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Hi MM,

We cross-posted.
Look, I get that EXIM bank wants to be sure that it's not being sold a pup and that the demand for the port is there.....and that it makes commercial sense, ie they'll get their money back.
I get that CRBC (the nominated contractor, as customary) wants the business , so has asked the 5 LoI signatories for an indication of potential business volumes.
For something that has been in the works for years, it seems from your own timeline that we've gone from EXIM Bank first request (?), through CRBC to the potential signatories and back from all 5 within a few days . That suggests a box-ticking exercise for cosmetic/CYA purposes, maybe to address the IMF issues ...or the BRI top brass concerns.

I also get that the longterm BRI goals are geopolitical,with commercial considerations secondary, a variant on the US Marshall Plan post WW2. Same old, same old.
But again I ask, if you were in the Chinese shoes, would you allow current ZIOP owners to keep the profits of this great mineral resource for themselves ?

I think not, I think they'll make us an offer we can't refuse. We need them a lot more than they 'need' us. And when I say 'we', I mean our core shareholders + GLEN. Our core shareholders don't have the IPO price as anchor, because that's not what they've invested; GLEN has written down its (Xstrata's) investment cost and presumably reduced its tax bill accordingly. GLEN has plenty of other fish to fry with the Chinese, so - Ivan's ego apart - isn't particularly motivated to fight our / its corner.

I'm invested because I expect to make 10 to 20x my money, I'll be surprised (and delighted !) if it's more than that.

ATB

Hi tomshare,

If we're say 40% of projected throughput capacity at the port, by volume or value, I'd agree that gives us a stronger hand, if we're only 5 or 10 %.....meeeh.

Hence my question. If we don't know , it's OK to say so. Do we at least know for a fact who the other 4 are ?

TiA and ATB

Hi tomshare,

Thanks for these further updates.

You write …" any Mineral Port will need the commitment of Zanaga being developed.".

AIUI, we are one of the 5 signatories to the Letter of Intent that the Chinese wanted to see. Is it known who the other 4 signatories are ….and the potential throughput of each ?

If ZIOP is a major contributor to the total, that gives us in shopping mall terms 'anchor tenant' status and would suggest some strengthening of our otherwise relatively weak negotiating position.

ATB

Hi rafaley,

You asked tomshare ..."do you think that the Chinese, Zioc and Glencore have a greed a price in principle already for the finance/ purchase price for JV ? otherwise, the Chinese would not have much control over the price they pay for product in 4 years time !!! "

He rather sensibly and understandably declined to commit himself. But in any case, I think you're missing a point here. Nobody can control the global price of a commodity 4 years down the line, the spot price for FSO will be what it will be , with a premium/discount depending on grade. The Chinese will pay the then prevailing FOB rate for our product. It's in the netback to us/ZIOP that the challenge for us arises.

Our situation is that of a dairy farmer, capable of producing premium grade milk. There are a number of other dairy farmers around us. If China Inc controls the new port and maybe the railway from the mine and is the primary buyer of our product, that is like Tesco owning the road from our farm and all the bulk milk trucks and being the only buyer of our milk.

Tesco (and other supermarkets, the example isn't perfect) are in a position to dictate the price they pay for milk to the dairy farmers, who get a pretty raw deal at present.

China has the whip hand in what we / ZIOP end up getting (net) for our product , because they can charge us for access (using their infrastructure). Our fallback to 'market' - likely still China, in any event - would be via Franceville/Libreville , which can't handle the volumes we need to produce to get economes of scale.

Since the Chinese would prefer (but it's not essential ) for the new port to be a commercial success, they'd obviously prefer to handle our business as well as that of others. We may even be 'the jewel in the crown', our product is 'premium' ......so there's the basis for a compromise, or 'win-win' in the jargon. But it's unlikely, all things considered, that we'd end up seeing/getting the great levels of profitability that people have been talking about.

Put yourself in the Chinese position. What would you do ?

Happy to hear counter-arguments.

ATB

Hi mrJimV,

I think your questions are interesting, but probably better suited to

https://uk.advfn.com/cmn/fbb/thread.php3?id=31347119 where there appears to be more appetite for off-topic discussion , personal feuds and conspiracy theories.

