averaged a price consistently above 6,000 real, which means that the average H2 price of gold as of today (53 days into a total 184 day period) = R5,497 @ R3.86 = R5,497 per oz.
That equates to a R543 per oz difference, which in theory currently increases that R774 gross profit by circa by over 70% and that figure is rising by the day.
For instance, a hold at circa R6,000 per oz and R3.86 exchange for the remainder of Q3 (39 more days) would deliver an average gold price of R5,710, which would equate to R756 additional gross profit, which if the same AISC cost is maintained would be a circa 98% increase on the H1 average.
The analysis isn't perfect as there are no doubt other costs attributable but then it doesn't need to be. One could easily argue that the current guidance should deliver increased production in H2, which will further reduce the AISC.
The key point for me is that H2 is well under way and each day the gold price is consistently above the current average price for H2, which itself is leaving H1 in its wake. That isn't reflected in the current valuation here or indeed the level of trading we are seeing.
I accept that the company has finance to find to pay the remaining circa $11.5m Coringa purchase cost by year end and that question mark may just be keeping the interest tamed. However, a consistent H2 in line with what I have just described above will certainly go a long way to assisting that cause and the strength in gold prices should give SRB better options for how they raise that finance also.
I actually quite like the fact that we don't exactly know how long it will take for the pilot well results to be announced, it will offset some of the games that are played in these interim periods.
What we do know is that all 3 wells are roughly the same depth it just that the test period for the pilot drill should be shorter.
In addition, I have read that the rig mobilisation is included in the 94 day programme, so that should remove 5 days or so. Then the rig will need to be relocated for both the A3 well and the Serenity drill, which fro what we have seen will likely take 4-5 days each. So the actual drilling and test times need to fit within a circa 80 day period. The mean average is around 27 days. That to me would then place the L2 pilot result at as low as 20 days but lets see.
@Fyoz with all due respect I believe you are over simplifying things.
As it stands the capital outlay to achieve 8,400 mtV actual production (10,000 mtV production nameplate capacity) will, in the case of Vanchem, take up to 5 years to execute. This decision was clearly taken in order to respect that same vanadium price cycle that is referred to under item 3.
Even on reduced earnings, which will highly unlikely remain the case over a 5 year period, the company is going to generate more income than it requires for the $45m refurbishment of Vanchem. It is therefore, as is the case with the majority of public listed companies, going to set aside a fair and reasonable cash balance that has sufficient additional leverage to ensure that this goal is indeed reached along with items 1 and 2.
Over the course of those 5 years there will come a point when the cash flows outstrip that amount. This is particularly true when one includes the additional staged production increases that will be achieved at Vanchem plus the additional revenues that a fully operational electrolyte plant will deliver. Therefore the situation will be one of expanding income and fixed (contingencies respected) capital investments requirements. Hence why the dividend will at at the appropriate time run hand in hand with the expansion to 10,000mtV nameplate capacity.
As time passes these dividends should grow and act as a means to demonstrate to the market that the company is expanding thus driving higher valuations.
If as I do you to date trust the management of BMN then any decisions on further acquisitions, whilst worthy of review, should be taken within the context of that trust, BMN's desire to build a substantial business and what that acquisition would mean for where we will have arrived.
After all they hold the rights to over 440m tonnes of vanadium and at 10,000mtV nameplate capacity will be the 3rd largest vanadium production company in the world and the largest outside China. So if they then decide the demand is there to expand further beyond that level of production then it will mean that the energy storage market has been realised and is large enough to cope with it. If so then by that point BMN will be at a higher enough valuation that any further acquisitions or indeed investment wouldn't take the shine off this story, whether there be dividends in play or not.
@Fyoz Nowhere in my last post did I refer to dividends. My post was centred around the company achieving closer to its true value once it becomes fully integrated and can demonstrate the revenue streams that come with that.
That aside the list you have enclosed refers to an order of priority but I have never believed that the company means one item needs to be completed prior to the others being activated.
In the end it will all come down to cash flows and that will be enhanced along the way by more production, alternatives sources of income, or indeed higher vanadium prices. The company's plans will have a fairly robust set of calculated costs against them. Once revenues start to exceed a level that gives the company security of its position on items 1-3, then item 4 "return cash to shareholders" will be activated and not before.
