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@Colt45 Yes very well pointed out although it does raise more questions than answers. The Oak Trust employs the same registered address as Bushveld Minerals and are seemingly now the holder of a considerable number of shares in the company. Whilst it is clearly not down to BMN to ensure these updates are filed in timely manner the outcome does nothing to assist with the removal of the confusion associated with YD, particularly when the buyer of the shares are registered to the same address as BMN.

I also note that the Orange Trust (no mention of Oak Trust) are a major shareholder in ATM.

I would add that whilst the Indico-2 spud does create a rather unique ticking clock scenario in terms of how it may potentially affect the approach of potential bidders, the fact that we have still not had an official offer, means there should still be some way to go before the bid process is concluded.

There were 40 days between the Indico-1 spud and the initial oil column result. There were then just over 3 weeks until the flow rates were confirmed. There may well be a speedy/hurried and successful bid prior to the Indico-2 result but right now the percentages say that Indico-2 will certainly spud and be well on by the time any realistic bids are received/considered/refined. Unless the offer is a good one then for me the BOD would be well within their rights to await the outcome of Indico-2 prior to responding to these bids, whilst fully respecting takeover code prescribed time frames of course. My point being that I believe even with another 3 weeks wait there is every chance of getting close enough to the Indico-2 result to ensure that its outcome is concluded prior to a bid being accepted (said speedy/hurried successful bid respected of course).

There were 6.5 weeks between the Calao-1 drill result and the spud of Sol-1 and 4.5 weeks between the Indico STT result and the Calao-1 spud. However, at the time of the Calao-1 announcement AMER stated that the next drill would be at Indico. Then Nathan Piper in his interview from 17th April stated that further to the analyst conference call (exact date fails me but it was post 9th April Final Results) the next drill would be Sol-1.

So there is an argument there that the Sol-1 spud was perhaps extended by these discussions but its a very loose one at best. Whatever the case ONGC have demonstrated that it takes them on average 5.5 weeks from the end of the last drill until the spud of the next.

It has currently been 1.5 weeks since the Sol-1 update so on that basis my own view is that we are looking at minimum 3 more weeks possibly 4. Perhaps they will turn things around quicker this time but personally I don't see the leopard changing its spots too much. So on the limited information we have had to date we likely have (unfortunately)a while to wait yet for the next spud.

@ColonelDrake In addition to my last response, I would offer the following extract from the I3E Final Results RNS dated 31st May 2019

"On 9 April 2019 the Company announced that it had executed a contract with Dolphin Drilling Limited ("Dolphin) to utilize the Borgland Dolphin semi-submersible drilling rig for a 94-day programme which is due to commence between 15 July and 15 August 2019."

I appreciate that delays can occur but the programme (not drilling programme), which should contain contingencies is designed to take 94 days in full.

Furthermore, the company goes on to state ;

"The drilling commencement window was agreed by the Company and Dolphin to ensure the availability of necessary equipment and to provide adequate preparation time to crew and mobilise the rig from its current mooring location in Norway."

So the rig should be ready if Dolphin have got their dates right but if they haven't then it is they that have bought into the programme and where the emphasis will be to deliver.

https://ir.q4europe.com/Tools/newsArticleHTML.aspxsolutionID=3508&customerKey=i3energyltd&storyID=14330781&language=en

@ColonelDrake Perhaps I should have been more specific in my wording, such are the trials and tribulations of attempting to post one's exact view point on these BBs.

The rig mobilization is indeed critical if the estimated spud date drifts too far. However, given that we are still inside the indicated timelines published by the company, it is for me not a concern at this time.

Furthermore, there is no guarantee that weather will delay the drills. As an example I refer back to my house favorite HUR. Back on 9th November 2016 HUR spud the Lincoln well and by 19th December the well was successfully completed. I absolutely 100% respect the fact that the North Sea can be very rough in Winter but I refuse to buy into a problem that right now does not materially exist and where examples can be seen of drills achieved beyond these anticipated cut off dates.

This is particularly true when considering that it is the first 2 drills that are actually key here. L2 delivers phase 1 and the RBL facility. A3 delivers Liberator phase 2 and potentially 40,000 bopd by 2023 even without Serenity. So if worst case scenario Serenity did indeed need to be delayed then it does not stop I3E delivering Liberator in full as planned, and that is more than enough to deliver considerable returns from these levels. Yes the Serenity drill would likely come at a higher cost but by that stage it would be immaterial compared to the revenues being generated from 2020 onwards.

