Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
So all is now submitted and in the hands of the competent authorities in Bots.
One comment I have been seeking to address is how I think Tlou and Sekaname compare.
Some noise exists around Tlou's proposal being too modest with the 2 to 10mw step plan. Some have even said Sek. are going in with the full 100 and this makes Tlou's bid look small etc.
However I struggle to reconcile these views. If the noise from Bots. was full steam ahead, zero doubt, we are committed for years with this etc there is no doubt a 100mw tender would look attractive. However, 100mw is circa $80-100m of annual committed cost and I remain to be convinced the Bots Govt are prepared to go from zero to this kind of committed annual expenditure in such a binary fashion.
Tlou's bid however is scaleable and much more in line with how I think a developing nation would proceed with this type of project. The more you appreciate that the Bots. authorities are naturally keen to get it right and not make a rash decision, the more Tlou's bid makes sense to me. To suggest the biggest bid is the better is a somewhat contrarian view
Add in that TLou, as a public company, will be subject to a greater degree of transparency and monitoring, plus the many who have backed the company in Botswana will benefit rather than a few private owners, and Tlou's bid feels the more compelling to my 'attempt to be objective' mind
JTD - you are clearly frustrated and I am sure everyone can empathise. However I think it pays to be pragmatic rather than lash out.
Clearly the company supports itself but I’m not sure that any of the communications have been other than clear and accurate based on info at the time. I don’t feel personally misled. This isn’t some FTSE 100, it’s a pre revenue Botswanan based company in a pioneering domestic industry. I think it pays to remember that.
Re the funding, my analysis is as follows. They currently have circa 7m I understand. If they win the tender, all well and good. If they don’t this leaves the money in the bank to pursue other off-takes. I think they will spend on a no regrets basis ie judiciously.
Extensions of Bid Submission date can occur due to:
-mistakes in the bid documents
-poor response to invitation
-amendments to the RFP due to mistake or requests for clarification
-other unforeseen circumstances such as natural disaster
-Prospective bidders request more time
Unless 1 had occurred and they are being discreet then I think it is not unreasonable to conclude Sek. have asked for an extension. I do struggle to believe this however given how long all parties have had to prepare.
Therefore either:
1) the other bidding party has requested this, whether because needed or as a tactic. Either way it wouldn’t reflect well on them in my opinion.
2) The Govt has asked for more time and Tlou are being discreet.
I don’t see either outcome as being in any way negative for us. As always patience is our friend.
9 days to submission deadline.
Right now I’m looking for confirmed submission RMS on or around the 9th from the company with no delays or unexpected news. That said I view this as a hygiene point on the journey we are on albeit a very important one.
Thereafter I think the SP will leave the doldrums and the expectation will rightly build
I think they have about £6m in cash after the last fundraising no?
Subject to funding relates to 3 of 8 items, seismic (or expanding reserves), drill rig acquisition (they already own 1), and ‘project development’.
This tells me the current cash is already spoken for, and to me this can only mean as capital to build the 10MW production facility if successful at tender.
This doesn’t alarm me, right now the focus is win and then deliver the tender amount. Reserve expansion and buying more drilling rigs is part of the build out to me if successful ie a less urgent application of cash and one we will all gladly fund if the tender is successful.
Indeed - I’ve done a little more research on SAPP and the more I see the more I like. It has a number of objectives but key amongst these is to move from purely a cooperative of power companies to an actual competitive market where power consumers don’t just have needs met but have a choice - and to do so via encouraging private investment in a sustainable fashion. It thus far only has one independent power producer in the form of Lumsemfwa in Zambia, the others are state owned power companies. It also has one ITC (independent transmission company), Copperbelt who are listed in Zambia. Lumsemfwa has 2 hydro electric production facilities which produce a little over 50MW between them (which has been scaled to this over the years) and there are mature facilities (google them). They are owned by the Norfund, the Norwegian Fund for developing countries. So taking all of the above it seems that the SAPP are tasked with increasing the power into the grid, encouraging private investment, are not averse to dealing with smaller scale producers, and thus far the 2 none state members are a company listed in the country they operate in (sound familiar) or a state investment fund (ie none privately held co). Lots of hurdles to clear I am sure but food for thought in the above, for me at least....