Vanchmem Acquisition RNS dated 1st May 2019
"The Company plans to finance the entire Consideration and associated capital expenditure from the Company's existing cash resources, future cash flows as well as, to the extent necessary, debt facilities which are currently being negotiated."
@Fyoz When BMN complete their plans and morphs into a fully integrated vanadium based energy storage business and the VRFB energy storage market is even in part there to have received it, then today's valuation will be a mere fraction of the true value that will be witnessed.
I would be so bold as to say that even those that deem this stock worthy of shorting at this time, if they do indeed exist, would agree with the above statement, and have merely taking advantage of the market fundamentals as they have existed here of late. But even that play like all others runs its full course eventually.
If as I do investors believe that the energy storage market will be there and that BMN can achieve their goals in a 'timely' manner and within their means, then great unknown catastrophes aside, that true value or something close to it will be witnessed.
To achieve it the company need only complete on a good percentage of the plans it has in play. It doesn't need to be operating at 8,400 mtV but it would certainly help enhance their offering. It doesn't need to develop Mokopone but again it would bring yet more enhancement to the table.
They just need to get the platform and the associated relationships in place and drive the market opportunity. That takes time. Energy storage is still just a baby right now and needs time to grow. However, it is a baby that is well fed and can grow quickly but it is about the fact it exists and will grow that truly matters.
The end game for me will happen and i have the necessary time to wait for it (I appreciate others may not) because it will in my view be worth it, which means this period right now, as dark and as questioning as it is, means nothing if I believe that said end game will be achieved and achieved by some margin.
I just need to remain patient and continue to check, review and even re-read the story as it unfolds in order to ensure that I remain focused on where it is going and not on where it has been or indeed stands as I speak.
@Larky again with all due respect to your opinion, whilst that looks good on paper it simply isn't the reality of how a well run business should be operating. That is far too speculative and short term a move and BMN to date has been built on strategy and getting ahead of the market with intelligent investments both externally and internally.
If the Mokopone license were to land and the company wishes to push on with its reported $20m investment there, then it already has front end commitments of $88m even before we start talking about the development of Vanchem, the electrolyte plant, and any further investments in vanadium rental products or indeed VRFB projects.
Now I have no doubt that the IDC, at least in part is going to come through on the electrolyte plant. There may be other ingenious methods for reducing the expenditure on some of these other investments. One good example is that the Vanchem purchase price may well get revised down once working capital movements have been accounted for. The European FeV price is down circa $10 per kg alone since the 1st May announcement, which very simply put halves the profitability of any inventory held at Vanchem.
That aside and even assuming these good ideas come through, we are back to that $88m figure. Even a further delay on Mokopone, which to be clear isn't required now that Vametco has demonstrated sizeable further resources are available, still places us at $68m, which as far as I can see cannot be covered by current 'attributable' cash and 2019 income. Therefore, debt is going to be needed and the company is not going to be helping its cause by expending cash resources on a buy back at a time when it wants to be demonstrating to a set of banks that its balance sheet is strong enough to justify their trust.
It is in my opinion important not to lose sight of the reality of the current pricing environment when looking at how strong a cash generative position BMN holds.
That is why with such a strong existing and available resource at Vametco, the development timing of Mokopone even with a signed off license, will no doubt be thought through very carefully by the company prior to executing. The balance between driving debt in order to pursue their plans and ensuring their gearing is kept in check, will be key. I have no doubt that FM and Co will air on the side of caution until Vanchem and Vametco have really started to deliver added volumes.
(2 of 2)
The above incentives are all effectively triggered by Vanchem and that transaction must be closed without any of the above help.
So right now existing cash is about supporting and closing that transaction and opening up the path to increasing production and wider non cyclical based revenue streams that are more greatly supported by operating cash flows as opposed to currently more limited post tax profits. It is not about a dividend bandage designed to make investors feel more at ease with the current pain they are feeling.
I said the other week, if investors are here for the long term and the rewards that should entail, then they are going to have to endure a little pain in order to get there. That remains the case right now but as I have demonstrated above there is much to like about where BMN is positioning itself and how strong its position will be once some of the key transactions have been completed and the belief in the growth of the company is further cemented.
