What is rather extraordinary about all of this, is that the market is so busy making plans for the failure of the A2 drill, it is to date (potentially very short term), forgetting to factor in a possible success.
The 31st October 2018 interview (as well as many other tells out there) gives a clear indication of where this is heading, when Majid Shafiq said ;
(see 3 mins 25secs in)
"When Graham and Neil originally bought the Liberator block (13/23d not 23c), they knew at that point there was an extension into the adjoining block because we could not see a closure on the mapping, and that's the same with Tain."
The discovery at Serenity employing the same seismic as is now being employed to map Liberator, has proved that interpretation to be correct.
However, the beauty about the A2 well pilot well location, is that it isn't even going to test that interpretation. That's because the A2 well location is still well inside the original block 13/23d boundary. So it is essentially directly linked to the oil discovery and is 'only' 500-550m from that discovery, and in a wrold class set of Captain sands.
The only test is whether I3E have now interpreted the seismic correctly. I say they have because of several reasons, including their skill set and the pure fact that they got it wrong once, and so would want to avoid that happening again.
So when Majid Shafiq says ;
"Very confident we are going to have a very good result on the next Liberator well," it comes with added meaning.
I appreciate there is still risk, and I appreciate not much in life is ever guaranteed but a lot more expectation and potential, is poured into much more risky adventures, than this.
The A2 well is about as good a prospect as one could wish for given its location, jurisdiction, and low cost development, and given what it can unlock, for me it must receive more respect prior to being completed, although after enough years of doing this, little seems to surprise me anymore.
That's more than enough from me here today, for sure.
@tonynorstrom1 In answer to the last part of your post, what is central to my argument here and my assured stance, is that the quality of the I3E management team is abundantly clear, and is backed by multiple examples. Just because this particular venture is newer to the market, and new to having an oil discovery, does not mean that are new to this game.
That said I don't believe I ever said they were the big brother in any negotiations, I said their asset is the big brother to Tain, at likely minimum 4 times bigger.
I do not support the "couple of chips to play with" analogy for reasons I have already stated in earlier posts. If a solution to the debt is found, then I3Es position is enhanced greatly, and thus far I3E have demonstrated they make very good corporate moves, so why would I support an argument that counters that evidence, particularly when it is built on gut instinct and nothing more.
Gut instinct works sometimes but in my view, facts and form are far more solid ingredients in an investment decision.
@tontnorstrom1 I agree. A grin should not be the basis of an investment decision. What said grin requires, as with all ingredients to am investment stance, is to be appreciated in the context of all things that are known.
Majid Shafiq is a very serious man when he is interviewed. He is very factual and clearly very switched on. I have read multiple comments, particularly immediately after the L2 result, that he (and Graham Heath) were particularly miserable characters and were clearly onto a loser with Librerator.
The reality is that they are serious oil men and take their interviews and presentation very seriously. They are also clearly very hard working and deeply involved with the ongoing operations. So the grin was more than just a grin. It was a moment when he let his guard down because it was the moment he was able to convey, through a smile, just how big an asset Serenity is, be it he cannot say right now. It was an opportunity to let a little pressure out, as all the hard work had clearly led to what is a very accurate and successful result.
You may not see it that way. You may not agree with me, that's fine, i have no problem with that. I am merely giving my opinion on a BB designed for just that, and I see very clearly how this I3E team feels about Serenity, and it is far more positive for them, the business, and us shareholders, than is currently being respected by the valuation. I trust that will change given a little time.
@Austin14 et al
The view you have described, whilst perhaps not being your true view, points towards being the general market consensus right now, but the actual evidence points towards an alternative reality.
It is for me, far too early for RRE or indeed Repsol to be making commercial decisions on Serenity. It was only discovered a week ago.
Furthermore, as I posted earlier today ;
"the interpretation of the owners of this field (Tain) is that it is isolated, sits alone, is not connected to anything on either side. If that were true then we wouldn't have any oil here (Serenity), we'd have eater here." (Oil Capital Conference 31.10.2019).
So Serenity will be a very big surprise to the Tain partners (hence why we saw the immediate and purely reactionary RNS from RRE) because it completely undermines their interpretation of their asset. That's going to take time to adjust to and review. So the idea that they are waiting is for me incorrect because they will highly likely have their hands full reviewing their own data.