I repeat, I respect the validity of your concerns but not the magnitude at this juncture.

Morning all.

Whilst in the grand scheme of things it really isn't critical as to when the rig actually moves, I would point out that there has been no signal from the rig for the last 12 hours or so, so we actually do not know.

That aside, even with the various current market headwinds we are clearly seeing driven by fears of oversupply and the trade war between the US and China, the current MC for I3E going into a 3 drill campaign of this magnitude and with this sort of chance of success, is simply far too cheap. Yes there may be potentially institutions selling into the rise but in my view the risk reward at these levels will see substantial interest as we move through the spud and up to the first result.

That is because the COS of the first drill when coupled with the fact that it will form the basis for the RBL decision, which in turn guarantees first oil, is such a significant catalyst for value, that the gap between said end value and what we are seeing now is simply too high.

I repeat my previous analysis of HUR, which was valued at £167m (17p a share) at spud of the Lancaster pilot well and £373m (38p a share) on the day the results of the pilot well were announced, and that was in a year when Brent was trading at just $44 a barrel.

One could argue that the appetite for oil stocks is lower than in 2016, one could argue that HUR had a greater initial oil resource to unlock but oil is even after recent shocks still trading some $16 a barrel higher than 2016 going into these drills. Plus I3E require $100m to develop Liberator phase 1, which will reportedly come through an RBL. HUR stated no intention of employing a dilution saving RBL and had a reported development cost of $240m prior to Lancaster pilot drill.

Bear in mind also that HUR issued over 347m (some 55% of the current total shares in issue) new shares to fund their drilling campaign just 2 months prior to the drill commencing at a price of 15p.

Yet after the pilot drill the SP still reached 38p and the company was still valued at £373m.

Even if one applies discount by ignoring the stronger oil environment and the substantially lower development costs and instead presses home any perceived disadvantages that I3E carries, it is still a long drop from £167m to the current £75m (fully diluted) we are seeing given that I3E when fully diluted will have another £27m in the bank and has already offset drill costs until first oil.

In my view I3E is cheap and the institutions know this too and so the sell off will be percentages driven and the demand for shares in the lead up to the pilot drill result will be high because it is a very solid drill with very solid potential and that is always going to be popular.

Lets me be absolutely clear here I am not for one moment saying the right men/women are in charge, I am saying that the quality if the asset and its proximity to a very lucrative gas market mean that I am willing to give the management team some slack because they never had an asset this good under their control.

At these sorts of valuation levels I can afford to do that because the deal when it comes, even if average in its make up, will secure a really good return from here. If its a really good deal and that for me would be 40% plus retained ownership, then the rewards push even higher, and it is that risk reward that I like.

If I could I would have the asset in a more trusted pair of hands but then if that were the case then perhaps I wouldn't be able to buy at circa 4p a share.

As for your second post, I trust CHAR can deliver and well.

@Scotscout My view is that the quarterly update has to be taken at face value or it starts to become far too misleading for a document that is designed to update the market on progress in a clear and concise manner.

Therefore, production and sales in the period are just that and no more, in my view.

In the Q4 production update is very clear that there was a 71 mtV surplus, which means we have had 3 sequential quarters of stockpiling.

I believe I understand your point regarding rolling lag between production and invoiced sales but as i explained in my earlier posts, sales over the same period have been fairly consistent at 586, 584 and 607 mtV, so any lag simply hasn't been accounted for when one considers that actual production were 657, 649 and 742 mtV.

So for me the only thing that could be happening is stockpiling and the sales are indeed what the company is achieving.

I am with you in that some stock may be sold during what is a lengthy maintenance period but that may well be attached to the pricing and how the company feels about selling additional stock at that price. Right now they are fairly consistent with their quarterly sales, which reflects controlled selling, which means any push beyond this is by choice rather than a desire to meet existing client needs.

As Ophidian demonstrated earlier and I concur, Vametco could well deliver 600 mtV of production in Q3 even with a 24 day shutdown because the plant has improved so much. So they may not actually need to dip into additional stocks at all.

