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The Crux Investors interview takes some digesting and so I would like to offer my own thoughts on it as and when I can collate them, and tie them back where possible, to what we already know and have discussed.
It is incredibly rewarding to see the actual realities of the plans BMN has, being relayed and executed in a manner that ties in so closely to those that have been discussed here at length, by so many BMN shareholders.
For all the endless discussion and dissection, that takes place on this BB, for me the wider market still has little chance of fully appreciating what BMN is putting together here. However, the efforts and commitment of so many participants here, are for me, going to pay handsome dividends in the years to come, so the wait should be more than worth it.
The Bushveld Minerals fully integrated model, from the mouth of Mikhail Nikomarov ;
"In some ways we are in direct control. Lets take an example of a project like our mini grid. There we are the developer, so we get a development fee when that project reaches financial close. We are an investor, co-investor, so we get the return on equity or dividends from the PPA, that is signed to pay for the energy that that mini grid produces. By the way we are supplying a battery into it, so if we want to, we can charge a mark up on somebody else's battery. If we are invested in that company, we get an additional benefit, because our investment has now appreciated in value, because that company now has more deployments. We're supplying electrolyte, so we get a fee for manufacturing the electrolyte into that project. By the way we have mined the vanadium, so now we've got a sale on the vanadium."
"So this integration allows us to capture value, sometimes from 4-6 activities on just one single project."
There we have it, the to date, currently being executed methods for delivering added revenue streams to the overall business, by allowing BE to participate in the downstream battery storage opportunity, as and where it sees fit, depending on how it is invested and with whom.
Right now the opportunity is limited by scale. BE are changing that by investing, partnering, or supporting OEMs of VRFBs, in order to drive those multiple revenue streams, over a much wider project base.
What is so beautiful about all of this, is the fact that BMN's first mover status, is once again allowing them (in much the same manner that it is working for their early investors), first mover status on the downstream battery supply chain, just like it did earlier with the very brownfield that is now paying for all of this and the low vanadium price environment it was achieved in.
Now those vanadium prices are once again working to BMN's advantage at just the right point in the cycle.
@Knighthood Agreed. My own window is set at 2 year intervals, as it normally always is, then it will be reviewed and adjusted as I see fit.
I would, at the very least, want to see LIB phase 1 in production and Serenity appraised. 2 events that, if successful, will add significant value, even with limited dilution in play.
@Ophidian I see now possible, sensible way or even necessity, that Serenity could or should be drilled again in this campaign.
I don't actually see any benefit to drilling beyond A2.
The I3E management team will want to get the RBL over the line, and as far as their words go, that does not involve drilling A4 or A3 this campaign ;
Serenity RNS 29th Oct 2019 ;
"The LA-03 well, originally planned to be drilled in i3's 2019 campaign, is now likely to be drilled as a pilot during Phase I development execution to optimize the placement of a production well, as will the LA-04 well."
What that statement implies is that I3E may drill a pilot well in the LA-04 location, prior to drilling the horizontal well, which will mean some added cost. However, by that point I3E will be financed for phase 1, which is the critical point.
So as it stands, I see now reason to extend the drill. What they will want to do is get on with defining the development drill locations, adjusting their FDP, possibly updating the CPR, and closing out the RBL.
The key question now is how will they fund the Serenity appraisal programme? If they are still at 100% by next 'Summer,' then that will likely need an equity portion. However, said dilution will be being applied to establishing additional resources, and so should be worth it, if indeed it is required in the end.
@Sankeys If your comments are focused upon me, then I like to think that I am not the preaching sort and that the wording I employ tends to demonstrate that. However, you clearly read it differently, so I will take on board your comments.
I don't believe I have spent very much time concentrating on the SP. That's because the SP tends not my primary concern in shares where I feel the chances of substantial dilution are limited. My focus is, as you have pointed out, is centred around the fundamentals. My belief is that longer term investors, of which I am one, are best focusing on the fundamentals and any changes that developments make to them, than they are on the daily share price, and the countless rumours that circulate social media, but are normally based on limited facts, or perhaps facts that are core to the investment case.
I have not dismissed conversation on warrants or placings, I have analysed and argued, that the wording from I3E post L2 pilot well result, did not lend themselves to the need to place new shares.
Today's outcome is not a bad one. The affect of the amount of shares placed is limited by their price and their number. Their impact on stabilizing the business, in preparation for the final drill and the subsequent RBL discussions, is far more far reaching.
In my humble opinion, and it is just that, an opinion, that I share without want of retribution, the bigger picture gets lost far too easily, as AIM investors focus in on shorter term outcomes, which do not define the company or its final outcome.
This placement is testament to that. The new shares and new warrants, do not matter in the long run. What matters is first oil, and the opportunities the cash flows from that achievement, open up I3E.
All in my humble opinion of course.
