@abd1991 WEll now that depends on where one sits in terms of belief and understanding.
My main investment interests are stocks that are involved in battery minerals with my 2 biggest being BMN (vanadium) and BCN.
I have studied this particular sector very intensely (yes I know many say that) for the last 5 years and the speed with which it has begun to take its place within the world is quite extraordinary, and it hasn't even barely begun in terms of what it is capable of.
Historically when a recession hits then manufacturing and construction decline quickly and the demand for the world'd minerals retreats. In the case of battery minerals and in particular those associated with renewables and stationary storage, there are two things that are happening.
1. World opinion driven by fears over climate change is driving governments, businesses and world funding bodies (World Bank recently committed $1 billion of investment in battery storage technology with a view to encouraging private business participation to raise this over $5 billion) to encourage and directly invest in energy storage as a means to assist renewable energy as well as other areas of energy generation, to combat the need for fossil fuels. It is a wind of change that is only going to get stronger because public perception of the climate and the planet have changed forever. Thus regulatory barriers are now falling and falling fast, allowing battery storage to co-exist and be implemented.
2. Battery storage solutions second greatest barrier has always been cost. In a downturn that sees the cost of these technologies key components fall or worst case scenario stabilise at lower levels, the battery storage sector has the ability to flourish. So a downturn is potentially the best thing that could happen to the stationary storage sector.
There are already a number of high profile and very large VRFB projects that have stalled due to high vanadium prices. Those projects can close out at lower commodity prices because the demand for them does not dissipate when the economy in which they sit sees a cooling off period.
The momentum that has built up in this sector will not be thrown off course by a global downturn because the fear won't allow a pause. The funds that then drive these projects will not be reliant or driven by global market events.
The same also applies to a degree to EVs because their take up is in part being driven by local government polices and the same fears over the climate. car sales may drop but the percentage of EV take up will increase meaning it should be less affected by weaker overall demand.
So the next downturn is going to be very interesting for the battery metals sector because whilst we may see a small drop in demand initially, what we may actually realise is changing of the guard and far greater demand when the opposite would normally be expected.
That is my opinion based on my research. We are all different of course.
In current times the market needs time to breathe things in more than perhaps a lot of us are used to. The reaction on the day or indeed in the week and month of a major update is for me these days, not a true reflection of what the market really thinks.
Give this stock 6-9 months and then judge how smart the market really is. For me Sonora will drive the valuation front end and Zinnwald will ride on the back of it creating even greater value in 2020. One just needs to be patient.
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This is dealt with under section 11 of the enclosed document.
There it is stated that ;
"In the case of an intermediate merger, the Commission, within 20 business days of certifying that the notification is complete, must approve or prohibit the merger, but may extend the period it has to consider the merger by no more than 40 business days"
"In practice, the Commission often makes use of an extension period to complete its investigations."
Assuming that the commission extends the period to the full 60 working days and assuming that BMN and the target companies both filed the papers in a timely manner post the 1st May announcement, then there would be sufficient time to accommodate the full 60 days and allow the transaction to close by 31st July.
The only question mark is the 190m rand threshold but as I said there is no upper limit in the official SA government wording, so for me it is an intermediate merger.
That therefore leaves the question of how the final $61.2m will be settled in full prior to the front end 31st July deadline.
I would expect that we will hear more on this soon enough.
If I am correct with my appraisal of the SA competition criteria then the transaction has a very good chance of being completed by 31st July and BMN would immediately gain access to an additional 400 tons of vanadium production.
If we assume that mid guidance for Vametco can be achieved (2,850 mtV) then what we have is a business that will be producing circa 3,250 mtV in 2019, which would constitute a 27% increase in 2018 production, which would be a sizeable uplift.
By my calculations the company would need to achieve around $33,000 per mtV in EBITDA in order to match their 2018 performance.
That would require in my opinion an average FeV figure for 2019 of circa $60 per kg, which is where the average European figure sits right now.
Note - Reduced FeV prices means lower royalties. The 2019 average Rand/dollar exchange is running at 7% higher than 2018 and rising. Increased production at Vametco means lower operating costs per mtV.
The more the Vanadium price responds in the coming weeks the higher the impact the closure of the Vanchem deal will have, which as I say should come close to the front end 31st July deadline.
For me the Vanchem deal being closed out is not priced in meaning a 31st July close out and that added 400 mtV in production is certainly not in the valuation as things stand.
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Good morning everyone,
In order to establish the likely profitability of BMN in 2019 it is important to understand their likely production, and this will be influenced by the speed with which they get the deal over the line.
In the Vanchem RNS the company stated the following "Conditions to Completion"
"1. South African Competition Commission approval, if required.