As for the invoicing date there are other s here with better knowledge of these things than me so I will leave it to them to answer you if they can.

Yes of course things can go wrong and yes CHAR management is not loved and I recognise and hear that loud and clear but the Lixus licnese is a game changer from these levels, and the risk reward is worth taking on the management angle because the assessment of the management is based on a different set of criteria to the ones now demonstrated by this license award.

@MrJinx With all due respect as a shareholder be it a seemingly reluctant one, you are presenting an unnecessarily negative view point of the Lixus license based on nothing but a hunch and past grievances.

There are a great many discovered off shore assets out there in the world sitting dormant that will go on to be developed by companies that did not make the original discovery. There are a good many valid reasons as to why licenses such as Lixus are given up even when they have a discovered resource sitting within them.

One very good example is the Liberator field in the North Sea, which I3E are about to drill. Bought for just £3m with an existing discovery.

Further examples can be found in Asia. I would encourage you to review the latest interviews and reports from CORO Energy to see just how many discovered fields are sitting dormant in that part of the world, despite the fact that they too sit next to markets with equally high gas prices as those currently found in Morocco. Opportunities such as these do exist and just because it is CHAR that controls it doesn't make it a bad asset.

Furthermore, how exactly can Lixus be described as an albatross when the only commitment CHAR has on the block is $1m of seismic. We are not talking about a company that has signed up to a commitment to a costly drill here. That decision is for the company to make and was clearly signed off prior to them signing on the dotted line.

Finally, you appear to be measuring CHAR ability to negotiate a deal on Lixus against the results they achieved on wildcats drills where no discovery already existed. Whilst there is always a chance that any management team could make that error, the percentage chances of them doing so with such a strong asset and a 75% starting interest is highly unlikely.

In terms of the farm out, in 2018 CHAR released 6 presentations across the whole of that year. In the 3 months since the Lixus acquisition they have matched that figure and included presentations at MMEA Scout Group and the Africa Assembly Oil and Gas Council, as well as the Africa E&P Summit (see below for details of what the first two organisations are all about).

https://getech.com/presentation-london-mmea-scout-group/

https://oilandgascouncil.com/event-events/africa-assembly-and-dinner/

That to me demonstrates that the company is getting itself out there and promoting the Lixus license to the right sort of people. They are doing that because what they have with Anchois 1 its satellites and its locality to the Morrocan market, is a very attractive asset that can generate its partners a great deal of cash flow, and the law of averages says CHAR do not need to beg or give all of it away to secure said partner and move it towards production.

None of that is reflected in the current SP and so the risk reward for me is very good from these levels.

@Ophidian Yes that ties very much in with my earlier thoughts. The crucial thing being that BMN should be able to maintain their minimum sales figure of around 600 mtV backed by their stockpiles, which in turn should give them confidence to commit to those levels of sales (at least) whilst the maintenance is all taking place. It may be at that point that they decide to release some of their stockpile to boost their revenues for Q3, if said Q3 vanadium prices don't rise sufficiently high enough.

It is also important to recognise that we are judging Vametco on what it sells but that figure is some way short of what it is producing and that has been a main point of mine here today.

With the much lower production costs seen in Q2, Vametco is demonstrating that at achieved sale prices of circa $49,000 per mtV and ZAR 14.40, the facility can still achieve EBITDA of up to circa $83m if it were to sell everything it produces. It is their choice not to that reduces that EBITDA figure not a lack of sales or most importantly production.

A point that is perhaps more relevant from next year onwards but at the very least shows that V prices do not need to climb very far to see Vametco producing very healthy cash flows.

Revise that to 4,000 mtV for 2020 (Vanchem costs still to be clarified but more than cancelled out by the likely 300 mtV production/ sales discount based on my circa 4,300 mtV estimate for 2020), then at $49,000 sales price and ZAR 14.40, BMN could deliver total EBITDA that beats that achieved in 2018 but at a higher level of ownership.

That target isn't all that testing and thus well within reach.

@Ophidian Yes you may well be correct. I certainly got a sense that the process and general set up at Vametco was very unorganized and it has taken BMN management a while to get this under control. That isn't a criticism because at the end of the day BMN itself is a very young company and the experience has come on the job. Hence the reason why the investors who came on board in the March 2018 placement for me insisted on the appointment of Michael Kirkwood as a more steady pair of experienced hands.

