I suspect if Ganfeng are playing nice then the further investment would come shortly after they have established the reduced construction cost and programme for the project.
So somewhere around 6 months from now given the fact that close to 2 months of the allocated 6 month period post strategic investment sign off has now passed.
If so then things should look very rosey around here as BCN construction costs exposure would be substantially reduced.
Good news this morning once again and everything looks very much like it is ticking along nicely. I haven't posted for a while because quite frankly I am very content with where this is all heading. Once Chinese investors establish a target there is generally very little that knock them off course.
For me thoughts would be better concentrated on when and in what form the next Ganfeng investment in Sonora is coming because as the quote below strongly indicates, it is coming.
"We are continuing to progress the approval process in China in order to complete our initial investment in Bacanora Lithium and its Sonora Project."
This is going to be very intriguing to watch. The size of the risk reward clearly points to a valuation substantially higher than where we are now prior to first drill result.
However, there is clearly some selling going on be it placement or warrants, which thus far is countering this. I have searched high and wide for the approximate individual drill periods but without success. 94 days is the full drill programme but that included rig mobilization.
Given the first drill is the pilot and may not be tested, one would expect a shorter time frame. So we could be looking at 20-25 days, which would place the numbering of trading days at circa 14-18 days if the drill commences by Weds 21st August. That's not a lot of time.
So something has to give here because that reward has in my view got to be attractive to a wide AIM audience.
Apologies formatting issues this morning after what felt like a very long night with a sick young child.
The key points can all be found in the EISP Paper for those that don't wish to go too far into the detail.
Item 1 : " The project was approved on March 19, 2010 in the amount of US$3,750 million (IBRD loan), and became effective on May 31, 2010."
So the project loan is signed off.
Item 2 : "To achieve the PDO, the project supports the financing of: . . . a 100 MW concentrating solar power plant (Kiwano CSP)"
Item 3 : "The IBRD loan is 81 percent disbursed (as of November 28, 2018). A significant part of the remaining amount (about 6 percent) is currently allocated for Kiwano CSP (now proposed to be a battery storage program) and the main element
of the proposed restructuring."
So the money is there it is simply waiting on Eskom.
In the Eskom Renewables Support Project, which is the restructuring of that Kiwano CSP Project we find that ,
"The estimated allocation from all financing sources for the original scope of Component 2 (Kiwano CSP) amounted to US$1.197 billion to deliver 100 MW generation capacity"
"The estimated joint financing (CTF, IBRD, AfDB) for BSP is US$655 million for delivery of at least 525 GWh (1,440 MWh
storage per day) of energy through at least 360 MW of storage capacity"
So not only is the money there already but the BSP Project as it stands will cost $545m less than the original proposal.
Therefore, there is a strong argument to be had that Eskom's known debt pile will actually reduce by close to R8.2 billion.
Now isn't that a news worthy story? No because there is nothing truly sensational about it in the current Eskom climate.
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In the World Bank CSP Restructuring paper (see post 1) we see the following ;
(Page 13 Item 28) "All the sites selected in the proposal would require a basic Environmental Impact Assessment (EIA) that takes about 197 days."
(Page 14 Item 30) "NERSA has decided that generation licenses will be required for Battery Storage systems. It will be a four-month license process. Eskom has engaged with NERSA and will submit a license application for each site in December 2018."
For the basic EIAs "Eskom teams requested for proposals in July 2018 from independent EIA consultants as per Department of Environmental Affairs (DEA) requirements."
The reality is these regulatory processes could just be taking more time than anticipated. Cue the electrolyte plant in East London as a prime example.
The World Bank highly likely would not turn down an extension of time request based on regulatory approvals outstanding, if indeed one was required (still in agreed project timeframes).
Yes there could well be other issues that we do not know about but the sensationalist approach by City Press is just that. Phase 1 of the project, which is the only element of the project being developed at this time, is fully financed along with the battery element of phase 2, and it is on terms better than Eskom bonds rates (I have seen as high as 13.25% in some circumstances). So it has nothing to do with Eskoms ability to raise debt nor can it be said that it was not included in the total debt pile declared by Eskom in its last set of results. How can it be when the loan has been around as far back as 2010 when it was a CSP element of the EISP project that funded the now notorious Medupi power plant.
What we appear to be staring at is the usual procrastinations that we see in SA SOEs and the regulatory organisations that are supposed to be supporting them.
That may change but we would be all wise to thoroughly check what the press of S.A. Is trying to tell us because if nothing else it is biased and at times a tad bit lazy with its research.