I3E have announced that post Serenity discovery they have agreed a deal with Dolphin Drilling to defer payments and as part of that struck a strategic alliance with them until 2023.
How many junior O&G companies achieve that? How many junior O&G companies persuade BGHE to defer payments to first oil, on a field that has never been drilled by the company making that deal?
Do these guys look like amateurs to everyone? The only amateurs in the room, are the ones attempting to turn such a big success into a failure ( and I certainly do not include you in that).
To date every single professional services company associated with I3E, is reacting in a manner that says that this company has a very bright future, and has work to offer them. Yet the market supposedly, doggedly holds onto its doomsday scenario.
If Liberator is such a big failure post L2, then why didn't BGHE pull the plug on their deferred payment deal, which began being paid out in late October? Am I to believe that they did not include a clause attached to failure? And if they didn't then what does that say about the validity of Liberator? Companies such as BGHE don't just go throwing what was £1.25m on a whim. Nor do they tend to gamble their revenues very often. Otherwise every junior O&G would be surely be striking such deals
Yet I am being offer a theory that not only the original BGHE deal means very little but also the fact that they took this payment, is also potentially insignificant as well. Lets instead focus on a junior debt facility and believe that it could not possibly be re-negotiated by a team that has made those deals, the majority of which were concluded prior to having an actual discovery on the books. Yes that is far more sensible a conclusion.
If I3E management can make such deals prior to finding oil, then what can they come up with post major discovery. Market says not very much, I say a heck of a lot.
Something I wanted to share yesterday, which I didn't have time to write about.
I appreciate that any BB, just like a company's share register, is a mix of various characters and investment strategies. Whatever, our individual reasons for investing, our goals, our pressures, both real and perceived, what we all tend to share in common, is that we are impatient.
Many lines have been written on what consolidation of the share price does in order to assist with the next leg up in valuation, particularly when the rise in valuation (SP) has been such a rapid one. Investors making a lot of money in a very short amount of time, leads to profit taking and new investors replacing older ones, whose goals have been reached.
I would think post occurrence, the vast majority of shareholders would agree that said consolidation was a very necessary thing. Impatience and perhaps also fear, may prevent such clarity coming through earlier be it many will know deep down in their hearts it was true.
However, what does not get discussed very often is the need for the company itself to consolidate and get used to the fact that its make up has also changed, also in a relatively short period of time too.
It is not all that long ago that Bushveld Minerals was a junior miner, exploring for resources and little else. Pretty soon they will run not one but two processors, as well as multiple investments in subsidiaries and other businesses. That change of scope requires time to adapt. It requires new faces with new skills, and new expectations. It requires new management systems and a whole lot of new learning.
For all of Fortune Mojapelo's appeal, I don't see much in his history, that says he has walked this sort of path before. One that will soon see him lead his company onto the JSE.
This is no computer game. This is real life. The deals we see laid out before us are not as straight forward as they are being made to look, and the skill sets needed to see them thrive, do not simply get plucked from trees.
A very good example of this is the expansion at Vametco and the experiences seen with the initial expansion plan, which in hindsight are understandable. As a new management team, there will always be those that attempt to fool you or convince you that things are different to reality. It is all part of the learning and development of the business.
So whilst our daily visits to this BB lead to a will to see more sooner, and perhaps be rewarded quicker, there is something to be said for the pause in proceedings, for the collective drawing of breath that it allows, and the support should give us all, when the next stage of growth really starts to take hold.
Of course it may well take some of that hindsight once more to appreciate that it was ever needed in the first place.
@Olderandwiser good morning.
In the latest Oil Capital Conference presentation, Majid Shafiq leaves little room for doubt when he said (see 22 mins 20 secs) ;
"What Serenity also does for us is puts us into a development. . . This has effectively put us into a development in Tain. Tain and Serenity will now have to be unitised as one field, and we will be part of that discussion with owners of the Tain field."
That's about as clear a message as anyone could ask for, which is why he later goes on to say about Serenity ;
"We do think we've got a very good thing here (big smirk). Its a good trading chip to have." and can't help a big and rather rare smirk, whilst saying it.
"the interpretation of the owners of this field (Tain) is that it is isolated, sits alone, is not connected to anything on either side. If that were true then we wouldn't have any oil here (Serenity), we'd have eater here."