Sorry to be so blunt, but the signal-to-noise ratio has dropped significantly in the last few weeks. Maybe it's something to do with the heat. Whatever.

ATB

Hi tomshare,

Thanks for addressing the interdependency / chicken-and-egg conundrum in such a clear manner.
I agree with your conclusion that IMF is likely to want to see some concrete (no pun intended) steps being taken before it commits.

ATB

Hi Sidneysideline,

Thanks for your concern. Last time I looked, my portfolio was in fact about 80 % AIM, partly for IHT reasons.

Using AIM as shorthand for spivvy or risky shares is a common mistake, there are a lot of conservatively-run , family businesses on it ......just as there are a lot of people who invested in the so-called safe 'blue chip' banks and found themselves , post 2008 in the 90% club. That is, they were down 90% on their investment.

There's risk everywhere, often - and most expensively - in unexpected places. Marconi, anyone ? BP post Macondo ? Equitable Life ?

Jay 12 posts a list of all the factors he sees as positives, as collectively they are. But he's missed the point that they're interdependent : if any of the factors he mentions don't work out as planned /expected/hoped for, all bets are off.

Hope that clarifies . It's differences of opinion like this that make a market.
ATB

Hi Afric,

The common thread is past and current China Inc B + R practice, which some might think has potential read-across here. Oh….I've just realised that none of the examples I quoted involved African countries. Maybe this time it'll be different.

With any luck, we'll all be long gone with our new fortunes before the final reel.

ZIOC is 'high risk/high reward' and so gets a portion of my 'mad money' investment pot. I also religiously buy 1 lottery ticket a week......but not too long before the draw. For the obvious reasons.

ATB

Hi MM,

As the World Cup has just amply demonstrated, it tends to be the players who can't deal with the ball who play the man.

Since I'm invested in ZIOC, if I miss out, then so will every other bona fide ZIOC investor. Doesn't make your wish very sensible.....or friendly.

I'm looking forward to the IMF take on things , hopefully next week. And any 'Chinese whispers'.

On the C-B side, it'll be interesting to see how the land expropriation process goes....and whether any of the 'usual suspects' are surprise beneficiaries. When I was working in Pakistan, ICI's PTA (pure teraphthalic acid) plant found it unexpectedly had to pay an exhorbitant amount to a local pol (from memory US$ 30M) for a ransom strip.

Good luck with all your investments.

ATB

Hi MM,

You're obviously a speed-reader.

The SriLanka port saga shows how China used debt to achieve a strategic objective - control of a port - that never made commercial sense. The IMF is sure to want to see that any debt relief granted to C-B isn't similarly wasted.

Turning to ZIOP, the proposed PN port is far more llkely to be driven by commercial considerations at this stage, but the fundamental yardstick - what suits China's interests ? - is the same.
Sure, China wants our highquality ore, for domestic political considerations.
If China finances and controls 'our' route to market (port and maybe rail) - and has the CB Govt in its pocket - how much of the gross FOB margins we drool over are likely to be absorbed by 'transport , port handling and miscellaneous fees' ?
And before you accuse me (yet again) of deramping, I've doubled my own holding in ZIOC in the last few weeks (increasing my average cost to 9.3p) and even bought a small holding for a grandchild.

The newsflow is indeed encouraging .....and I expect to make a good return at some point, but I think it's wrong to consider this a slam dunk.

ATB

Hi Ricfle,

Thanks for yr reply re wells for 2019, I'm sorry for some of the subsequent 'slaying'.

The other part to my question was : "Kerogen's other investment Zennor immediately precedes us. Any chance of juggling slots in our favour ? "

At the risk of starting another round of intemperate posts, do slots ever get juggled in the way I query ?

TIA for any input
ATB

Hi tomshare,

You're much more au fait with Chinese thinking than I am - how amenable do you think China Inc will be to Congo's requests for help ?

There's been bad press recently ex Sri Lanka (port), Malaysia (railway), Colombia (bridge) and now Laos (hydro dam) for Chinese-supported/arranged projects, are they likely to feel that some good publicity would be good politics ?

The Hambantota port case in Sri Lanka is particularly something that might trouble the IMF when looking at plans for Pointe Noire and related SEZ.

https://www.nytimes.com/2018/06/25/world/asia/china-sri-lanka-port.html

To be fair, President Xi appears from the article to acknowledge that , to coin a phrase, the necessary lessons have been learned.