Sorry 3 not 2
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Nowhere is this better demonstrated than in the EISP Restructuring Paper from Dec 2018. The document is a World Bank led paper but the funding for the EISP is a $3.75 billion loan from the IBRD.
Item 3 on page 6 of that document states the following ;
"The IBRD loan is 81 percent disbursed (as of November 28, 2018). A significant part of the remaining amount (about 6 percent) is currently allocated for Kiwano CSP (now proposed to be a battery storage program) and the main element of the proposed restructuring."
So both the CTF and IBRD elements of the battery storage project loan are agreed such that the $468m battery storage project can proceed once Eskom concludes its documentation.
Then we are down to simply the 60MW of localised solar that will be positioned at each site and will be Eskom /ADFB financed.
However, that has absolutely nothing to do with phase 1 or indeed the 300MW of battery storage that will be required over the 2 phases and is fully financed already.
So the R10 billion claim is false as far as I understand.
Then the article moves on to the World Bank May update and the insinuation that the project has been further delayed whilst environmental approvals are sort.
To be clear the article is referring to World Bank statements that were made as far back in July 2018 and which led to the above restructuring paper.
The City Press article states ;
"In 2017, the World Bank accepted Eskom’s proposal to convert the project to battery storage. Eskom was expected to go out on tender in April this year and complete the project by October next year."
"According to the World Bank documents, environmental approvals must be obtained for the various premises and the National Energy Regulator of SA must also give the green light."
"Eskom said it would be difficult to say exactly when the approvals would be in place. In the meantime, the World Bank has granted an extension."
"Eskom has not said how long the extension is, but Rapport has established that it will only be for a year."
The October next year statement refers to Phase 1 completion only. The actual overall project deadline is now set at
The restructuring paper from December 2018 clearly states that the project deadline was extended to 31st December 2021. So whilst phase 1 is running late it is still well within the overall project timelines, so cannot be designated as requiring an extension.
What this all boils down to is Eskom's ability to go out to tender. In order to do that they require the environmental approvals, which are essentially outside their control and noted as such above in the quote employed by City Press.
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Good morning all,
I note the article from City Press that was posted last night.
In my view, and I press this strongly, the article is opportunistic in its nature, cobbling together selective details on the BESS Project in order to create a doubt that isn't substantiated. Nor does it clearly demonstrate any changes have occurred to the process other than the rather predictable "Eskom sources."
The BESS Project (formerly the CSP project element of the Eskom Renewables Support Project) has a total estimated cost of $661m (thus the City Press 24 R10 billion eye catching figure).
On page 5 of the World Bank restructuring paper, which is effectively the latest key document relating to the BESS Project itself (more on that later), item 14 is very clear when it states ;
"There would be no change to the financing instrument, which would remain a CTF concessional loan."
Item 2 page 3 also states ;
"The estimated joint financing mobilized for BSP is US$661 million – of which US$195 million from IBRD and US$273 million from CTF - for delivery of at least 525 GWh (1440 MWh storage per day) of energy through at least 360 MW of storage capacity -- 60 MW of cumulative new solar PV capacity (Eskom-owned) and enabling optimal use of 300 MW of
Variable Renewable Energy (VRE) from the Renewable Energy Independent Power Producers (REIPP) program."
"Of this amount, at least US$468 million will be for battery storage and the balance for Eskom-owned solar PV plants
and technical assistance, financed by Eskom and the African Development Bank (AfDB)."
Firstly, the battery storage element of the project of which 800MWh forms phase 1 is being funded by "US$195 million from IBRD and US$273 million from CTF " = $468m of concessional loans, which have already been approved by the banks that are providing it.
For those that do not appreciate what concessional financing means there is this from the World Bank IDA ;
"IDA lends money on concessional terms. This means that IDA credits have a zero or very low interest charge and repayments are stretched over 30 to 38 years, including a 5- to 10-year grace period. IDA also provides grants to countries at risk of debt distress."
To be clear the World Bank document only refers to the CTF element being concessional funding but what must be understood is that the group of banks involved is made up of what is called multilateral development banks (MDBs), who are directly linked to the CTF and are taking part in this and the EISP project (Eskom Investment Support Project) as part of a World Bank led initiative.
@JTD Personally I don't believe we are yet at the point of concern over the Indico-2 drill. It has still 'only' been 3 weeks since the 29th July update and the to date limited history on CP0-5 supports an argument that ONGC will take between 5-7 weeks between drills.