There is as we have discussed very much a sense of security and control emanating from the Q2 update, which demonstrates that much has been learnt throughout all of this. The company was decisive in their move to install a new GM at Vametco and that is perhaps already contributing to this positive affect. It all bodes well moving forward.

For now I am happy to build in a slightly more conservative estimate and an expectation that Vametco will deliver somewhere close to its 3,400 mtV target in 2020 with 3,250 mtV looking about right. I think the expansion to 4,200 mtV is going to be quite expensive and with Vanchem closing will continue to be 'reviewed' as we move through the rest of the year. Like Vanchem with its 5 year expansion plan it will for me be all about how much cash the business is generating. Debt of course can come into it to a certain extent but I don't think they will want to stretch themselves too much.

So if vanadium prices and indeed other revenue streams deliver faster, then the expansion plans will do too. However, I see 2020 being a year of limited expansion beyond what we already have and thus total production will likely be in the range of 4,250 - 4,450 mtV. That's not to say that expansion at Vanchem won't take place more that it will take time to be completed given the plant won't now be under BMN control, until November 2019.

I certainly see some limited extra production from Vanchem in that time but it will for me be just that, limited.

I am being deliberately conservative because in times of lower revenues I believe one should test the bottom end of what can be achieved and see if it indeed holds up.

That said with Vanchem on board BMN will actually likely get close to achieving the equivalent of phase 3 expansion at Vametco in line with the timings originally announced, so the progress will be very good indeed and should not be seen as anything less than that.

If more is then achieved then all the better.

Given what I have posted this morning I believe the means by which Vanchem is closed out is key here not just the added production it brings with it. I think the production is difficult to assess becase we don't yet understand what its production costs are. However, I think the confirmation that it really is going to be paid with cash flows/debt would really be a major milestone in the to date relatively short life of BMN.

Sorry another error on my part.

"The Q2 figure of $16.40 per kg (even lower) was achieved at ZAR 14 per US$, which means the production cost when averaging 742 mtV was just ZAR 243 per kg.

To achieve the target of $20.40 per kg the exchange rate would need to drop to ZAR 11.95 per US$ if as advertised the production cost increase is purely going to be down to the exchange rate."

That is incorrect.

The Q2 2019 figure of $16.40 per kg was achieved at ZAR 14.4 per $. That makes the unit cost was ZAR 236 (not 243) meaning the exchange rate has got to drop even lower to ZAR 11.6 per $ to achieve the bottom end guidance of $18.90 per kg, when based purely on the exchange rate.

This makes the argument even stronger that BMN are aiming low and planning to achieve higher.

@Ophidian I appreciate your engagement on this thank you. The Q2 figure and subsequent report was a little surprising because I was expecting a drop off for the signposted 24 days of maintenance. However, as the report states this has been to Q3.

"Vametco commenced a 24-day planned maintenance programme in July, which is expected to be completed in August and will not affect annual guidance."

Despite this relatively long period of maintenance I do feel that the company is demonstrating a renewed approach of under promising and over delivering and it is backed by a renewed confidence in reliability of the figures being produced. So for me mid range guidance is definitely on (2,850 mtV), which would deliver a further 1,460 mtV in H2, delivering at least the same production costs achieved in Q2.

However, given what they have already achieved in Q2, I do feel that the current trajectory should go on to deliver a really strong end of year result, setting up the plant for their goal of 3,400 mtV per annum during 2020. The report is deliberately conservative with FM saying ;

"with several further productivity initiatives to be implemented during the course of H2 2019, from where we can continue to build towards our target of 3,400mtv per annum during the course of 2020."

But I do feel that they can now get very close to this figure in 2020.

Where I disagree with the company is on the production cost and the affects of the ZAR7$ exchange. On this FM says ;

"Unit production cost guidance of US$18.90/KgV to US$19.50/KgV for the 2019 calendar year remains unchanged due to the anticipation of a stronger ZAR relative to the USD during H2 2019."

To average even the bottom end figure of $18.90 per kg H2 has got to come in at $20.40 per kg (H1 17.40 per kg achieved).

