Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
Fair enough Jinkar and let's see how things play out. Although I do think the Director deals were related to Disko post the announcement, rather than financing for Dundas. In any case, not much to do except wait for news!
GLA.
Hi Jinkar,
It was the way that Bo phrased his response to the question in the interview. I believe he said that there were still some outstanding criteria to work on and it was looking like they had a good “set up” with various banks and export credit agencies.
That suggests to me that the negotiations are not as advanced as we would all like them to be. Also, most of Europe is currently on holiday at the moment so not much will be happening until mid-September.
So two and a half months of further negotiations from mid-September to December feels about right to me.
While it might be a straightforward mining operation, the financing package will likely be quite complicated. This is due to Bluejay being unproven as a mine operator and therefore the banks will be quite cautious in their approach. This can drag out the negotiations as the lenders will keep adding conditions or seeking further clarifications on the project plan, capital expenditure, etc.
All my opinion obviously and I would love to see some news soon; however I do think the end of the year is more realistic. Maybe an early Christmas present for those invested…
GLA.
In terms of the financing for Dundas, the below video is worth a watch from 8:20.
https://youtu.be/0Gkyl5y_K0k
It’s clear that the discussions are still ongoing with various criteria needing to be met. Even though Dundas is a simple mining operation, Bluejay are unproven as operators and the funding partners will want to go through a rigorous process before issuing binding terms.
I wouldn’t expect any news on this until December at the earliest, if not the new year.
There's a lot of fear in the market at the moment, so it's worth remembering a few things which are specific to HBR:
1. The business has a FCF breakeven oil price of $35 per barrel. Even after this weeks price drop, we are printing money at current prices and reducing debt every month.
2. Even if prices fall further, we have a significant amount of production hedged at $58 which provides a floor in terms of earnings.
3. HBR is not a supermajor with huge levels of production to sell into the market. Current guidance suggests we will produce between 178-185k boe per day for 2021, which should easily be sold into the UK and Europe given Covid is largely endemic now with minimal restrictions or lockdowns.
4. We are currently hugely undervalued given the merger and creditor shares, etc. The lack of consolidated financials will also be weighing on the SP; however this will be rectified on Sept 23 and will give analysts some numbers to work with going forward.
5. The lack of a dividend means any future announcement on this topic will see the SP rocket.
In my view, HBR has the best short term potential out of any oil company on the LSE.
All IMO obviously and DYOR.
I’ve sold out after booking a 40% profit this week. The SP feels a bit weak now and the volume is dropping every day. Don’t get me wrong, there’s more to come here but I can see a gradual price drift downwards as we wait for more news. Volume has also started to reduce in the US which doesn’t bode well in the short term.
This is a very interesting long term play, but I do think new investors should wait for the pullback before jumping in.
Funding for Dundas is the key here which will unlock the major SP move.
Feels like the beginning of a healthy pullback after the rapid rise this week. At some point the stock runs out of buyers and people that bought earlier start taking profits off the table. This will need to happen if we are to push up into the 20's.
GLA.
Only natural for some to take profits after the gap this morning, although I suspect the Americans will keep bidding this to +20p over the next few days.
Battery metals, EV’s, Gates, Bezos. Widespread media coverage. Relatively low market cap. It’s got all the right ingredients for a sustained uptrend.
I've been bullish on Bluejay for some time now and this only reinforces my view. As most on this board are aware, the critical near term focus has to be getting Dundas into production and generating sustainable revenues. Once the mine is up and running, Bluejay should (hopefully) be in a position to self fund its pro-rata share of Disko Stage III after Dec 2024.
Hopefully the results at Disko are promising and Stage II is completed earlier; however giving Dundas time to generate cashflow can only be good for current shareholders, as this should eliminate the need for an equity raise to fund Disko Stage III.
Difficult to predict where the SP will land if both projects come off and Bluejay retains its 49% stake in Disko, but I wouldn't be surprised to see between 50-100p given the race for battery metals this decade.
Onwards and upwards from here and looking forward to the key RNS re: financing for Dundas.
GLA.
I've been thinking more about Phil Kirk's share purchase on Friday and how it provides quite a strong buy signal to the market, particularly in relation to the outstanding PMO creditor shares.
The board and management team know the business better than anyone else, so if Phil chooses to purchase 100,000 shares at 327p then he must believe that there is limited downside from that level. Otherwise, why not just wait for more creditors to sell and push the price down further?
While there is good news around today and the market is in a positive mood, I think many institutions would have been waiting for a signal such as Friday's to really push the button on this stock. I'm anticipating a strong performance this week as a result and hoping for £4 by mid-month.
It's also notable to see the rise today on the back of a -1.13% movement in Brent prices.