Indico to Calao 1 = 33 days
Calao to Sol-1 = 46 days
There is an argument to be had with the 6.5 weeks was between Indico-1 and Calao-1 that there was at the very least discussions/disagreements between the partners over the strategy that stretched that period out. On 26th March AMER stated clearly that the Indico-2 appraisal would be next but after the long wait came Sol-1.
Whatever the reasoning the form says we have up to 3 more weeks before the drill start and until we are beyond that point there is little factual evidence to suggest that anything else is going on.
Yes frustration is understandable but the investment case is improving considerably here simply because the gold price is so strong and showing signs that it intends staying that way.
Gold price in Brazilian Real now hovering around R$6,130 and I have the SRB H2 average price at circa R$5,400 (after 46 days) and rising. That is (potentially as other costs must be considered) a rise of circa R$450 above the circa R$770 achieved above the AISC reported cost for H1.
That's a rise of 58% to date.
Another 46 days at R$6,000 per oz and Q3 will come in at circa $5,700, which would be a near doubling of that R$770 figure.
There is a lot to like about that, so patience needed to see it all work through.
@Phoebus fully appreciated and welcomed. Placing the wildcat terminology to one side, it was an exploration well with a 44% COS. L2 is a pilot well and comes with 90%. That alone alters the "market dynamics" considerably and changes how investors would feel about holding through the drill etc.
As do the warrants and the lower placement prices for I3E I might add, thus rendering the two incomparable.
Still as with HUR I feel there are far more sticky fingers here than appreciated but lets see.
The best comparison I can find (and even that isn't perfect) is the HUR Lancaster pilot drill from 2016.
I won't regurgitate it all here because I have posted the numbers before but for me it is strong evidence of the appetite that should be expected here as we draw closer to the 1st well result. Its just about how strong the headwind is on the way.
Personally I very much like the risk reward on L2 and that alone should be more than enough to put this whole warrants episode well and truly to bed.
@Phoebus It dangerous to start making comparisons between oil plays with such differing outlooks.
ECO 15% minority working interest in a 1,350m deep wildcat drill and valued at £132m the day prior to the spud
I3E 100% working interest in 100m deep pilot well drill and valued at now under £45m even before the spud.
One can make an argument that ECO even at 15% were after larger extractable resources but the risk reward is still incomparable given L2 should deliver I3E their RBL and thus their path to actual production by 2020.
That all said ECO was priced at 72.2p the day prior to the spud and 68p the day prior to the result, so we are talking a circa 5% drop only over the 39 day drill period.
This is about the warrants and the placement shares and how many want to sell out and de-risk prior to the first drill result.
I strongly believe that the percentage is far lower than many think because the first drill has such a high COS and delivers sizeable production to the company. But we will see as the next 40 days or so unfolds.
In addition, if we are going to allow ourselves to include what our gut is telling us given the way the company has gone about talking about this project, then there is every reason to believe that BMN feel very confident about their ability to be successful in this tender.
It is clear that BMN have through the IDC (remember those levers FM talked about) enabled this project to come to fruition, If that is true then they have had ample time to plan for it and thus give themselves the best platform fro which to strike at it.
If that is true then the plans we are seeing and their timing, whilst perhaps running late on some fronts, do not lead to a situation where that confidence emanating from BMN is diminished in any way. Thus the leasing model for me becomes more of a feature than the electrolyte plant, although the convenience of the delays to the Eskom BESS project and the support it gives to equally delayed BMN energy storage platform elements, is not lost on me either.
We can run the programme and analyse the likelihoods based on what we think BMN is about but something just tellls me that BMN are more than prepared and they have an angle or an offer that is strong enough to succeed here.
I also think that once the tender does come out and BMN start making their case more public, we will start to see just how important a cog this project is in the grand scheme of what BMN is planning to do in S.A. and on the world stage.
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If they went to China then for me they visited BYD and that means at least one sizeable player is making up the competition (as should be expected for such a big project).
So BMN need to be as prepared as possible for it.
That said with vanadium prices falling (here comes those advantages we talked about) BMN and their partners have the ability to source vanadium/electrolyte from elsewhere. In addition, they now have a leasing model, which I am absolutely certain will be unleashed on the BESS Project if not before. So perhaps the electrolyte plant is a red herring.
For those now worried about BMN's ability to defeat a major Chinese battery producer (if they are indeed involved. Remember they have a battery at Rosherville too), we must not forget home advantage or indeed the home supporters who sit on our bench.
