Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
Let’s calculate some market implied probabilities here.
First, we can approximately split NPV of various KEFI projects as follows in units of share price: (I took 2023 NPVs from the company presentation. One can argue about gold prices, discount factors, etc. )
TK: 4.6 p
SA: 3.8 p
Total: 8.4 p
Now, if we assume that the company at feasibility stage should be worth approx 10% of NPV, that would give us a 0.84p share price.
However, once the production facility is approved, financed, and construction is started, the value typically moves to 50% NPV. Which would give 4.6*0.5 + 3.8*0.1 = 2.68p.
KEFI price is between 0.84 and 2.68 currently, after the Final TK Umbrella Agreement is signed. With simple math, at 1.0p price, we get the implied probability of starting TK plant construction at approx. 9% !
My conclusion is that market is still too pessimistic about TK. Even at probability of starting plant construction of 50%, we get 1.76 KEFI price. Once the construction is started, the price should be at least at 2.7p.
Yes, RAB has been selling here for a few months. When I started to accumulate my position in KEFI, I was surprised how easy it was to buy virtually any size. You just leave the low bid, and eventually it was filled throughout the day. That deterred me a bit, because I thought insiders were selling while Harry promoted optimistic b*llsh&t. Now, especially after the signing, I feel a bit more relaxed. The RAB selling could be a blessing for many, providing cheap entry points - KEFI could be at 1.5-2.0 now otherwise.
Published now.
Ferrexpo plc (LSE: FXPO), a producer and exporter of high grade iron ore pellets to the global steel industry with operations in central Ukraine, announces that Jim North, Chief Executive Officer (CEO) and Executive Director of the Company, will step down following a period of nine years with the Group, in order to pursue other opportunities. Mr North will leave his position as CEO following an orderly transition process with effect from 30 June 2023.
The Board Chair, Lucio Genovese, will act as Executive Chair on an interim basis and assume leadership of the Group from 1 July 2023.
The Board is pleased to announce the appointment of Nikolay Kladiev, Chief Financial Officer (CFO) of Ferrexpo, as an Executive Director of the Company with effect from the conclusion of the forthcoming AGM.
Lucio Genovese, Chair, commented, "On behalf of the Board, I would like to thank Jim for his significant contribution to Ferrexpo over the last nine years and for his role in leading and shaping the Group's strategy since he assumed leadership in 2020. Jim was appointed to the role of CEO at a time when our focus was on accelerating growth, leading Ferrexpo's decarbonisation plans and furthering cultural development within the business. However, given the situation in Ukraine with the ongoing war and the uncertain outlook, we have had to slow our growth programmes and the CEO's focus has necessarily shifted to that of business continuity and operational resilience.
Jim was a key driver in implementing Ferrexpo's long-term expansion programmes as well as leading the transition to the new high quality DR pellets, driving the decarbonisation pathway for green steel. He has worked tirelessly to support the Group's resilience through the extreme conditions we have had to face during the ongoing war in Ukraine, and prior to this, successfully navigated the significant challenges associated with Covid-19. The Board and all Ferrexpo wish him every success in his future endeavours.
I would like to welcome our CFO Nikolay to the Board. Facilitating effective succession planning has been a recent area of focus at Ferrexpo and we believe this has put us in a good position to achieve business continuity in the light of these Board and Management changes. As interim Executive Chair, I look forward to working closely with Nikolay until such time as the outlook in Ukraine allows for the search for a permanent CEO."
Jim North, outgoing CEO commented, "It has been a privilege to lead Ferrexpo and to be part of the management team for the past nine years. I would like to thank all my colleagues in Ukraine who are brilliant people and who have continued to embrace innovation to ensure Ferrexpo remains a leader in the supply of iron ore pellets for a greener future. The resilience shown by my team to support the business and maintain continuity of operations through this conflict has been incredible. This is testament to the world class
In the best scenario, KEFI will start commercial production in 2025. However, the industry statistics is that if the construction of the mine started, there is 93% probability that the commercial production will happen. Therefore, I expect KEFI market cap to move to approx 50% NPV of TK interest plus 10% NPV SA interest, as the funds start to flow into TK project.
% to NPV depends on the stage of the project. We can expect around 40-50% NPV for TK after the mine/plant construction is started. For SA assets, it would be much lower before permit is received, finance is sorted out, construction is launched.