2. South African Reserve Bank approval.
3. The cession of specific commercial agreements.
4. No material adverse changes to the Vanchem Business or Ivanti during the interim period between signature and completion of the agreements."
The front end self imposed deadline is 31st July 2019.
The enclosed document below gives a very good explanation of the types of things that the S.A. authorities would want to see and why both the SA Reserve Bank and the Competition Commission would be involved.
Section 6 covers the Reserve Bank and given the fact this deal is being financed mainly with existing cash + limited debt, I don't personally see any hold ups that would prevent the front end deadline being met. So item 2 shouldn't be a problem.
I also don't see any lengthy issues with item 3 and item 4 shouldn't have any affect at all.
So we are down to item 1 SA Competition Commission approval. This is covered under section 5 and 11.
The threshold for an intermediate merger is either combined turnover or assets of both the acquirer target firms of up to 6.6 billion rand or ;
the target firm's turnover or total assets sit at over 100m rand but more importantly a larger merger is classed as turnover or total assets of more than 190m rand.
The BMN Annual Report states turnover for 2018 was $192m and total assets stood at $210m. So we are talking circa top end 2.7 billion rand and 2.95 billion rand respectively.
The combined assets of the 3 target companies is circa 1.26 billion rand. So our total is around 4.2 billion rand so well under on that particular measure. The profits from the 3 companies are far below this so again this isn't an issue. Great.
The only sticking point is the fact that at pre tax profits of circa 142m rand and assets of over 1.17 billion rand, VVP is certainly above the larger merger threshold of 190m rand in turnover and/or assets.
The question is does that matter given that the main measures have not been breached and the intermediate merger criteria states over 100m rand and does not give an upper limit. This is only specifically applied to the combined turnover and assets.
Therefore, for me it is an intermediate merger and BMN know this: the question of whether Competition Commission approval is needed is for me a given, so the "if required" statement from BMN was unnecessary.
Given we have established the takeovers status , it now becomes about expected time frames.
Good morning everyone.
Firstly to be clear, that in my opinion is an exceptionally strong FS that BCN has delivered today. The company has been dropping heavy hints for a while that it would be impressive, now we can see why.
A key takeaway for me was this update ;
"an agreement with the administrators of SolarWorld AG ("SolarWorld"), which holds the remaining 50% interest, to extend the Option period from August 2019 to February 2020."
You don't extend an option period unless you are interested in taking it up. This ties in very nicely with the statement that reads ;
"Subject to Board approvals and other key milestone events, project detailed design is expected to commence in H1 2020"
There is a clear message there that says the company knows exactly what their plan is for tying this project up over the next 6 months and securing a strategic partner to assist with what is a relatively low CAPEX.
My guess on first reading is that BCN have extended the option period in order to give their share price the time and space to react to what is now a very substantial and fuller picture.
This FS alone has the ability to cover the majority of the current market cap, let alone the Sonora project at financial close.
The way I picture it is that BCN will likely make a small raise closer to the time against a substantially higher SP, then immediately sell this 50% on to a pre-arranged strategic partner at a likely higher valuation, adding immediate further value to the business and likely going a good way towards securing their £70m share of the total build costs.
Given the low capex and high returns i am surprised that BCN feel the need to spin this project off now. The market's interest in lithium is certainly back and higher product prices will drive that interest even more. By the time we reach year end they may realise this and back away from a separate listing.
All in all these are 2 exceptionally strong projects and the future here is very bright in my opinion.
"Forward-rate agreements are pricing in 25 basis points of easing in July, and another 17 by year-end."
"While it (rate cuts) may help to resurrect growth, lower rates would add pressure on the rand at a time when South Africa needs to attract portfolio flows into its stocks and bonds to finance its current-account gap"
A move over ZAR 15 /dollar is looking inevitable.
It is important to remember that the field development plan is effectively in place and it is a very simple design.
1 successful appraisal well at Anchois 1 unlocks a Phase 1 development plan of 90mmscf/d, which has the ability to deliver that flow rate for approx 10 years.
Then "Phase II envisages additional wells to tie-in Anchois N only to extend plateau, funded from cash flow generated from Phase I production" See slide 8 of May presentation. Chance of success 43%.
All other satellites and prospects on the license are a complete bonus.
Thus delivering 22 years of production at 90mmscf/d. That is a highly desirable scenario in a country where ONHYM will pay their 25% of the development costs, there is a 10 year tax holiday, and the local gas market offers up to $9.50 per mcf with access to a European gas pipeline.
Pull off this deal and exploit the "anticipated to deliver strong returns and significant cash flow" (see Annual Report page 7), and suddenly the other Moroccan drill ready assets (estimated 1 billion plus prospective resources) becomes less about partners and more about internal strategy. Both those assets hold the same 75%/25% relationship with ONHYM, thus that a CHAR led exploration programme opens up a development plan where by ONHYM once again start paying their 25% way.
