Member Info for Dcat80

Thanks Mesb interesting appointment and as you say hopefully a sign things are finally progressing there. Not sure if you remember that Apollo capital made a bid for Tronox last year, small world the Tio2 sector I guess as NVS acts as consultant to Apollo.

Forgot to add, in addition to pitombieras there is mocidade 3km as yet undrilled but with more targets…

https://www.lse.co.uk/rns/JAN/tenements-granted-at-pitombeiras-vanadium-project-t7sid0rfvo17dgq.html

Fulmar - think of it more as a starter project if you prefer.

The proactive write up is quite good at covering the basics on the exploration upside. Namely
1) The Technical report released was largely to Feasibility standard and as such can only use the high confidence resource of 5.1m tonnes (measured and indicated)
2) There is another 3.16m tonnes of inferred that with further infill drilling could be proven up
3) The overall jorc target for pitombieras is 40mt-60mt (check 2019 technical report)

Both the current measured and indicated and inferred resource comes from just 3,623 metres of drilling. You won’t find another project that manages to produce a FS based on such little drilling! It’s possible as
- the deposit is so near surface, outcropping in some places. Means very little wastage on drilling metres through overburden before you find mineralization
- the high mass (specific gravity of the ore). Each cubic metre has a mass roughly twice that of most copper bearing ore so basically 1 cubic metres = twice as many tonnes of resource than say a copper play
- as the deposit is at/near surface and magnetic exploration success/confidence is quite high

I’m sure Jangada could drill out a much larger resource resulting in longer mine life and further improved economics, however if cash is used doing that then it’s spent and not available to put towards any mine build financing. Believe the BOD don’t see resource expansion as priority use for our cash.

Hope that helps

Agrogerson - i’ll be able to post more this evening after work, however in meantime the article below is the best introduction to VTM articles I’ve seen - as in relatively easy to understand

https://smallcaps.com.au/investors-guide-understanding-vanadium-deposits/

Pretty decent write up by Proactive on Jangada, particularly pleasing to see

- the annual free cash flow of the FS highlighted of $16.1m
- Exploration upside with commentary noting in addition to the 5.1 measured and indicated resource used in the FS there is inferred of 3.1mt in current resource that couldn’t be used in FS as not to measured and indicated std
- Jorc target across the licence much higher 40mt-60mt

https://www.proactiveinvestors.co.uk/companies/news/982772/jangada-mines-plc-developing-low-capital-and-high-return-brazilian-vtm-project-982772.html/long

BF - suspect they’ll be in a closed period due to both discussions and accounts due.

I don’t see them buying open market either, far more likely any increase in ownership would be putting money into the company as part of financing package by converting their options when applicable.

Much rather see them update the presentation and carry out some PR. Value of the stock outside of TR1s only totals £3m at current SP….

D220 - circa 100m warrants at 3p at Arcm due to expire mid June and suspect lot of those holders were waiting for the deal volume to either flip them or sell existing shares to raise funds to convert the warrants. Always was going to take strong buying to sustain a rise until they expire, however less incentive to flip at current lower SP and in relatively short period any remaining not converted expire. Hopefully see a good sustained rise once they’re cleared and when Anglo start drilling.

The drilling commitment of averaged out and with the minority holder contributing is circa $9m PA for stage 1, that’s well over 6 times what Arcm spent in their busiest drilling season and that data from that and the surveys should make major discovery that much more likely now.

Once it does well I’m sure they’ll be some moving across to Jan, quite a few common holders but has to hit slice targets there before things move here!

I also mentioned blackrock got involved with a royalty agreement which was the first part of financing, link below highlighting provides details of this.

https://www.proactiveinvestors.com.au/companies/news/149715/avanco-resources-agrees-12m-royalty-funding-for-brazilian-copper-project-with-blackrock-48860.html

Below is the link i reference earlier of an interview with the founder of Appian capital who were lone of the parties involved in financing Avanco so worked with our BOD before.

Tell us more about the problem of short term thinking vis-à-vis cycles in mining sector.

A common mistake amongst investors is to be overly geared to the macro exposure of a commodity. Appian targets defensive assets which are able to generate cash flow regardless of commodity prices due to their low operating cost positions and therefore ability to attain financing and remain insulated from the swings of macro movements. While we certainly have guiding macro beliefs, we are fundamental bottom-up investors.

The above part in particular stood out to me. I’ve posted recently calcs on how the DS model appears to still be profitable even if iron ore price fell down to $40 per tonne and as such whilst the reward (npv) hasn’t gone up, the risk of lower commodity prices had been reduced and this might be what financiers who are more risk adverse than most PIs would be looking for.

https://www.mining.com/not-scoring-big-win-not-backing-losers/

The project isn’t too small for the DSO operation they’ve demonstrated, NPV to capex ratio is 5:1 - that’s excellent. Yes extending mine life would add to NPV and improve, but the capital returns already good.