Local supply chains and local beneficiation remain key and are central to Eskom tendering policies. A company that can demonstrate an ability to create value from locally mined resources and add a great many new jobs, be it they may be triggered by this project as opposed to being a direct participant in it, has a very strong case for winning at least part of the 300MW, a figure that itself is split over 2 phases meaning 2 bites at the apple.
Furthermore, BMN has the IDC in their corner with all of their regulatory and political might and whilst S.A. politics often works against our goals, their make up and their needs can also be made to work for us as well.
So I remain confident that the project is coming and that it is about the process rather than any change of policy at this time. I am less inclined to believe that local electrolyte will play too much of a part in phase 1 but that BMN will leverage what they can offer in the future (jobs, value creation, export potential etc) in order to win enough of this project to make it count.
Note - Remember BMN stated that local assembly and manufacture would be established once they meet critical mass on projects. which if I remember rightly was around 25MW. So they don't need much to move things on substantially with their fully integrated platform model.
However, I feel BMN have enough weapons in their arsenal to mean they can highly likely secure contract wins on the BESS project once it is in play.
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@Halespur As far as I can see there is no reason to believe that the project is under threat at this time.
Looking at things logically, first of all the cost of the battery storage element of the project and in particular phase 1, which is purely a battery storage element, is fully funded (See attached document page 9 item 33, under IV Risks) through concessional funding.
The 60MW of solar PV requires the IRP to be updated and "Ministerial Determination" to be given but that is a phase 2 item and completely independent of 300MW of the total 360MW of battery storage assigned to the project.
So despite Eskoms well documented financial problems there is no reason to connect the two or believe that this would derail the project.
Therefore, if there is to be a delay, as perceived by S.A. standards, then it is likely due to the completion of the processes leading up and including the completion of the bid documents.
I note that BMN management have stated fairly recently (please excuse me the exact date and time fails me right now) that the project is due to run until 2022. As far the latest visible World Bank document is concerned, the revised date stands at December 2021.
However, this was based on timelines that delivered the bid documents no later than 15th March 2019 and the revised verbal communication from Eskom are already at "middle of the year." So 2021 already looks sporty.
In all honesty as much as we would all like to be cracking on here and for the BMN puzzle pieces to perfectly fit together, the reality is as far as i can see, that the electrolyte plant is going to come on line later than originally planned. My view is start of H2 2020. This is because the latest company announcement stating "the EIA has passed the public participation stage and it is on track to be completed this year" demonstrates that there are likely another 18-20 weeks (see 2nd enclosed document below APPROVAL and PUBLIC REVIEW) to run before this process is complete and BMN have stated that construction will only start once that process is complete, be it that the design is being completed in advance.
However, I would much rather see BMN approach a delayed BESS project with more weapons in its integrated arsenal than the tender come out earlier and BMN not be as ready as required. It should be noted that item 27 of the World Bank document states ;
"Eskom and Word Bank teams conducted technology and market reviews (visiting battery storage manufacturers in
United States of America and China for both Solid State and Flow technologies) to assist them in deciding on the
most appropriate procurement process."
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Energy storage has great support in the growing fears for the world. That is catalyst enough to support the necessary regulatory and financial shifts we are already seeing to support substantial energy storage execution at an appropriate point in time in the future. (A key fundamental)
More importantly, BMN has itself and it dogged determination to bring energy storage to the world through the leveraging of its own resources, and it is that added stronger frontier that really has me believing in where BMN will end up.
With such abundant high quality resources, low cost production, a debt free (right now) business, and (effective) first mover status on the integrated platform but also a vanadium leasing model, BMN has all the tools to deliver a strong fully integrated platform even if energy storage and VRFBs don't go on to deliver the sort of results that are being discussed in the wider market. They have the ability to become the focus point of the VRFB sector because the moves they are making/planning are substantial when placed in the context of what the industry has achieved to date and that should never be forgotten. BMN aren't just taking part here , what they are doing is help drive the direction of the industry.
BE don't just chair the Vanitec Energy Storage committee, they started it, they introduced it, and at a time when they were very small and the other members were some of the biggest names in vanadium.
Fully integrated models with ownership along the full value chain is how VRFBs will truly succeed. BMN are at the tip of that change
If investors believe that BMN can make a success of their platform then there is a very strong argument to invest or remain invested.
If investors believe that the wider market projections are realizable then that case gets all the more secure.
Then it becomes 'merely' about timing and those trigger points once more. The wider market is certainly distracted elsewhere by more readily available and better understood opportunities. That's life in investing and BMN is certainly not alone there. Furthermore, BMN haven't as yet delivered enough certainty to the market as to what all of these energy storage based developments mean to them as a business but its coming. . .