NickE, what's wrong with the dividend valuation model? How would you value it?
barry7376, you have been posting bearish comments on SHG since October and sub 9.0 price. :)
To me, it makes sense to front-run the predator and increase position at 13.50. The price can double in a few weeks.
If it was La Mancha buying at 13, then the share price will go much higher before the offer is made. They'll try to increase their stake.
My guess is Eric got promoted and will take a job in one of the majors, after successful completion of Sinigda and WK drilling. I am pleased to see that Sinigda output is already 3kOz per month. It is a pity Eric leaves, I hope the momentum he created will keep Shanta going for a few years until its acquisition by the major.
I guess HUM is much riskier jurisdiction (Mali), and its output is super volatile. In October, its market cap was 3x less than now due to disastrous output, high AISC and local insurrections.
Unfortunately, the coming recession and imminent drop of iron prices supersede war and other factors.
Any idea what prevents signing TK launch at this point? Are the issues with EG fully resolved? Where did it get stuck?
Could you please give me a link to podcast?
Thanks Alex, your scenario is certainly possible. I liked the recent piece from Jeremy Grantham, perhaps you've seen it already https://www.gmo.com/americas/research-library/after-a-timeout-back-to-the-meat-grinder_viewpoints/. I am not saying his scenario is a certainty. The fututre is unknown, probabilistic, chaotic and path-dependent. :) However, I think that industrial metals will be much lower than they are now at some point in the next 2 years. And that skews my risk-reward in favour of precious metals, expecially gold. Copper and silver might be different too because there will be high demand for EVs and green energy.
I am sorry to say it, I love this company and made a lot of money here. However, there are objective headwinds that FXPO will face in the next 3-12 months, which I will list below, so the opportunities costs prevail. (I particularly like reward-risk in junior gold-silver-copper miners at the moment). I am pretty sure FXPO is a good reward-risk long term if you do not look at the price for the next 3 years, and I will buy again when the price falls below 80. Anyway,
Headwinds.
1) It is likely Ukraine takes Zaporozhie and Crimea before autumn. However, it will not finish the war. I expect the war to continue at least for another 1-2 years unless Putin is removed somehow. Russia has the potential to mobilise and send to certain death another 500k-1000k of its citizens. :(
2) Therefore, there will be low production, high electricity costs, disrupted logistics, cash burn for another 1-2 years.
3) It is likely (almost 100%) there will be a global recession at some point in 2023, with S&P reaching a minimum below 3200 in 2024. Industrial metals, like iron, will suffer after the initial euphoria of China reopening. FXPO will also be pressured by the sellout of FTSE250 funds.
Anyway, I'll be back at some point.
Last 3 days trading volumes were relatively high, almost comparable to the beginning of Novemver when share price moved from 0.6 to 0.9.
It is good they outlined the remaining hurdles to be cleared. The way I see it, it will be done, because it is in the interest of the country, its people and its corrupt officials. It is just the matter of cost.
· Ethiopian Ministry of Finance and National Bank of Ethiopia (central bank) confirmations so that finance agreement details provide the same protections for both banks and comply with international practice for mining project finance; and
· Ethiopian Ministry of Mines completion of endorsement of historical investment, confirmation of tenure for production and exploration, and direct agreements with lenders.
Lots of the US and Canadian mining companies went 20-30% up during the week. This is the beginning of self-reinforcing cycle which will pull out precious metals junior mining industry from the swamp: gold up --> easier to get financing --> lower dilution risk --> zero bankrupcy risk --> stock price up --> cheaper finance, and so on. Why is it relevant for KEFI? Well, if there are any issues with the current TK deal, with gold price appreciating the motivation of all participants to make it done will build up exponentially. At some point, there will be a competition to give money, and that is when all these exploration licences will come handy. Once the benign cycle starts, there will be no stops until this one becomes a 20-30 bugger. I like that so many people are negative in this chat. If they are rational players, they are trying to build a position in a very illiquid share. I hope they are already late. :)
In the long run, there are two possible outcomes. The good one is Ukraine "privatizes" assets, ideally by selling FXPO shares to the Western institutional investors. This may drop the price in the short term, but good for the long term. The bad outcome is the government sends representative to the board of directors and starts managing the company on non-profit incentive basis. This would be good for the Ukrainian people because FXPO profits will be used for rebuilding the country and containing Russia.