With all due respect, even after all warrants are factor in, I3E would have 'just' 167m shares in issue.
For this they would have all debt cleared (assuming junior warrant holders cash in debt for the shares), have a further £5m in the bank this year, and a further £3.2m to come from Bybrook for the 8m warrants issued today.
As I have just discussed at length on Twitter, even if the company, post A2, said to me that they needed to issue another 25% of total shares in issue to get the RBL over the line, and perhaps increase it to expedite Serenity appraisal next Summer, that will still 'only' be c.210m shares in issue.
For that we get LIB phase 1 development at upto c.20k bopd (although even 15k would be splendid).
With that production, we would see Serenity the c. 200m STOIIP appraised and likely increased in size. In addition, the company, at a convenient point in the future, could explore/appraise the 400m STOIIP in LIB West.
All of that will take time to come to fruition but talk of 100% upside is purely a short term outcome, which given time, will look very limited in its outlook.
It all starts with A2, which of course needs to come in to trigger that future, but if it does then in my opinion, this is a long term hold, that can deliver many multiples of today's share price, because the assets are that good.
Right now we are very much in the establish the business phase. Post A2 and RBl/funding conclusion, this moves into a growth phase, and that will be the most rewarding part of all this. All in my opinion of course.
Excellent news this morning on the finance side of things but also the A2 spud.
The rig only arrived on site late Weds and now the spud has been notified. To place that in context, the Borgland Dolphin arrived at the original L2 drill site at lunchtime 19th August, and the spud was announced on 22nd August. So circa 2.5 days.
For the Serenity drill, the rig arrived late 29th Sept and was spud late afternoon 4th Oct, so circa 4 days.
For this well (be that they have no doubt learnt from previous experiences), the spud has been announced after just 1 day. Mightily impressive.
My just for fun revised key dates are below. I must say, Inever expected to be shortening it.
5th November anchor handlers set sail. (Achieved)
7th November anchor handlers complete move. (Achieved)
10th November spud 11th (Actual 8th Nov)
27th November preliminary result if duster.
1st December if oil found.
8th December Borgland Dolphin sets sail for home (dependant on testing of course)
I wouldn't put it past them to gain more time on this second LIB well. Lets see.
Its all about whether or not one trust these 'sources' but if one does, then it indicates that at least 3 bidders are keen.
One private equity backed bidder
We shall find out soon enough.
For all those that do not have access to Twitter, here is an update on the strategic process. Whether shareholders believe the authenticity of the content or not, is for them alone to decide.
If its true and one of the offers is good enough, then the next couple of weeks should be very telling.
Offers being the key word in all of this, as more than one creates competition, which is good for business.
@Bella6532 I read Lemur the way I used to read the Mokopone iron ore project in 2014 but didn't fully appreciate at that time. Lemur is a dead project, which will come good when it comes good because it has been replaced by a much bigger story, just like the iron ore project was back then.
My only hope for the Lemur project is that it finds a home that allows it to be built in order to help the people of Madagascar, who have such limited opportunity and access to electricity. I hold not wish or desire to profit from a coal project, particularly one that my investment does not need, in order to be successful, which given Lemur's size and progress, says much about just how far BMN have come and will indeed end up travelling.
If as an investor of BMN you believe that energy storage will be a success and that VRFBs will play a healthy part in that success, then there simply isn't enough vanadium being produced in the world to satisfy even a fraction of that success.
So something will have to give and whatever it is, with 2 of the world's 4 active processors under their control, and a considerable high grade resource to support them, BMN will be front and centre when said something does indeed give.
That will take time but said time will in my view, come with an excellent hourly rate of return.
@Compass0007 I believe a little more patience (yes more of it) is required here. All BMN need to do is keep building up their arsenal, by developing their assets, and supporting and taking part in the energy storage market, making ready for the day that will inevitably going to come.
It may take high(er) vanadium prices. It may take a demonstration of the profits those prices deliver. It may take a demonstration of the sort of profits their stake in the energy storage market offers. It may take a combination of all 3 or indeed something else all together.
The most important thing it is coming. It is going to happen. It is about when, not if, and so it is about remaining patient, and 'simply' waiting it out.
I sincerely trust and hope all LTHs are able to do that because it is going to be worth the wait.
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With Vanchem now acquired, BMN management and their advisors, can use the experiences gained at Vametco (good and bad), in order to carry out a meaner and leaner refurbishment of Vanchem. I am sure they will have built up some very good contacts with contractors and consultants they now trust, and will employ these advantages in their mission to make Vanchem a second serious weight in their vanadium arsenal.
Finally, whilst the sales figures for Q3 were down, for the first time I am not too concerned about it. Vanchem automatically boosts production by circa 35% but also the closure of the debt facilities and the revised Vanchem payment terms, mean that BMN can afford to hold back a little, when it suits the business.