The options are whether to proceed with mine build for which the FS demonstrates a robust model in which the mine would make money even in times of poor commodity prices, or whether they look to do something different (such as partner up, drill and review different production route). That’s stage they’re at and we don’t know what will happen or when, but the economics produced are very good for financiers and likely they’ll be options to consider.

I’ll post couple of other articles after o finish work, including interview him Appian capital and terms of blackrock royalty agreement and cash injection into Avanco

Aligned and walked this path before in Brazil.

I had a quick check back through Avanco Resources FS last night. 94% IRR, NPV $250m, capex $50m.

Extremely similar economics to our FS in respect of IRR and a 5:1 npv/capex ratio.

Blackrock, Appian and glencore all got involved in their project. Ultimately next steps for pitombieras is financier orientated, that’s more Brian’s world than PI PR…

https://www.proactiveinvestors.com.au/companies/news/149712/avanco-resources-feasibility-study-yields-94-internal-rate-of-return-for-brazil-project-40321.html

Hopefully company are working on an updated presentation and get more vocal in PR to help the average PI both become aware of the project and Company, but put across in an easy way to understand. Below might give them some ideas, It’d be great if they did reach out to the lths they know about how to improve the PR. It doesn’t need to be rampy and unrealistic, the project should do the talking, but it does need to be communicated in way inexperienced PIs can follow

Separately whilst the DFS is written rather poorly and certainly detail is hard to follow at least for the vast majority of PIs there are at least some aspects easy to see and understand.

$146m post tax free cash flow over 9years = $16.2m PA

That’s based on a 185k tonne PA iron/vanadium concentrate

From above we can test the viability of the project should there be a drastic fall in iron prices. For example if the price of iron ore was to fall by $80 per tonne to circa $40 per tonne (extreme and would be lowest seen in well over decade) We’d get $14.8m PA less revenue (185k x $80). In this instance project should still make Circa $5m PA in post tax free income (save the tax on the reduced revenue plus difference between that and the $16.2m).

The DFS has therefore shown an extremely robust project with study done by GE21 (who are used by Anglo American, BHP, Largo, Vale to name but a few) to high confidence levels of a DFS in which at the extreme lows of iron ore prices the project would make money on those years.

For those that don’t usually check Twitter (BF…)

Adriatic metals, the only other DFS I’m aware of with a post tax IRR in excess of 100% (other studies which achieve that all been either scoping study of PEA) have a slide on their presentation covering DFSs in the precious metals sector.

Whilst pitombieras isn’t precious metals to highlight just how exceptional the finances are someone added Jangada dfs to it just to help demonstrate. Irr post tax 100% and NPV to capex ratio of 5:1 makes project extremely attractive.

Tweet below includes.

https://twitter.com/goleftmassa/status/1519271349960773632?s=21

I really wouldn’t be surprised if todays selling was short term traders buying last few sessions for a bounce and either not checking liquidity before hand or getting spooked by few more sells and just taking the loss.

At these levels sellers likely to be taking losses so fingers crossed the floor comes soon.

Fundamentally there’s only a handful of projects that manage a post tax IRR over 100% and they tend to trade 50%-70% of the projects NPV. Worth noting those with just scoping studies or PEAs include the inferred resource within their lower confidence level economics, DFSs don’t.

50%-70% of the NPV in Jangadas DFS equates to an equivalent of 15p-21p area against our issued shares. Not surprising Brian thought selling was mad, but then he needs to take responsibility for comms and making it clear.

Long term holders might understand things take time and the DFS produced outstanding economics, they certainly don’t appreciate their holdings being so undervalued to project worth

For those that struggle with below 15p-21p would be fair value SP range for Jangada judging against the value of other such high return projects…

Short answer is next steps after DFS is offtakes and financing if they are to proceed with the DSO…

I’ll post over weekend, but busy at work at the moment.

For those wondering on fair value 50-70% of NPV for post tax 100% IRR projects is the norm. Check history of Marianna sold at 70% of PEA NPV (which includes inferred resources a DFS can’t include). Adriatic metals who at DFS stage (they have great slide on their presentation showing how various projects stack up) or Atlantic lithium from their recent scoping study.

BF - NVS (non-exec) also a consultant to Apollo global. They’ve interest in Tio2, as can be seen offered to takeover Tronox last year…

https://www.reuters.com/business/exclusive-buyout-firm-apollo-makes-43-billion-offer-buy-tronox-sources-2021-09-13/

Clearly B&I, time stamp between and spread between makes it obvious.

Let’s hope Covid isn’t a factor now then…

In meantime Valore released exploration update, might keep few occupied for few minutes whilst we wait to hear from our BOD…