(1 of 2)
@Fyoz With all due respect a dividend is not the answer at this stage and would only hinder BMNs growth not assist it. If the valuation is going to rise here then it has to be built on foundations that are built from far stronger materials than a dividend.
BMN is a growth company on a steep curve and with growth comes growing pains. But what we want to see at the end of it all is a strong individual that can handle any and all knocks that the investment cycle can throw at it. In the meantime, it needs to protect its capital and employ it to the best of its ability to achieve the growth plans that have been set out by the company.
By doing that and demonstrating to the market that it can fund itself, that it can grow even when the market is against it, will set it up for far greater and more successful times down the road.
The first goal here is to complete the purchase of Vanchem in a manner that protects existing shareholders interests. Subsequent investments in the plant should then be far more beneficial to the company as they should be taking advantage of the 12I Tax Allowance Incentive to expand Vanchem and perhaps even Vametco at a later date.
The enclosed website page explains very clearly what is on offer and how "preferred status" is achieved, which in the case of what BMN is proposing to achieve, should not be too taxing.
"55% of Qualifying Assets or a maximum of R550 million investment allowance in the case of any Brownfield project with a preferred status"
"The Investment Allowance may be deducted from taxable income in the financial year when assets are brought into use (start of production)."
A staged development of Vanchem employing this scheme, whose application scheme currently runs until March 2020, should allow BMN to deduct the full $45m of investment proposed for Vanchem from their taxable income.
Furthermore, the positioning of the electrolyte plant within the East London SDZ also creates a set of tax incentives, which afford BMN comfort even during reduced income periods (See pages 12 and 13 in the first document below).
The 2nd document below gives a good example of what this basically means and what is needed to achieve said status.
The company must be incorporated in S.A. Hence why BMN have incorporated Bushveld Energy (Pty) Limited6 as their "energy development" company in S.A.
That unlocks 15% corporation tax instead of 28% and allows access to the same 12l tax incentives listed above but on a greenfield basis rather than brownfield.
@oilheadgame You are entitled to share your opinion but I feel the comparison with ECO is flawed.
Whilst the neighbouring blocks to ECO had already found massive oil finds, the risk reward for ECO still remained substantially below what we have here with I3E.
Furthermore, ECO peaked at 94p on 14th May but the day before the spud was sat at just 72.2p, which when we compare to the day prior to the well result (68p), equates to circa 5.8% lower only and not the perceived average 24% drop you have demonstrated in your post.
If the same were to happen here then we are talking 48.5p. Whilst we would all like to achieve the lowest buy in price we can, thé amount on offer through your theory is too low for me given things could just as easily go the other way.
It is important to remember for the ECO drill that "the targeted prospect is(was) estimated by the Company to hold 250mmbbl of gross prospective resources and the Chance Of Success is estimated to be 44%.
Whilst the neighbouring block has been prolific with its discoveries, until Jethro came in the recoverable resources for the first drill presented the chance for ECO to secure circa 37.5mmbbl as the holder of a minor interest. It is that position and the 44% COS that will have guided investors through the spud and up to the result.
I3E isn't drilling for prospective resources. It already has 11m barrels of 2P reserves when the 2P 38m STOIIP is measured at 28% recovery. However, the neighboring block in the same Captain Sands play has already demonstrated that 50% recovery is achievable. Thus that figure should rise to circa 19m when on production.
The pilot drill should then boost the STOIIP upto circa 58mmbbl and circa 29mmbbl recoverable oil. That takes I3E above the pre-drill expectations of ECO on a pilot drill vs exploration drill. That alone positions the 2 firms at this stage some distance apart in terms of risk reward at the same stage of progress, and it is that which will ultimately drive the decision to hold or bail.
I acknowledge that ECO post drill has potentially far greater resources to recover but I3E holds 100% of its license, has a plan and a proposed debt line to get it into production and on a far quicker timescale, such that it will likely have far greater capital at its disposal through revenues before ECO even gets into production, and thus can employ that capital to expand its footprint and grow.
So there is plenty of info out there to dispute even that 5% drop prior to the drill result here.
To be clear I do not believe there is any true worth in comparing ECO and I3E but wished merely to highlight how dangerous it is to merely throw out share price figures without getting into the detail and understanding the drivers behind these share price moves.
ECO at £132m valuation on spud is sporty. I3E at £48m looks very light given what I have just explained.