Member Info for Caposoka

Skid, the point you have put across so succinctly below and in previous days is well understood and quite clear but I think the answer remains the same. ILU are sitting on large stocks, rising rapidly in value and being liquidated to produce large amounts of cash. RIO are making vast profits from iron ore (>70% of their total is from iron ore), producing large amounts of cash. BASE have much lower costs, higher margins, producing large amounts of cash and have been paying down debt for some time. KMR are producing cash, somewhat lagged as the cost base is higher but at the start of debt repayments, needing to reinvest in extensive capex and facing lower grades, which are already significantly lower than others, and past confidence/execution issues to put to bed. The cash and reinvest will eat up at least 2 years worth of cash generation. So why invest in KMR when you can get better and more immediate returns elsewhere, unless of course you are in for the long term, in which case today's SP appears to be opportunity (for the long term).

Considering they were in the GBP 10-20 range prior to collapse to present 1.2p, the value destruction has been off the scale. With a MC of less than GBP 3M even if they cut a deal and went up 400%, would it be a useful comparison with KMR?

I last looked at them back in Nov.... see article below. http://www.alignresearch.co.uk/pathfinder-minerals/pathfinder-minerals-new-speculative-buy-call-offering-rare-asymmetric-riskreward-profile/ It coincided with some spikes and rise in optimism / SP but in the absence of any significant move since, presume matters are still pending. Decided it was simply a gamble on whether a deal is to be done or not.....so not for me..

If I follow the logic being put forward in this tete-a-tete and the depressed and depressing SP, the only viable solutions would appear to be change the management or put the company up for sale / available for take over. Well as ever, it is all in the eyes of the beerholder. If you supported the OO 18 months ago, you would be 12.5% up as are the CIs. Not a mind boggling return but if you are in for the long term, not to be sniffed at. If you were ahead of the curve from Nov 15 onwards, you would be very happy with your return. Presumably the major IIs / CIs knew are marking progress against the long term strategy rather than being concerned about the transitory SP. So no change is coming on that score. KMR remains a long term play but at these 'disgraceful' levels offers good value. GLA.

Think the answers are there in the presentation. If they stand-still in production terms in Y18 they will be doing well given disruption to WCP B during upgrade, declining ore grades. Thought production holding up despite the expected disruption this was a positive in the presentation that had been implied but had not fully come out before. Reality of course may be a small dip and higher cost / t so growth will only come from increase in sales prices. Don't underestimate effects of 2020 move of WCP B. It will be highly disruptive to production. It will also have a cost, not yet detailed and at present there are not large stocks kicking around to fully cover period. During this time they will be repaying debt (20M p.a) and building cash to pay for WCP C (last info I have is USD 90-100M but now maybe less given the size of dredger). This will be installed c. 2022. How much return will there be for shareholders amongst all this capex and uncertainty in terms of execution risks. Hopefully presentation will be one of many to give confidence and sell the plan. I'm sold but equally can see why others may doubt and look elsewhere until further down the track.

KMR appear to be firming up on future plans: WCP B upgrade completion H2/18 WCP B move from Namalope to Pilivili end 2020 (appears decision now made, viz-a-viz Nataka) WCP A move from Namalope to prob Congolone 2025 (or alternatively Nataka) WCP C to be a 500tph dredger - can't recall previous details on size but my impression is they are looking at this s a smaller option, to reduce capex.

http://www.kenmareresources.com/~/media/Files/K/Kenmare-Resources-PLC/pdf/presentations/2018-02%20Kenmare%20Site%20Visit%20Presentation.pdf

Apologies for that BF, credit where credit is due... still makes me chuckle even now.

Ha - who knows, but when assessing BoD competence or otherwise, at least the BoD will be able look back when they finally put their feet up and say, as Peace so succinctly put it at the time, that they did manage to sell sand to the Arabs....

Not only are ILU higher up the quality curve and more weighted to Z but they are also sitting on (and drawing down) large inventories of stock which is also rising substantially in value.

Thx.