So for all the criticism aimed at I3E and their mapping and interpretation of Liberator, they have acquired a block right on the doorstep of Tain and proved up a minimum 200m STOIIP, that is connected to Tain, and throws its plans right up in the air, because Serenity is at least 4 times bigger than it.
What I see is a brilliant corporate/technical move that has outsmarted Repsol/RRE, to the point that they are now forced to the table to negotiate a unitised development, as the smaller brother in all this, meaning their hold a weaker hand.
All the talk of I3E debt, whilst absolutely relevant to a point, completely disrespects what I3E have just achieved at Serenity.
This isn't an oil discovery sitting in the middle of the Atlantic Ocean, many miles from anywhere, never mind anyone. This is a significant oil discovery that is connected to an existing field, that is in the final throws of its approval process for its FDP.
More importantly, it sits within a jurisdiction that under the OGA, insists on fields being exploited in a manner that maximises the total recoverable oil. Therefore, even if Repsol and/or RRE (and I remind everyone that it is Repsol who are the operator of Tain), have the royal hump or indeed do not wish to buy into Serenity (unlikely), then at the very least thjey have to sit down with I3E and agree a commercial plan to develop the whole field together.
So at the very least, I3E have a development that will move forward to production, and is relatively low cost, because the Bleoheim FPSO has sufficient capacity for a unitised development.
The debt is respected but that development also needs to be recognised too.
And as Majid Shafiq later says ;
"Very happy with the Serenity result. Very confident we are going to have a very good result on the next Liberator well, and then we'll progress plans for 2 developments essentially."
Market is either asleep to this or it is simply attempting to find the bottom. I would go with option 2.
Enclosed is the SEZ brochure, which demonstrates the choices on offer.
Furthermore, and well worth repeating, are the advantages to locating the plant within the East London SEZ.
See pages 22-24.
My personal favourite :
"Certain companies will qualify for a reduced corporate income tax rate of 15%, instead of the current 28% headline rate."
In the early days, the ability to flip that 13% of corporate tax into cost reductions for new and needy VRFB OEMs, without the need to offset profit, will be very helpful indeed.
@Richken I believe Ophidian is better placed than me to comment on the practicalities of shipping electrolyte.
What I would say is that BMN from the off have stated that the electrolyte plant is where it is because it has access to the economic development zone and the associations with 2 sea ports.
As the East London SDZ website states ;
"The East London IDZ is directly serviced by the East London Port, a world class port situated just under 10km from the zone’s entrances, offering investors direct shipments to Africa, Asia and Europe.
Manufacturers located in the East London IDZ can also bring their shipments through Ngqura deepwater port which has capacity to accommodate new generation container vessels form the hub of north-south and south-south sea traffic."
If BMN did not intend exporting electrolyte, then why did they establish the electrolyte plant so close to a port? There are after all other SDZs closer to Brits.
So for me the export of electrolyte is very much on and I believe that the conclusion of the ReDt/Avalon merger, has the ability to drive a further expansion of the electrolyte plant (1,000MWh has been quoted by BMN), because with that deal concluded and an exclusivity contract in place, the BMN team has the off take led support, to justifiy an expansion sooner rather than later.
A good write up if I may say so.
I am still waiting for the Proactive video to be released, so I can judge the words and tone for myself. However, despite I3E's initial report that Serenity is "consistent with i3 Energy's pre-drill estimate of 197 MMbbls STOIIP," I am struggling to see how that can be the case.
In the post discovery interview, Majid Shafiq is clear that they expected around 4-5ft of oil at the Serenity location, and they achieved not only double that but also found oil in the Coracle sands, which was a "pleasant surprise."
The model assumes an average 40ft of oil sands across the entire Serenity area tat sits within the I3E block. I am struggling to logically accept that this 40ft mark can be maintained, if they are starting from a thickness that is double that expected.
The Serenity discovery well is barely inside the boundary of the block and so it is about as far East as it could be.
And then we need to add the Coracle Sands, which right now is an unknown.
I accept that as a shareholder i may be deemed to be wishing myself a more bullish case but nevertheless the oil thickness is considerably more than expected (circa 100%) considering where it sits.
Furthermore, I3E management are not known for bigging up their assets, so it would be of no surprise to see the 197mm STOIIP figure, substantially increased. After all slide 8 of the Jan presentation was always clear that the much maligned internal estimate of 197mm STOIIP was "based on conservative assumptions regarding oil column thickness.