The Q2 figure of $16.40 per kg (even lower) was achieved at ZAR 14 per US$, which means the production cost when averaging 742 mtV was just ZAR 243 per kg.

To achieve the target of $20.40 per kg the exchange rate would need to drop to ZAR 11.95 per US$ if as advertised the production cost increase is purely going to be down to the exchange rate.

Right now the Rand is running at 14.83 and has averaged ZAR 14.15 in H2 (37 days). With the issues being faced by Eskom and the US/China trade war, it is difficult to conclude that the exchange rate will improve very much. So for me the figure should be closer to the $16.40 per kg figure achieved in Q2 than the guidance reiterated in the report. But as I say I am basing this on the reasoning given by BMN, which may actually change moving forward.

Again, I am seeing this as a new more conservative and professional approach to forward guidance and market expectations and I expect to be surprised to the upside on both despite any offsets required for the loss of production during the maintenance period.

at would place the exchange rate

Returning to my earlier post and simplifying the numbers some more, i would offer this ;

BMN Vametco is now stockpiling vanadium even when the price of vanadium has been very high.

In 2017 and 2018 Vametco sold more vanadium than it produced, be it minimal.

2017 plus 72 mtV
2018 plus 13 mtV

However, the 2018 figure is skewed by the fact that in the last quarter of that year the surplus was 71 mtV.
In 2019 this has expanded despite the fact that the price of vanadium has dropped off.

Q1 = 142 mtV
Q2 = 135 mtV

So even when prices were at their very highest and even when they began to pull back at what for many was an alarming rate, the company still felt able to stockpile nearly 350 mtV. This despite the fact that the company knew it would soon be announcing a $68m deal to buy Vanchem, which comes with a $45m refurbishment cost, be it spread over 5 years.

To place that in perspective, Vametco produced 2,049 mtV during those 2 quarters meaning they stockpiled 17% of their production.

One could argue that BMN expected higher prices to last for longer but if anything Q2 demonstrated that this wasn't an issue because by that point the drop was very clear. Yet they still stockpiled 135 mtV and sold barely more vanadium than they did in Q3 (584 mtV) and Q4 (586 mtV) 2018 at 607 mtV.

This despite producing 85 mtV more than Q4 and a whopping 205 mtV more than the now notorious Q3 2018. Yes they need lead in and proof that they can achieve extra production before they can sell it, but as demonstrated they have significant surplus stock from the previous 2 quarters already.

What this all says to me is that BMN are very confident that they can achieve their expensive expansion plans by the means stated in the Vanchem acquisition RNS.

There they said ;

"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."

From what I have calculated from the 2018 accounts and current cash flows, BMN are going to need a debt facility to complete the Vanchem acquisition. As I posted previously, the extension to the end of October certainly helps and the current very surprising all in cost also supports a further solid quarter of cash generation. However, the debt facility will be required because Vanchem is not the only horse in the stable that needs feeding, and we also have the question of how fast does BMN want to move with the expansion at Vanchem post acquisition close.

That aside, the holding back of vanadium stock is very interesting because after all everything happens for a reason but if nothing else it demonstrates a confident well organised BOD at a time when vanadium price movements have surprised us all, and that should not be taken lightly or indeed under appreciated. But then we knew that already didn't we.

Morning Ophidian, I am having all sorts of problems with the LSE posting service this morning having already lost 1 lengthy post already to its glitches.

I have taken the average sales price figure to be total revenues ($30m) divided by the total number of mtV sold (607). That equates to $49,400 per mtV.

The $39,400 figure is the average FeV for the period (Q2) only. See note 3.

"The vanadium price is based on the FeV mid average price for the period, published by Metal Bulletin. Vametco realised price is based on the prior month's average price."

That is why I make the point that the average FeV price printed by BMN is a red herring. Evraz have always included (until recently) the US Ryan Notes pricing, which I am surprised BMN do not, given they are selling over half their product there. It wouldn't answer all questions but would be more relevant data at least.

Apologies, I have noted an error in my last post.

"but a $30,000 (Q3 18 to Q2 19) difference in sales price alone ( and Q3 18 sold surplus stock) does not deliver a circa $15,000 per mtV difference in EBITDA."