Thanks very much Tidd for your thorough reply, much appreciated. If I understand well, given the known unknowns, somewhere in the order of 5MW would get to cash free breakeven and anything above and beyond (RFP or otherwise) would look promising.

After all the KMR upset last August, TLOU came to my attention and amongst all the chaff I saw enough titbits of good info to make an investment, in early Sept and early Nov. I don�t post here due to the abuse I received at the time simply for being invested in KMR but I do have some genuine questions if someone has the inclination to give their views on them. Thanks in advance and GLA. Quarterly cash outflow AUD 2.4M, current cash 7.4M, expected next quarterly cash outflow 1.9M. Exploration costs will fall thereafter so TLOU have sufficient cash for the year with debt (all good). Ongoing staff / admin costs in range of AUD 3-4M p.a. Questions I have: What does TLOU if it fails to win any part of the 100MW tender (unlikely but only to ask). Once reserves upgraded, some form of tender award achieved, how long until first gas / revenue (I presume 2 years min). Once reserves upgraded, some form of tender award achieved, TLOU will require additional funding. (I presume this will be debt based project funding from infrastructure / investment funds and not dilution. Does anyone have a feel for how such a deal may be structured). If 2MW or 5MW is awarded as a start (to be scaled up later), how much revenue is generated per MW and/or how much production is required to cover the AUD 3-4M p.a. running cost of the company. i.e. what scale is needed to reach cash breakeven. (Of course, by this stage there will be financing costs to consider which are not yet known).

Don't get... "The Company is bound by a set of restrictive covenants will not allow the SP to rise, plus we have c. 13% of the shares held by (some or all of) this parties".... SP can freely rise / fall - it peaked in Aug16, Feb17, Sep17 in 340-360 range. Lenders could have sold then but chose not to. Lenders having 13% is a non-issue. They remain a minority shareholder with limited influence and if they were to sell up, it would most likely be a placement or series of placements and not a daily drip feed depressing the SP. The debt and their shareholding are two separate issues. If KMR can refinance the debt on better terms, they can do it but 1% saving on interest saves $1M but the fees involved would be prohibitive. The nub of your post really is you would like to see KMR to raise cash to buy out lenders but at what price? they didn't sell at 360.... SP is not rising as there are doubts on grade and quality and capex needed to maintain production, the higher unit costs that will follow, doubts on when shareholders may start to get a return in dividends, doubts on KMR's ability to sell and generate cash to pay down debt and fund capex, doubts on past performance and ability to deliver new projects. These are more important issues than the lenders having a shareholding, which essentially is a lender issue and not a KMR issue.

I don't get the argument for trying to refinance the debt with alternative lenders. How much were the fees in the past, how much would they be this time? What level of interest would be charged for a one trick pony operating in Mozambique? Not much less than the current level. In fact, I don't see any financial benefits arising, only unnecessary costs. Given an agreement is in place that everyone has signed upto and gives sufficient flexibility to meet KMR's needs, why change?

Agree - various details we are not party to but I regard reported cash as being cash, no matter where it is held. Cash held in mandatory reserves would not be subject to the sweep nor available for a routine debt repayment. Being flippant, I would regard your $10M analogy as being akin to finding $10M down the back of the sofa so instinctively this must be a non-starter. I regard the cash raised in the MD/OO as being no different to cash generated from operations. It has all ended up together. The purpose of the MD/OO was to raise money to pay down the debt or have cash available for capex, so being subject to the sweep seems a natural step to follow. KMR's explicit commitment to the lenders is to follow the debt repayment schedule. The cash sweep is what it is, but if no cash is swept up, nothing changes. The commitment is the repayment schedule. I therefore see KMR being quite free to decide to proceed with capex or not. They no doubt will discuss matters with the lenders but the obligation should be limited to demonstrating that the capex will not impact on the ability to make repayments as per schedule. In the case of the WCP B upgrade, this was easy, the cash is already available. In the case of $90-100M for WPC C, work is needed to demonstrated future cash generation but ultimately KMR should be relatively free to proceed, if they demonstrate the ability to meet the schedule. Again, this seems a natural step. KMR should be masters of their own destiny, to run and expand their business as they see fit and not to be dictated to by their lenders, if agreements are being followed. Dividends is more limited, as already discussed, and for good reason - it stops cash being syphoned off in large amounts prior to lenders being repaid.