The market isn't getting this yet but I feel confident that it will because the opportunity is a significant one at these sort of levels.
All my opinion of course . DYOR always.
I would say a little more patience and a more clear definition of what the Anchois discovery means in terms of potential cash flows and costs to develop.
Note - FinnCap were reported in April as expecting the following programme of events ;
"time line for news flow on Anchois is as follows: release of the Competent Person’s Report (CPR) in May; development feasibility study in June; Moroccan gas marketing study over the summer; Lixus seismic reprocessing at the end of the year; and potential partnering discussions in late 2019/early 2020 with a view to a field start-up in 2023."
The CPR was spot on. Next is the feasibility study which I expect to be announced any day now and should start to add some meat to the Lixus bones.
Remember also what the latest report from Ferroalloy stated ;
"the supply of raw material is tight"
What this particular data is also saying is that demand is actually up over the period because the market has eaten through the vast majority of production and the traders inventory too.
Again I repeat, if the data is to be trusted.
If it is then we have a situation where by demand is higher than this time last year, inventory is weaker, and traders stock is exhausted.
Let's see how this develops over the next few weeks but it could be about to get really interesting.
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There is never a lot of information to go on but more and more it looks to me like the traders were the issue, and it is their stock overhang that has driven prices lower, and not Chinese producers suddenly finding more production.
What's even more alarming for the market is the fact that the market has swallowed the majority of what China can produce plus the traders stock, such that we find ourselves in early June with 28.8% less inventory than we had in April 2018.
What does that say about where we are going next?
I will continue to research this but the data to date is making me believe the bounce is in.
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According to Asianmetal statistics published on vanadiumprice.com, at the end of the last price surge (Dec 2018) Chinese FeV stocks stood at 350 tons. This compared to Dec 2017 position where stocks stood at 1,185 tons.
The latest statistics for April 2019 demonstrate that due to the demand lull in the first part of this year, there has been some re-stocking with the current position standing at 630 tons.
However, this is still 28.8% lower than the YOY position in April 2018 (885 tons).
So if the data is to be believed, then the reality is that despite a perceived fall off in demand between December 2018 and May 2019, Chinese FeV producers could only add 280 tons to their inventory during that period.
Average China output of FeV between Aug 18 and May 2019 (minus Sept for which I could find no data) stood at 3,480 tons per month with total production over the 9 month period of 31,320 tons.
Therefore, Chinese producers even in an 'extended' period of (and again I will use the word perceived) lighter demand, were only able to add 0.9% of their total production to their inventory.
At the end of May 2018 average FeV prices stood at circa $67 per kg. Today they are around $35 per kg.
There is nothing in the data that is being published by Asianmetal at least to
justify that this position is correct. There has been no mass increase in inventory given its status in December after the unprecedented rise in FeV prices. In my opinion what this does is point the finger more firmly in the direction of the traders and perhaps a desire to take advantage of a new set of regulations that did not materialise.
Note the words employed in the release from yesterday.
"with the active purchasing of traders in vanadium market and the spot tightening of vanadium market, the quotation of vanadium plants edged up"
So the traders actions are helping drive the vanadium plants pricing direction.
Then there was this report from 30th May.
"Ferro-vanadium prices continued to ride the momentum upward trend amid increased spot buying interest and thinning trader stocks"
This really is an unloved share isn't it. The Annual Report gets released and nobody even comments upon it.
"10 year tax holiday on production revenues with low 3.5% - 5% royalty on produced gas, with ONHYM paying their
25% share of the development"
"Early development concept requires standard industry equipment and operations, with a subsea tie-back to
onshore CPF solution offering a low-cost development opportunity. Combined with attractive sales prices and fiscal terms, this gives high-value project economics"
75% means 75% of total costs only. At exploration phase the company must carry 100% of the costs but when a Moroccan gas project moves into the development phase i.e. has a gas discovery already, then ONHYM pays its share of the development costs.
Throw in the 10 year tax holiday on production and Anchois shows itself to be a very attractive proposition that will find a partner, and CHAR won't have to work that hard to get an equally attractive deal.
Remember minimum 22 years of gas at 90mmscf/d throigh 1 appraisal well on Gas sands C and 1 exploration well at Anchois N, which has a 43% chance of success.
I very much like those odds.
Since October 2018 there have been 7 reports on Chinese Vanadium Consumption made available on Vanadiumprice.com, Combined these reports demonstrate a total deficit of 6,175 tons between October 2018 and May 2019 (excluding November as no report was made available for that month).