We have demonstrated clearly before that Vametco has built up a good stock pile in finished products these last few quarters. If they ever need to boost sales then it is there, and the fact they aren't selling everything they have, is supportive of a business that does not have cash flow issues.
Long may it continue. Infact I trust they will continue to stockpile vanadium and wait for a better pricing environment, be it next year or even later. That is the advantage they have as the future largest supplier of vanadium outside of China.
The boy has most certainly become a man now.
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Whilst I am absolutely delighted with the Vanchem deal and its punctuality, it is the Q3 update that I find most notable.
Key quotes ;
"Vametco achieved record monthly production of circa 310 mtV during September."
"Vametco's production for the nine months ended 30 September 2019 was 1,953 mtV"
"Vametco is on track to meet its production guidance of 2,800 mtV to 2,900 mtV for the 2019 financial year, underpinned by its improved operational performance."
"Unit production cost of US$18.90/KgV to US$19.50/KgV for the 2019 financial remains on track."
"The maintenance programme was completed in 22 days, two days ahead of schedule. No further shutdowns are planned for the current financial year."
What BMN are saying in a nutshell, is that when given a free run (no shutdowns), Vametco will produce minimum 847mtV in Q4 2019 but with the possibility of pushing this to circa 900mtV and beyond (2,850 mid guidance - 1,953 production for 2019 to date).
At 900mtV per quarter and assuming a 3 week shutdown per annum, that will deliver circa 3,325mtV per annum,which is not far off the "steady state production run rate of 3,400 mtVp.a. during the course of 2020" figure, and further supports why "during" is being employed.
Even at 3,325mtV, that would mean a c.475mtV uplift in production, which is circa 16.7% improvement on the average 2,850 mtV figure expected in 2019.
One would expect that said 2,850 mtV figure ties into the average production cost figure of $19.20 per kg (guidance $18.90 - $19.50), which means in very simple terms, that the production cost for 2020, should reduce by circa 16.7%, to c. $16 per kg.
Such savings will be most welcome if vanadium prices continue to hold their lower levels. It is also a clear example of what existing producers can do to protect their bottom line, whilst continuing to produce at the same or indeed increased levels. An advantage that works directly against junior vanadium plays, who need higher prices in order to secure finance.
What it means is that BMN are able to continue to fine tune their operations and their production, even during a downturn in prices, ready for the next upward cycle, where they will be meaner, leaner and a whole lot bigger.
What this update also delivers is the final piece of evidence that Vametco, and more importantly BMN, have learnt from their errors back in 2017/18, and have acted decisively to turn around what was a black mark, in terms of their promises to the market not being met (Phase 2 3,750 mtV), and demonstrated that they can be trusted, and that their plans can be achieved.
That is something I am particularly happy to see unfold.
@mcbride.c No I do not believe so. One should not confuse "first refusal" with an actual contract to carry out something. I believe I3E have confirmed said first refusal to ensure that they are able to conclude A2, whatever the weather brings, and nothing more.
They have previously talked at length about good weather windows keeping down costs and with money a tad tight, given that want to appraise Serenity next Summer too, a further well in Winter is too risky and unnecessary at this time. My view only.
Well as it turns out my theory has no grounds due to a good source confirming to me that the survey is not for I3E.
So feel feel to ignore those 2 lengthy posts from just earlier. Shame, it was a really good theory too.
I won't say anymore on the subject or (out of courtesy) entertain questions on why I have changed my mind. Sorry but just trying to be respectful to all.
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The 2 main areas currently being surveyed by the Ocean Observer sit within an area that has never been drilled before. The nearest identified completed well is 13/23a-4 but that is well outside the survey area.
Key opening line that comes immediately above the quotes I included earlier from te Serenity Prospect document ;
"Blake does not close structurally."
What is strongly implied is that there is a connection between the 3 wells, between which I3E 2 blocks both sit.
The evidence to date is indicating that I3E potentially believe ( and I stress this is merely my investigations to date), they have another prospect directly West of the Blake field, which sits within these K50.2 zone, that is interpreted as being shared between the 3 stated wells.
What is interesting is that I3E included this as page 1 of the Serenity Prospect document, prior to then going on to talk about the Serenity prospect. Whats more this survey is being conducted immediately after I3E have made a confirmed discovery on Serenity, which they state has performed pretty much in line with all anticipated outcomes, from the modelling.
It should not be forgotten that I3E produced a regional model across this whole area, and have claimed all along, that it demonstrates that sizeable quantities of oil have been dispersed across this region, which are yet to be found. Serenity clearly has some, but perhaps, just perhaps, I3E believe their blocks hold more, and the Serenity success, has given them the knowledge needed to push on and find out.