Interesting to read all this but being a simple laymen, I still regard the cash being subject to the sweep as being simply the free cash not needed for the running of the business, on-going capex or any other existing commitments such as agents, arbitrations, suppliers etc etc. Stands to reason that cash paid ahead of the agreed schedule should not be at the expense of managing the business. The sweep at 25% every 6 months is quite aggressive. The 75% not in the sweep will be subject to a further 25% sweep after only 6 months, so effectively is 43% p.a. Clearly designed to get the debts paid off as soon as possible but also subtle enough to allow planned capex (WCP B upgrade of WCP C purchase) to proceed as a higher priority than the sweep. This means capex proceeds the under the existing debt arrangement / free cash being generated. It also means capex is encouraged as cash not used is swept up by the banks. Dividends are third on the list. If there was no capex, it would be from the 57% p.a. not swept up but given the capex need / planned, continue to see dividends, if any, being modest and symbolic until either debt is repaid or there being sufficient cash generated to cover the capex.

I remain positive that today's update is another step on the right road and although progress is perhaps slower than some would like, I am pretty sure that when the financials come out there will be various items to explain why the fall in net debt is underwhelming - eg one-off costs (dry docking, arbitration), reduction in volume of pre-paid stock, lag on contracted sales prices, clearing the decks of legacy issues, new investments made etc etc. But to be realistic, even though shipments were Q4 weighted, I am not expecting a mega rise in trade debtors - if this was significant, some reference should be made to it in the update - and in predicting 2018 sales, I would not make allowance for the 200kt of stocks held at year end to be sold during the year. Stocks at year end have been +/- 200kt for the past 4 years which looks like a working level of stock carried forward as part of the running of the business, so sales for 2018 will be in the range of 1 to 1.1Mt and not 1.3Mt.

The fall in net debt of 10.7M in 2017 will effectively be cancelled out by cash costs per ton rising by approx. USD 10/t on 1Mt in 2018. Sales prices are rising so cash generation will improve and there were various non-recurring cash costs in 2017 (dry docking / arbitration etc), investment in earth moving equipment (replacing hired machines) an increase in trade debtors etc etc but on the flip side debt repayments will start in 2018 (approx. 20M) and there is investment of USD 19M in WCP B and future expansion plans so exactly how quickly will net debt fall next year and what is available for potential dividends seems pretty underwhelming. Looking ahead at cash costs per t, KMR is presently in a bit of a sweet spot that is coming to an end as grades decline. The investment needed to maintain production will feed into a higher depreciation charge and a higher cash cost per t in coming years. The Hannan research paper from Oct looked at the cost per t rising towards USD 150/t by 2021 until WCP C comes on line to increase production and reduce unit costs/t before costs climb once more. In short, KMR need increased sales prices to move forwards and today's net debt figure does not inspire great confidence.

I've not been away but quietly sitting on the sidelines, enjoying the craic of others but happier to be out of it - I would have to be able to take it as well as give it ! and as we saw with the other BB a couple of months ago, keyboard warriers are braver than they would be face to face. My view at present is that sub GBP 3.00 looks good value, so I am still accumulating all the time. With KMR the market has been consistently right and ahead of many of us here so being at these levels does flag a few questions. You would have thought positive news in the latest 6 monthly sales round would have leaked into the SP but the opposite thus far. I like keeping an eye on the Chinese credit cycle - ie is the credit spigot being turned on / off at any particular time to keep GDP growing. Add 6-9 months lag to see the effects on Chinese property prices and it feels like KMR follows a similar cycle, so after the clampdown's earlier this year, a depressed SP at end of year may not be so unsurprising. Also, the last production update had a very low mining grade (bit of a shocker) and maybe the need for future capex has been made clearer to some - with issues of confidence on delivery (aka past mishaps) and the length of time for a return to be made to shareholders, may impatient investors look elsewhere. Who knows - just a few thoughts but I remain upbeat long term.