It doesn't take a genius to see that 10ft is a lot thicker than 5ft,so I expect a material mark up in the coming weeks.
@Ophidian I do not disagree. However, with such a strong base from which to offer, what are for me, substantial costs advantages for such a localised project, the Eskom BESS project offers a sensational chance for Bushveld Energy to cement its developer skills and experiences, for future large scale work.
Furthermore, the signs are clearly there in the Q&Q section of the Energy Storage 101 webinar, that large scale mandates create the opportunity for BMN to fulfill its plans to firstly assemble and later manufacture ,VRFBs locally.
Friday's deals demonstrate that the moves to establish partnerships with VRFB companies is now about now, and not then.
So the partnership related to the BESS Project is for me about timing rather than actual agreement. I am keeping my hat firmly in UET's court because not only have they partnered on a demonstration battery but also the USTDA has financed its development with a grant, and that grant shouted very loudly, this is for work with UET and nobody else (Avalon's US connections noted but for now discounted).
So there is a natural path towards a South African UET assembly hub with BMN investment and security of localied electrolyte supply, designed to service Eskom but set up to push into the SADC and beyond.
That does not discount other battery partners. It is more a case that if said other partners tender for work in Africa (which is rather large after all), then BMN will back them, but if the opportunity to be developer shows itself, the Bushveld Energy will likely push that harder, because it has all the signs of being more lucrative because it captures the whole value chain and not just part of it.
But as I say, as always, we are discussing how BMN gets there and not if, and that is what makes this all so beautiful to be a part of.
I do not see any way that the Phase 1 BESS Project is going to be completed by Dec 2020. Eskom can, as they always do, keep telling the world that something will happen, but the delay in the tender is for me simply too much for any contractor to recover.
In the 25th Feb 2019 restructuring paper (the first time the end of 2020 first phase date was decided upon), the date for the "contract award approvals" was set as 21st August 2019.
The latest webinar set the revised date for these awards as sometime in Q1 2020, which itself is far too woolly. That webinar took place on 25th Sept 2019. It has now been 6 weeks since then and no further news is with us.
If the tender were to be issued next Monday (11th November), then according to the programme in the paper, there are just over 5 months required to complete the tender decision (contract award).
That places us at around 11th April 2020. Given this is a EPC contract and that further design will be required, I simply cannot see any contractor being able to commit to that many units installed by December 2020. The industry simply isn't developed enough to cope with such a tight deadline.
This World Bank restructuring paper clearly states that "concessional funding is needed at this stage to support maturity
of the technology." This project is not about profit and is aimed at a fledgling industry that will not be helped by being flogged to meet a deadline, just for the sake of it.
I therefore fully expect either Eskom, or the World Bank and its co-lenders, to step in and ensure that the project is delivered over a time period that is sensible, and respects those that are trying to thrive from its delivery.
All of which will help BMN and their quest to deliver electrolyte out of East London, and possibly in time to play a significant role in this project.
What I am essentially attempting to communicate here is that if a partnership is required for those Eskom batteries, BMN will achieve it,and achieve it on their terms, because they hold the majority of the cards here, and that is why BMN are so stable in their comments regarding partnering with "different VRFB companies" because right now BMN and their VIP model, is the very best offer on the table for the vast majority of VRFB OEMs, and that lack of opportunity drives far better deals for Bushveld Energy, however fair they may look on paper.
Bushveld MInerals drive to secure Vametco is continuing to demonstrate its worth and act as a lynch pin for all the deals that have and are continuing to follow it, be it that as always, time is needed for it to truly starting paying us all.
(2 of 3)
So BMN are planning (and no doubt already achieving far more than we know) to vary their offering to the thirsty and very much needy, VRFB manufacturing industry, based on what works best for them. By doing so they create competition within their own partnership network, which can only help Bushveld Energy's efforts at securing stronger deals in the future.
The beauty of all this is the fact that Bushveld Minerals, due to a number of reasons, has first mover status on the whole VRFB manufacturing chain outside China.
The greatest reason of all is the vanadium price itself. The very thing that is holding back the share price today. Shrt term that smarts a little but medium term, that should pay great dividends because no matter what the potential pure plays say (those being the ones that are near or ready to be financed but have nit achieved it yet), they are going to struggle to obtain finance in a falling vanadium price market, particularly one that has seen such dramatic volatility. Financers do not like that.