ATB

Hi all,

Good find ! Looks like CB Govt has its back to the wall, the Ministerial Meeting report acknowledges some politically challenging stuff :
- mostly failure of previous 5 year development plans, incl. embarrassingly those launched by Sassou himself as far back as 1982-1986;
- major ongoing poverty (1/3rd of population on less than $ 2 per day) with 30 % youth unemployment;;
- new development plan 2018-22 will cost 67% of GDP (110% of non-oil GDP) and will itself have to be financed approx 2/3rds by third parties;
- extrapolating from Q1 2018, they'll only make 72% of 2018's target....not exactly a strong start.
- mainly caused by "comportements retardateurs comme la paresse, la sinécure, la fraude, la corruption, la concussion, la prévarication et autres maux qui gangrènent la société congolaise." ( damaging behaviours such as laziness, jobs-for-the-boys, fraud, corruption, bribery, maladministration and other ills that plague Congolese society.).

Acknowledges that there are a number of heroic assumptions including : improvement in non-oil sector economy; likely drop in oil-sector revenue; ability of Govt' to contain expenditure; ability or otherwise to MANAGE PUBLIC DEBT ; and ABILITYOF THE GOVERNMENT TO MOBILISE NECESSARY BUDGETARY SUPPORT FROM
TECHNICAL AND FINANCIAL SECTORS.

Last two both acknowledge that - given basket case status - major conditional debt relief is the only way out.

Let's see what happens.

ATB

Hi Ricfle,

Thanks for the fine-tuning / correction !

With the leadtime in filling up the AM - esp. with slow ramp-up - of 40- 60 days, wouldn't that be a strong indicator of likely FOIL anticipated in late 2018 ?

ATB

Hi homebrewruss,

Thanks for this. Two things that seem relevant / interesting :

Location Client Contract period

UKNS Zennor Petroleum Limited Dec-18Jan-19
UKNSZennor Petroleum Limited Jan-19Feb-19
UKNSZennor Petroleum Limited Feb-19Mar-19
UKNSHurricane Energy PLC Mar-19Jun-19
UKNSHurricane Energy PLC Jun-19Aug-19

Kerogen's other investment Zennor immediately precedes us. Any chance of juggling slots in our favour ?
We have the PBLJ for 6 months, from March, which suggests management think we'll have FOIL cashflow by then , no? And 6 months gets more than 2 x wells , I would imagine.

ATB

Hi Ricfle,

I miscommunicated.
My point wasn't the eventual valuation - about which there is fair latitude for differences of opinion - but rather the one indisputable point that the ratio of cost : likely uplift is substantial under virtually any scenario.
The prospect of a 15 to 30x return on your drill cost is a pretty compelling argument for staying independent for a few more months.

ATB

Hi Ricfle,

…" a flowing Warwick would add about £1.08bn - £2.16bn or 45p - 90p a share to the value of Hurricane for about £70m drilling cost. No one in there right mind would sell before this well was drilled."

Pretty much what dspp felt when outlining his valuation assumptions over on lemonfool.

ATB

PS

This link https://www.bbc.co.uk/news/business-44813753 re Chinese contracts under BRI with the previous Malaysian / IMDB scandal-tainted government gives a flavour of some of the problems that the IMF will be keen to avoid.

ATB
PS. For those who choose to interpret these realities as deramping, I'd just say that I've recently bought some more ZIOC... in trust, for my grand-daughter. And no, that's not my implied timeframe to monetisation.

Hi shaun 86,

Last IMF communique http://www.imf.org/en/News/Articles/2018/06/28/tr06282018-transcript-of-imf-press-briefing on 28th June, scroll down to next to last of 'any questions'. Just repeats earlier IMF conditionalities re transparency, governance, anti-corruption, asset declarations for civil servants, etc.

Maybe there's something more current (albeit likely less authoritative) from the Africa watchers.

ATB

Hi johnniefp,

From your link

…"Ten largest shareholdings Pence per share Percentage of investee equity held
Hurricane Energy plc 62.1p 6.5% "

Odd ! I don't recall this being the shareprice @30 June...…?

ATB