That should read "does not deliver a circa $15,000 per mtV difference in all in costs"

Morning all,

A few key points that I believe are worth considering.

Taking a look at the Q2 numbers we can see that Vametco achieved EBITDA of $27,840 for every ton that was sold in the period (607 mtV) against a realised price of circa $49,425 per mtV. That equates to a total all in cost to produce of just $21,580 per mtV. That is mightily impressive and considerably lower than the previous quarter.

In Q1 Vametco achieved 508 mtV of sales at $87,200 per mtV achieving $31.7m in EBITDA, which equates to $62,400 per mtV, which in turn equates to an all in cost of just $24,800 per mtV. I say 'just' because Q4 delivered sales of 586 mtV achieving $60.2m in sales at an average price of $102,730 per mtV and EBITDA of $67,580 per mtV, which equates to an all in cost of $35,150 per mtV.

To compound this further, Q3 2018 produced the following numbers ;

584 mtV sold creating $46.6m in revenues = $79,800 per mtV.
EBITDA $25.5m, which equates to $43,670 per mtV.
Total all in costs for Q3 = $36,130 pr mtV

So between 3 the last 4 quarters, the total all in cost has been as follows ;

Q3 2018 = $36,130
Q4 2018 = $35,150
Q1 2019 = $24,800
Q2 2019 = $21,580

What makes this significant drop off in costs (and yes there are royalties to consider but it cannot just be that) all the more compelling is the fact that the difference between production and sales is weighted towards 2019, meaning actual total costs in the period were greater if as expected they were booked in the period (See below). Better still in Q3 2018 more product was sold than produced and so this should have skewed the EBITDA figure even higher as the costs to produce said surplus were booked when the product was actually manufactured, or so the theory goes.

Q3 2018 = minus 47 mtV
Q4 2018 = plus 71 mtV
Q1 2019 = plus 142 mtV
Q2 2019 = plus 135 mtV

I have generally employed a circa $32,000 per mtV all in cost for Vametco until such time the data demonstrates otherwise. I respect the fact that at far higher prices the royalties are much higher, but a $30,000 (Q3 18 to Q2 19) difference in sales price alone ( and Q3 18 sold surplus stock) does not deliver a circa $15,000 per mtV difference in EBITDA. Nor can the exchange rate be looked upon as being the reasoning because the fluctuations between Q3 18 and Q2 19 are minimal (ZAR 14 to 14.4 spread).

One thing that is clear is that production costs (not all in costs) are down and it isn't just down to the exchange rate.

A $21,000 per mtV cost in Q3 2018 has become a $16,400 per mtV cost in Q2 2019 and that looks well supported moving forward given we are witnessing near ZAR 15/$ and if nothing else production looks like it will at least match Q2 if not better it.

In the current pricing environment there is much to like about the direction Vametco is now heading but I am still scratching my head on those cost figures and how they dropped so fast and so far.

Personally I didn't buy into CHAR for the elephant scale wildcat drills, I bought in because of Lixus, although I do like the potential tie ins and partnering options for MOH-B and KEN-A.

The company may call them rill ready prospects but as far as I am concerned they are pure bonuses that I see very little chance of being farmed out any time soon. The company may big them up but the reality is for me completely different.

MOH-B and KEN-A could well come through sooner but the best strategy in my view is to push the farm out on Lixus and drive a re-rate that then allows the company more wriggle room on MOH-B and KEN-A. I also cannot see why anyone would sign up for those two prospects if Lixus is still available. So it is all about Lixus for me and quite frankly that is more than enough to deliver really healthy returns from these levels.

With all due respect the company only completed the Feasibility Study and Gas Market Assessment a little over a month ago. Without these documents, which are clear markers on the path to the farm out, the company couldn't possibly meaningfully commence or indeed conclude said farm out in a satisfactory manner. To be done right and to achieve the best deal for shareholders it should indeed take a good few months to conclude, particularly when as I believe, CHAR holds such a good set of negotiating cards.

My own expectations are for an announcement to be made by Sept/Oct this year. That would be circa 3-4 months post FS.

Given the size of the prospect and its close proximity to a strong gas market, the level of interest should stretch to more than one option and thus making the chances of a successful farm out very good and the potential returns from these levels very attractive. In the meantime there is very little to discuss.