Add to that Largo Resources, who with a chain around its neck the size of Glencore, has not been able to enact the sort of changes to its business model that Bushveld Minerals, now finds itself 3 years into. That is if Largo are or were ever so minded.
So in essences, and things are never truly that simple, Bushveld Energy through the work of its founding father BMN, has a very strong hand with which to play the VRFB field.
We have talked about this many times, many moons ago. That BMN through its ability to step into the inner circle of vanadium producers, is now inside looking out, and outside are struggling to find a way in. That makes BMN's position a very strong one. However, even more telling is the fact that there really aren't that many options for VRFB manufacturers out there and right now Bushveld Energy, is the very best option because it is willing to do what it takes to support VRFB OEMs, because it wants the demand that comes with that.
So for me it has never truly been about what the VRFB manufacturers want. It has always been about what does BMN want? Who does BMN want to partner with? and the deal with ReDT/Avalon demonstrates that very clearly.
The only question mark I have is UET (despite my assured view on their involvement in the Eskom BESS project) because they have a very big Chinese partner and potentially electrolyte security.
However, what they do not have is a South Africa based partner with access to the levers that pull S.A. politicians and regulators into line.
(1 of 3)
With regards to the upcoming Eskom BESS Project, the VRFB strategy RNS has a very clear tell in it.
"Joint development of large potential customers or projects well-suited for VRFBs. This includes the work showcasing the technology at the Eskom Research & Testing facility in South Africa."
One could make an argument for Bushvelds Energy's part in the BESS Project, being one of "large potential customer development" only. However, I tend to lean heavily towards the "joint development" element of that statement, because that lends itself to project level collaboration, and I simply cannot see Bushveld Energy giving up the chance to be a part of the development team. It would give them so much kudos and demonstrable experience, that it is an opportunity that really must be taken.
The fact that this statement comes under the umbrella title of "Clear strategy to partner with VRFB companies" but more importantly the statement that says ;
"VRFB OEMs are the critical drivers for the success of the VRFB technology and vanadium demand in energy storage. A key activity for Bushveld Energy is developing partnerships with VRFB OEMs that can take the form of multiple structures, including:"
So there is a definite indication that there is a partnership to be had (be it that one must be had in some shape or form), when Bushveld Energy enter the race, in whatever form that ends up taking, for the Eskom BESS Project.
However, as I say, I see Bushveld Energy as a developer in this project, but perhaps with several sideshows running at the same time.
These sideshows are hinted at in the wording immediately before the statement on "large customers or projects."
"Joint development of region or project specific business models for vanadium electrolyte rental. Bushveld enabled the successful deployment of a vanadium electrolyte product in industrial-scale batteries developed and sold by Avalon Battery."
The region element may well go on to be a South Africa/SADC wide vanadium electrolyte rental model, that enables BMN's VRFB partner in that region (See Note 1), to be able to take full advantage of said product, in partnership with BMN and the IDC, to deliver a potentially unassailable bid for the Eskom BESS Project.
Note 1 - My money remains on UET for this role because introducing anyone else's product would undermine the work already conducted at Eskom's Rosherville, which is noted in the RNS along side the joint development statement.
This strategy of sharing themselves around is further supported by the statement that ;
"By partnering with different VRFB companies, Bushveld can diversify its vanadium customer base and support various technologies, maximising its exposure to VRFB upside potential."
(2 of 2)
In addition to this, what BMN have achieved by stepping in and gaining first refusal on the vanadium supply (which for BMN shareholders is a significant development), is they have further de-risked the ReDt/Avalon proposition, because they are offering a solution to a long standing problem in the VRFB production business.
Guaranteed vanadium supply and at a price that is competitive. Those hallowed BMN words of years ago coming back to haunt us all in a very nice way.
So again, said corner investor's opportunity and risk profile, just got a whole lot better.
The latest ReDT RNS does not mention the corner stone investor but I suspect they are very much still there, and more importantly, if BMN's words are to be believed, which given they came out on the very same day as their ReDT investment was announced, then BMN know this corner stone investor. That's because they very cleyrly state that it is they that will be ;
"mobilising additional third party capital to create sufficient capacity to play a meaningful role in scaling up VRFBs manufacturing capacity."