GLA.
I think what everyone needs to remember is this:
1. This is not your usual steady state O&G business. The merger means there will be a period of uncertainty as the two companies are consolidated and synergies/cost savings are realised.
2. The PMO creditor shares have held the price down ever since the merger, so we never saw HBR rise with its peers and underlying crude prices. It certainly fell in line with the market though, which is why (in my view) we see ourselves trading at the highly discounted levels we see today.
3. I think the management team and the BoD will surprise many investors on this forum in the medium term. Patience is required as they look under the PMO hood and tidy up any faults (I.e. with Tolmount) that they might find. This will make HBR a stronger business long term.
4. The key catalyst that should dramatically increase the SP is the first results in September, as it feels like the market is waiting to see how the consolidated balance sheet looks and what kind of profits the combined business is throwing off. Direction on HBR’s debt repayment strategy will also be critical.
Basically, if you’re patient and crude prices don’t sh*t themselves in the short term (which is unlikely given OPEC’s small production increases), you will absolutely make money by buying at these levels.
All my opinion obviously and DYOR.
Agreed - at least the selling is across the board and not an HBR specific issue. Likely just some profit taking at the end of the week after the big rebound on Wednesday.
Can’t see it staying this low for long, especially with Brent back above $70 after the OPEC/Delta wobble.
Great RNS this morning. The management team just keep delivering and pushing the business forward. Very exciting times.
I was tempted to sell this morning and lock in some profits (hoping to re-buy lower) but there’s just too much upside and I couldn’t face missing a big move higher.
Looking forward to the next update and some figures in due course.
GLA.
Massive drops after 2:30pm over the past few days. Not sure what’s going on with the US at the moment. Looks like across the O&G sector as well.
Hoping for a recovery to £4+ over the coming weeks. If UK covid rates continue to slowly decline (as they have over the past few days) then I think this will fly back up.
You’re right that the timing does seem related the latest share price drop. To be honest, it was the recent comment about the management team that got me posting (rather than lurking).
In any case, I’ll be interested to see how the next six months pans out and whether there’s a catalyst for me to reinvest. Hopefully there is and we all make a decent return along the way.
GLA.
Appreciate the insightful replies as usual.
Re: hydrogen - it was merely an example of an alternative solution being explored by the market.
I know the two of you won’t believe me, but I’ve got no agenda in trying to short or deramp the shares. These are just questions that (in my view) need to be considered for those invested here.
QFI is a tiny company with great technology that is trying to win a contract with an industry giant. They will need some serious partners to make that happen - hence my comment about the JV.
Happy to be proven wrong, but that seems like the most realistic way to secure the MSC contract.
Thanks and that’s an interesting read.
“If available at scale” is the key phrase there. If QFI can’t source/produce glycerol in the commercial quantities required, then supplying MSC with BioMSAR on an ongoing basis will be a challenge.
If MSC thinks there’s a risk on the glycerol side, then this will likely push them towards other alternatives with more reliable supply (i.e. hydrogen).
While I don’t think QFI is currently a takeover target (as some have discussed below), I do believe that they will need to enter into a JV to deliver the MSC contract. In my view, it’s far too risky for MSC to take on BioMSAR without the scale and working capital support that a larger partner would provide.
Salinger - I know you're a long time investor and I hope you do well here.
As I mentioned earlier, I'm bullish on the product itself and will continue to watch with interest as the three projects develop (particularly MSC). If the LONO goes well and they manage to secure a contract, then I'll likely be back in with a sizeable position. What will be crucial though is the actual production of the required tonnages, as it's all well and good to have the orders but QFI will need to produce at scale to fill them. I assume this will come in the form of a production agreement with a larger refiner, so that's another piece of the puzzle to factor in.
Good luck to those invested and hopefully some solid progress over the coming months.
First time poster but I felt compelled to weigh in on this. I was a shareholder in QFI earlier this year but sold around 5.70 as the drift downwards was taking place.
I have to say, I do believe in the product and BioMSAR in particular; however it was this nagging feeling about the management team that ultimately led me to take my profits and sit on the sidelines.
They just don’t have enough skin the game for me and I get the feeling they are a somewhat adrift as to how they are going to take the business to the next level. As harsh as it might sound, I can’t see Jason and Mike at the helm of a £500m+ market cap business with hundreds of staff and driving the QFI vision forward. They just seem a bit flat and uninspiring. I also think the salary’s are far too high for a pre-revenue company.
Just my opinion obviously, but I do think others on this board share similar sentiments. If the management team paid themselves a bit less, hired a brilliant Head of Sales/Project Delivery (and incentivised them properly), then we might see things start to move here.