BMN as always play their cards close to their chest. They certainly don't break things down in order to impress the market or sustain their interest, that's not their style and arguably never will be. They are a team of doers and are reserved in their methods when it comes to talking to the market and selling themselves.
It has always been that way and in the end it didn't matter because the outcomes were worth it.
I see the same happening with the energy storage arm such that when it does come together enough to be appreciated by a wider audience, BMN will indeed be flavor of the month once more and the next phase of growth and understanding will be upon us.
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Right now some of that reasoning as to why I remain.
The big game changer here is the potential that comes from energy storage.
BMN have made great strides in setting up their fully integrated platform, which itself is market leading merely because it almost fully exists and they are effectively the first to do it (certainly the first outside China). Others such as AVL talk very confidently about the virtues of being fully integrated, others employ the words but don't appear to show signs of how they are going to get there.
By being the first BMN have effectively stolen the same march on the competition that they achieved by buying Vametco at the bottom of the vanadium market. That demonstrates very clearly the quality and consistency of the management team that is running BMN, a point driven home by other more prominent contributors here yesterday.
It may sound too good to be true or too simple in its make up but the BMN management team is executing the same first come first served mentality that drove this business out of the junior miner pack and into that very small inner circle that makes up pure producing vanadium producers today.
To date it could be strongly argued that the limited elements of that fully integrated model that are on show, which will change what BMN is and how it is perceived as a business, are receiving very little recognition in the valuation. That there are various pieces in play is clear but none of them to date have come together in a manner that the market can understand. That is understandable given the fact that it is a model that has never truly been seen before. because it is striving to deliver something that the world has yet to see achieved at a commercially successful level.
Those that live and breathe this sector and this stock often find it difficult to understand why the market hasn't, isn't understanding this market more, and the question of when will they understand is the million dollar question and what makes investing in new ideas so intriguing and potentially so rewarding.
If we are brutally honest with ourselves what they have actually achieved to date is very little when seen in the eyes of those that do not follow this sector or story closely but its coming. . .
Bit by bit, piece by piece, BMN continues to build the elements of their platform. As an investor my focus during that phase is to ensure that they continue to achieve it all without taking too much away from what I already have.
As they build a trigger will eventually come along. It may not be the trigger we all expected but in the long game it isn't about which exact trigger, it is about the fact the trigger exists and will happen.
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Following my series of posts yesterday on some of the realities of BMN life today as I see them, I would like to share some of the reasons why I am still heavily invested here. Before I do I would like to share the following :
Note - For the record I never at any point stated that current S.A. politics was having a new impact on BMN. I merely answered a question directed to me by Daitom on the subject. In order to debate fully we must first fully understand what the person we are debating with is actually attempting to convey.
S.A. politics as Daisan pointed out has always acted as a dampner but when the SP was flying it was more politely tolerated. When the valuation is under pressure it becomes more of an issue but the same rules apply. S.A. companies traded in the UK are struggling to improve market sentiment towards them, however good the story might be and right now Ramaphosa is not improving that situation as much as was hoped. Perhaps that will change but investors would be wise to follow S.A. politics as closely as they do the vanadium price.
To be absolutely clear, my series of posts from yesterday was centred around this key theme that i wrote in my answer to Endion yesterday ;
"I never said that the market has valued BMN fairly. I focused in on the rhetoric that BMN right now deserves to be considerable higher in valuation, and I indicated that this is perhaps wrong because not all factors are being considerable fully."
I also greatly appreciate the posts by Sanchez599 (20.36pm) and in particular Ophidian (19.55pm), which finally demonstrated that what I had wrote was actually being fully appreciated for the context by which it was meant.
Lastly, I thought the post by Serenus at 20.08pm was a stand out contribution yesterday from a relatively new shareholder who is in that group of individuals who are underwater but can clearly see the long game is the right game right now.
Nothing goes up in a straight line and even the best growth stories have lulls or times when they aren't the flavor of the month, that is particularly true in mining. However, the key is that the fundamentals that are central to the story continue to hold their course and the company's actions along with it. That in my view remains the case with BMN such that its popularity at the investing polls remains about when and not if. Newer investors that believe in this story are in my opinion going to have to dig in, hold the line and wait because when this all comes together the rewards should show themselves to have been well worth that wait and the pain that came with it.
This very much has the feel of a share that is building strong pressure for a move north. Gold looks to have serious support as the market looks to be going more and more on the defensive. Something /someone is capping the gains for now but when they stand aside it should get very interesting indeed.