That's not to say that they are in the business of taking over VRFB companies. BMN have been very clear that their expertise lies elsewhere. However, having a corner stone investor on your team, allows you to shape the direction of said business and influence it in ways, that a strategic minority interest cannot.
Lets see how the ReDt/Avalon fundraise etc all works out but at the very least, the VIP strategy is in play, and the merger will happen, and that means BMN is a owner in a technological play that mjust seek its main material from BMN, and that can never be a bad thing can it now.
The hunted is certainly now the hunter.
(1 of 2)
Yesterday I wrote a series of posts centred around BMN's investment into the ReDt/Avalon merger.
After conducting some background reading on the merger, I find myself becoming all the more intrigued by the following set of statements, made in the follow up RNS entitled "Strategy for partnering with VRFB companies."
"Establishment of a new VRFB Investment Platform ("VIP") to make strategic investments directly into VRFB OEMs that offer strong growth upside and provide potential off take for Bushveld's vanadium products. The VIP will leverage Bushveld Energy's expertise in the energy storage market, its capacity to ramp up vanadium supply and its capital investment to attract additional external funding into the VRFB OEMs and the industry."
In their original "proposed merger" RNS dated 25th July 2019, ReDt stated the following "redT and Avalon have received substantial preliminary support for the Fundraising from a strong new strategic investor that intends to make a cornerstone investment in the merged business."
Now that cornerstone investor is not Bushveld, because its VRFB Strategy RNS goes onto to state ;
"Bushveld's role would be that of a significant minority investor, with strategic involvement such as vanadium sourcing, while keeping the day-to-day operations in the hands the management team."
I stated yesterday that for me this was a circa 10% shareholding, which enables them to maintain their place on the board for the long term, and cements their +5% over the longer term (further ReDt/Avalon dilution anticipated), in order to maintain their first refusal status on vanadium supply.
Most importantly, BMN are stating very clearly that they are not the cornerstone investor.
Now for the interesting partt. BMN go on to say that ;
"The Company intends to leverage its initial capital commitments by mobilising additional third party capital to create sufficient capacity to play a meaningful role in scaling up VRFBs manufacturing capacity."
So we have a World Bank esc situation arising here. BMN contributes a "significant minority" stake in order to encourage further more substantial investment, from sources that perhaps need the risks to be lower, in order to play the game.
The ReDt RNS from 1st Nove is clear.
"The Interim Loan will enable redT to complete the due diligence process, finalise the negotiation of the Merger and progress the Fundraising. redT's Board expects that, with the Interim Loan in place, the Company and Avalon will move swiftly towards completing the Merger and the Fundraising and, as a larger and financially robust business, embark upon its exciting development and growth strategy."
So the BMN loan takes a big risk off the table, capturing the merger and its costs, which are likely to be unattractive to larger corner stone investors, with the message being, get your house in order and then we will pay to play.
@Bella6532 It is one thing to employ photos from a company as an example but I don't believe that Bushveld Energy would go as far as using a Cellcube concept design, that is marked up with the exact size of the proposed min grid (1MW/4MWh), unless they were actually considering working with Cellcube.
According to the interims, the latest developments included "commenced a number of activities including an Environmental Assessment, a grid connection and geotechnical studies. Procurement for the project commenced in Q3 2019."
I am seeing a date of 21st August 2019 attached to the basic assessment, in terms of completion ready for comments by interested parties. Therefore, the inclusion of Cellcube at that point in time was still relevant, which is well into Q3.
If they are procuring then they will have made a decision on the contractor and the design associated with them. 21st August is just over half way through Q3, thus leaving time for an alternative option. However, given it is the basic assessment, which is the official environmental assessment for the project, I feel strongly the correct methodology and designs would be employed from the start. Therefore, the inclusion of Cellcube points towards them being the chosen VRFB manufacturer.
If so, then that places Bushveld Energy in a relationship with not one but 4 well known VRFB manufacturers.
(3 of 3)
Furthermore, the RNS is clear ;
"Subject to Bushveld continuing to beneficially own at least 5 per cent of the ordinary shares of the merged entity for one year from completion of the Merger and the Fundraising, it will have the right to nominate a member of the board of the merged entity. Bushveld will retain that right after one year provided it beneficially owns at least 10 per cent of the merged entity. In addition, for so long as Bushveld beneficially owns at least 20 per cent of the merged entity it shall have a right to nominate two members of the board of the merged entity"
The terminology is not clear, but c. 1-2 year after the merger completes, BMN need to be above 10% ownership in order to maintain their member of the board. The fact that the RNS even mentions that 20% ownership would lead to 2 members being on the board, for me signals a strong intent to take advantage of this opportunity by more than just 6.99%.
