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@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.

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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.

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@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.

https://www.thedti.gov.za/trade_investment/export_incentive.jsp?id=45&subthemeid=26

"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).

https://assets.kpmg/content/dam/kpmg/ng/pdf/tax/ng-incentives-in-africa.pdf

The 2nd document below gives a good example of what this basically means and what is needed to achieve said status.

https://businesstech.co.za/news/business/299640/the-tax-benefits-of-a-special-economic-zone/

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.

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.

Morning all,

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.

http://documents.worldbank.org/curated/en/929211544210220055/pdf/Disclosable-Restructuring-Paper-Eskom-Investment-Support-Project-P116410.pdf

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"

But!

"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.

http://documents.worldbank.org/curated/en/390371543618515176/pdf/Disclosable-Restructuring-Paper-South-Africa-Eskom-Renewables-Support-Project-P122329.pdf

http://documents.worldbank.org/curated/en/929211544210220055/pdf/Disclosable-Restructuring-Paper-Eskom-Investment-Support-Project-P116410.pdf

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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."

Here's why.

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."

http://ida.worldbank.org/about/what-is-ida

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.

http://documents.worldbank.org/curated/en/390371543618515176/pdf/Disclosable-Restructuring-Paper-South-Africa-Eskom-Renewables-Support-Project-P122329.pdf

@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.

@JoeCreed May I inquire as to where you have seen this information? Thank you in advance.

@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.