The only documented evidence included with those reports to explain how the shortfall was at least in part being covered, was included in the October 2018 report and stated the following ;
"actual output of vanadium pentoxide was 7933 tons, lower 1375 tons than the estimated consumption. It was because some factories replaced part of V2O5 with ammonium metavanadate."
The extent to which this substitution was possible is unknown. Thanks to a little help from Alphacomp I now know that AMV has 43.5% vanadium content in mass, so lower than V205, which we know stands at 56%.
Shortages aside, what is more interesting in the 7 reports is the production of V205.
• Chinese production
? Oct 2018 - 7,933 tons (V205)
? Dec 2018 - 6,998 tons
? Jan 2019 - 8,248 tons
? Feb 2019 - 8,295 tons
? March 2019 - 7,648 tons
? April 2019 - 8,090 tons
? May 2019 - 8,065 tons
Whilst it looks like there was a marked increase in production in Jan 2019, in reality it was only 315 tons more than Oct 2018.
An average of the 7 months that are available to us would place average monthly Chinese production of V205 at 7,896 tons. That equates to around 94,760 tons per annum. Therefore, even production at the highest figure (Feb 2019) only deviates 5% from the average production figure over the period.
What is even more interesting is that despite the fact that Chinese downstream producers were short 6,175 tons of V205 during this 7 month period, the producers of V205 in China did not/could not react to the situation. For all the talk of China being able to react 'quickly' to shortages in supply. One would expect that at the very least a figure close to the Feb 2019 figure would be maintained but instead production dropped off by some 650 tons and has stayed consistently 200 tons below this figure in the 2 further months since.
The argument could be that downstream producers are indeed employing AMV or other alternatives instead but that doesn't get away from the fact that Chinese V205 producers for whatever reason cannot up their production and compound any supply based issues, be they perceived or not.
So whatever else is happening it looks like Chinese V205 is doing all it can when it can and it still isn't enough, and it is V205 that is the at the core of all of this, because it is the main source of input for Ferro-vanadium and Nitrogen in China.
China FEV prices up on average 6.25% compared to last Friday. Vanadium nitrogen alloy has jumped around 5%. The week has barely begun.
To demonstrate that I am not merely ramping here are the January and March Consumption Analysis reports. If you takes the calculation for V205 usage from the May report and applies it to the January and March production of Ferro vanadium and Nitrogen, then you will see that the deficit comes in at over 1,300 and 1,000 tons of V205 respectfully
The same applies for the other months but these 3 alone deliver nearly all of the deficit I talked about in my last post.
Whatever the current price of V205 in the world, China has a considerable shortage still.
@BabylonBoatman The last information that I had was that the tenders would be out around mid year. If the proposed timelines that are shown in the World Bank restructuring paper are followed then contract should be awarded by around December.
The stage 1 800MWh of batteries would then be installed by the end of 2020 although BMN have gone on record as saying that a little flexibility from Eskom would allow more components to be manufactured locally. A rather confident suggestion don't you think given the tender hasn't even been released yet.
Over the last 6 months or so I have been following the Chinese consumption/production figures as closely as I can.
What has been clear during that time is that whilst Ferro-vanadium and Nitrogen stocks have been fairly good due to customer demand falling in the first part of this year, the supply of V205 has remained fairly tight and there has always been more V205 used than produced in China.
Each month (nearly) Ferroalloynet produce a report on Vanadium consumption and to date this year it has produced the following known details.
Jan 2019 - 1,330 ton deficit.
Feb - 200 ton deficit
March - Approx 1,000 ton deficit
April - 100 tons surplus
May - 1,478 ton deficit.
Here is the May update for clarity. I should note that from the above data only May includes export quantities, the other are all calculated by myself from the formula used by Fewrroallynet in their reports. So the reality is the deficit is likely higher.
According to the latest report the Chinese market was short a whopping 1,458 tons of V205 in May alone. That is a significant amount of V205 but for the first 5 months of this year we are talking minimum 3,900 tons of V205 that downstream producers in China have had to find.
For me the supply has come from inventory run up during the latter part of 2018. There could be some importing going on but that should reflect itself in the European V205 price which it doesn't.
Whatever is the true source what I can say is that the stocks of Chinese Ferro-vanadium are still lower than the YOY position and that position allowed prices of over $70 per kg to exist. So it won't take very much demand to wipe out those stocks and push the downstream producers to demand even more V205.
China may be resilient but even it cannot continuously withstand a circa 9,400 ton deficit in V205 over the course of 2019. Something has to give at some point and I whilst i don't wish to see high prices again, there is no getting away from the realities of the market, and that market in China at least, is pointing to a significant shortage of V205.
@qwertyqwer25 If you want to make good money out of BMN then pray for a major bounce in vanadium prices. If you want to make really good money from your investment in BMN, then pray that prices rise but not by very much.
My opinion only.