I may be wrong here, and much mlore research is required. I question why they would need to survey now,so soon after Serenity was discovered. Desopite the fact that the survey hip has visited both Tain and the Bleoheim, I am struggling with the notion that such a survey could/would be activated so quickly. There is the question of weather and perhaps the need to survey prior to Winter, but Serenity only has 1 well drilled in it, so identifying pipe runs etc looks premature.
There is the possibility that the LIB phase 1 development plan is being adjusted, due to the new layout of Liberator but having looked at it, I don't see the need to be surveying so far North of Liberator (the lower survey is 4km North Of A2, which is maximum 1km South of the highest Northern point of the LIB channel), so I don't buy that right now.
So i am back to my new prospect theory driven by the knowledge that I3E have already called these sands, have identified that Blake does not close, and are surveying an area of their block that has not been drilled.
If I am right, then "we are going to need a bigger boat" and any discussions with Repsol/RRE cannot truly come to a conclusion, until we know just how many connections I3E blocks have to their neighbour, be it Tain, Blake or both.
To be clear this is just my theory. I cannot say for certain that I am right, and investors should check all details for themselves.
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Further to my earlier post, I would offer this ;
The survey being conducted right now by the Ocean Observer, has two main survey areas approximately 4km in length, which very close (and I mean essentially touching) to 2 Blake development wells (13/24a-7 and 13/24b-9).
These can be viewed on page 10 of the enclosed I3E Energy FDP plan.
The survey can be viewed via the following link, by searching for Ocean Observer, clicking on it, and hitting "Past Track." A reference of the co-ordinates on the Marinetraffic interactive map, to said plan in the I3E FDP, should enable readers to reach the same conclusion.
The width of these 2 main survey areas are circa 450m and 300m. So I struggle to conclude that they are pipeline surveys. This is demonstrated by the fact that Ocean Observer has had a run upto the Tain discovery and down to the Bleoheim, and these runs were far narrower. This is further supported by the fact that the anticipated production pipeline for Liberator phase 1 is just 10 inches wide.
Moving on. Enclosed below is a copy of the Serenity Prospect presentation, dated 12-.12.2018.
In there I3E stated the following on page 1 ;
"Interpretation suggests that the 13/24-9 Blake injection well, and the 13/22-20 and 13/23a-7Z northern wells encountered a different Captain facies to the Blake Liberator Channel"
"In these Northern wells, the Captian sand is a series of different stacked sands separated by several shale intervals."
Now the third well mentioned in that document, 13/22-20, is actually 13/22b-20. We know this because directly below the above words is a comparison log, and the well in question is identified correctly as 13/22b-20. Also, it is in that set of logs that the difference between the sands is noted (K50.1 and K50.2).
13/22b-20 location was a little difficult to pin down, because the OGA tend to update and sometimes mash together, their blocks. The following link is for the OGA Public well bore search site. I have enclosed a direct link to the 13/22b-20 well bore, but it may not work. Therefore, readers may have to search for it themselves.
When found, one will note that the well bore sits right in the middle of what is now Block 13/22c, which is the block immediately South of the Captain field, and a field which sits immediately West of I3E's 2 blocks, which incidentally sit directly between the 3 wells in question.
They been the 2 Blake wells 13/23a-7A and 13/24b-9 and the well (that has itself just been acquired by Chrysaor from ConocoPhilips) 13/22b-20.
A better understanding of the geography involved and the relationship of the wells to I3E's blocks, can be got from the diagram on page 2 of the Serenity Prospect document.
Good morning Oldandwiser.
In connection with your post, I would offer the following that I just posted on Twitter.
The plot continues to thicken with the Ocean Observer.
Its first task today was to take a run up to to the Tain discovery, which means it has now visited both Tain and effectively the Bleoheim FPSO.
Its now busy surveying a section North of its main survey area, which effectively sits along the line designated "Captain 8in Gas Export" in the #I3E Field Development Plan.
This area is right on the Southern border of the Tain block.
So much so that the survey is now cutting through the bottom left hand corner of that Tain block.
Given the Serenity discovery was only announced on 29th Oct, somebody is an awful hurry to establish something.
What that is, I am still very much mulling over, but given that the Serenity discovery has highly likely placed I3E in a unitised development, that itself undermines the FDP currently being produced for Tain, then the appearance of a survey ship, running between Tain and the Bleoheim, is very interesting indeed.
More so for the fact that it is focusing it main survey around two West to East stretches, both around 4km long, and both sitting mainly within the I3E owned but penetrating into the Repsol controlled block 13/24b. The home of the Blake field.
Early days and we must be careful not to fall too far down the rabbit hole, but this survey does not smack of an I3E that is working on its own, or at the very least is working towards working with someone else, connected to those blocks.
Scratch that last post. The survey area is some 4km North of the A2 well site. That places it too far North to be a pipeline for A4/A2 because it is well outside the Liberator field area.
Something is driving I3E to survey so far North, prior to the A2 result. Thinking caps firmly on.