BMN may nor choose to add to their holding immediately. Choosing instead to wait and see and make sure that it is all working out. However, my view is that BMN continue to demonstrate their strong belief in the future of VRFBs, through their continued actions. So in my view, a further 3% (c.126m shares) commitment at 1.65p, at £2.1m ($2.66m), would be a very worthwhile investment opportunity, and so the button may well get pushed on that additional investment. Hunter not Hunted.
With this deal, BMN are demonstrating further foresight and their ability to act, in a world of VRFB manufacturer that, despite the early signs of success, is and will continue to struggle, unless it can find willing and able partners, such as BMN.
In being that willing partner, BMN can take strategic positions on what are technologically very solid VRFB manufacturers, knowing that a guaranteed and cost effective vanadium supply, can really open up these businesses to growth.
Of course it is not all about winning, but WIN/WIN. The company receiving the benefit, needs to feel there is benefit to be had. So the deal isn't too harsh in its make up but it recognises the risks involved for BMN and rewards it both through ownership and guaranteed, preferred business.
To place that in context, ReDT in their interims stated that with just a 16% hit ratio on their pipeline of work, they would have a circa £200m project portfolio. That 16% was stated prior to the merger, prior to economies of scale and cost cutting, and prior to the largest owner of high grade vanadium in the world, coming on board.
10% of that plus the supply contract, is a very big deal indeed.
Long term BMN shareholders have ridden enough storms and felt enough heartache, to justify their place at this table, such that becoming the hunter (as fair a hunter as they may be), is well earned.
So the feast that was Friday is to be rejoiced, be it with hommage paid to those that weren't/aren't able to enjoy it in quite the same manner.
(2 of 3)
Better still, this deal then also secures BMN the right to make a further investment into the merged business, at the price agreed for the fund raise, so 1.65p a share.
Right now ReDt has 951m shares in issue and will be valued is, courtesy of the fund raise, being valued at 1.65p a share. So £15.7m.
Avalon is being valued at $37.5m, which based on the fund raise conversion rate ($1.28 per pound), is £29.3m.
At the stated 1.65p conversion, that equates to 1.775 billion new shares.
The we need to add in the proposed new funding, of which $5m is coming from BMN, all of which comes in at 1.65p a head. So that's another £23.437m @ 1.65p = 1.42 billion new shares.
Therefore we have ;
951m shares in issue + 1.775 billion RTO for Avalon + 1.42 billion fundraising shares.
Then we have to add in the interest and commitment fees due to BMN of $1.2m (£937,500) = 56.82m
= 4.202 billion shares in issue, of which BMN would hold 293.56m or 6.99%.
19.35% of that total 6.99% (so 1.35%) is being achieved purely because BMN has the money available to lend to two companies, whose need is sufficiently great enough, to warrant a substantial set of fees/interest.
Said 6.99% ownership automatically places BMN comfortably above the required 5% ownership level, which triggers the full clause that stipulates ;
"A right of first refusal to supply vanadium, vanadium electrolyte and vanadium as a rental to the merged entity for two years and thereafter subject inter alia to Bushveld continuing to beneficially own at least 5 per cent of the merged entity
However, as the terms state ;
"Bushveld also has the right, but not the obligation, to invest further into the merged entity on the same terms as other investors, at a maximum price of 1.65p per ordinary share."
So BMN can increase its stake in the merged entity if it so wishes, although a deadline to do so is not communicated.
At 4.202 billion shares at 1.65p, the merged entity would be worth c. £69.3m.
For me this consolidation exercise demonstrates an ability to cut costs across both businesses and adds substantial cash reserves to fulfill both companies current project pipeline obligations, which in the case of ReDt is substantial. So there is substantial future value to be had there, particularly with such a strong and cost effective supply chain partner, as BMN. When we add in the fact that said partner has a fully functioning vanadium rental product with the most dominant merger partner, Avalon, then there is scope to appreciate that a further investment at 1.65p, is a gift, generated by being a hunter and not the hunted.