Bob - for me every investment has to have a timeframe and these are closely linked to various so. , some within the company’s gift to manage and some outside of this. For some this is short, for others long. Witness Apple and FTree - both have been multi baggers but which have taken years to deliver on full potential. Whilst it is human to be disappointed when things don’t turn out as expected, for me I ask why this is and has it changed the fundamentals. In AIM I’m looking to root out mis-representation and focus on the fundamental authenticity of the information at hand and what this is telling me about the prospects. In TLOUs case this boils down to 2 things: do I believe they have the gas and do I believe someone wants to buy it? These are co-dependent and both most be present for success in the long term. Re the gas: yes, they certainly do, this has been independently verified and we are currently in the process of firming up just how much. 2P can only go one way. Re someone wanting to buy it. I personally think the Bots Gov and Ministry are not only credible but have integrity and thus every intention of awarding the tender and buying the gas. They are serious, the mood music is supportive in country and region and the frankly the country needs it to deliver economic growth. I Will everyone feel this way? No, if I was ultra cautious I would sit on the sidelines, wait to see if the tender is awarded and then dive in. Will these people see the biggest potential return? No of course not as they aren’t in the game thus far. Notwithstanding, we all have to weigh up the options and take our own view. Setbacks occur - whether they are postponements or something more fundamental to the investment case if of course the key question. None of us know how things will turn out here, but I for one will enjoy the ride from 12 Sept to Christmas and am enjoying learning more about Botswana than I thought I would ever know. If things do come good I will certainly be holidaying there with my family - whether they will want to visit a power plant I’m not too sure! GLA
Lots of excitement over on Petro Matard for the Matadors (of which I am one) which leads me to reflect on where next here. I expect this to bob around current levels with a mild uptick until a confirmed submission on 12 September after which things will hot up. Thereafter I think people will come back to this as the possibility of very reap and signifier near term gains will attract the market and place us back in the same place where we were with the last submission. I’d say pre Tender result we could expect to see 13-15p, possibly touching the 17p we hit last time. If we get the 10mw award then I think this could quickly conservatively become a £150-250m company within a very short space of time which would place us in the 35-60p range. Obviously non positive signs from the Bots Govt will impact significantly in the short term but I don’t see these at the moment, in fact the opposite
Perfectly entitled to your view Brad but that’s comparing apples and pears. On that basis Fevertree would have been lacking ambition for just starting small. Regardless it’s all about the gas in the ground and getting into the grid. If they get 10MW this turns from a pre revenue company into one with circa $10 million of income and a shed load of potential more. That is what I find most attractive from an investment perspective although clearly this isn’t without risk
I thought it was a solid RNS - welcome (unexpected I might even say) news re the spudding and a credible and realistic assessment of where things stand. The company is being nurtured well to my eye. I am a patient investor so for me I want the Bots Govt to be happy with the RFP response - if this takes a 3 months so be it. I don't even look at the share price on a day to day anymore - I'm here for the fundamentals and direction of travel. The SP will find its correct level in due course and take care of itself.
My hope is today’s meeting went ahead, provided clarity for both parties (were it needed) and it is now game on. I don’t expect an RNS (perhaps beyond the meeting occurred and went well) as it is a commercially sensitive process we are now in that neither party (TLOU or Govt) will care or want to to share. As shareholders we just have to sit tight like all parties and rightly so. Whilst it is a road with potential setbacks as we well know I think the various staging posts (primarily this meeting and then submission) will support the share price as we take firm steps towards tender result and what is hopefully a successful outcome for us. This is a big deal for the Bots Gov to break the current BPC monopoly and is a chance to genuinely light the blue touch paper for them economically by taking control of their own power generation and encouraging some healthy capitalism. I believe if we can respect due process and hold our nerve the result will be a great one for all involved on all sides. Good luck to Tony and team, TLOU and Botswana - we’ve got the power ;)
The Govt won’t award for more than the amount tendered for - that much is clear. TLOU aren’t tendering for 100MW, they are tendering for 10MW. If they can deliver more, later, that will likely be a separate matter. I was being a little facetious with my “disappointed with less than 100” as it isn’t obviously possible but my point was the company needs to demonstrate the scale ability furthet credentialise the 10MW offering in my view. Rereading my words I would revisit their serverity - a 10MW award would not in anyway be failure, it would be a fantastic achievement. However it will only be the beginning which I think we all agree on!
Or the below in a slightly more tongue in cheek form: I’m out to tender for the supply of 100 toilet rolls. Party 1 says I have a licence to supply them, can get you 10 in the next week, the other 90 a little later but they will take a bit of time to make. Party 2 says I haven’t even got a licence to supply loo rolls or even have solid proof I have them but yeah don’t worry about it can definitely get you 100 sometime. Under any form of objective assessment why would you go for party 2, or split it 50/50? Then add in party 2 gets 15% of Party 1s profits without even having to supply a single sheet of toilet roll....
Correct Zippy trader - I’m not interested in sharing with anyone and I’m not sure why Tony would be either. 50/50 with Sekaname seems to be a mantra trotted out and I don’t see the support myself. I want the full 100MW, exclusively. If we aspire to be a major power supplier in Bots and exporting to the SAfrican grid then we need to be bold in our ambition and execution plans whilst still recognising the commercial and cash flow realities of achieving this. I have no idea what Sekaname’s plans are but if they do not have the required licences it must contain a number of significant go/no go points to even arrive at where we are. Whilst 50/50 would still see a significant share price filip, I personally would see it as failure. Why allow the completion a foot in the door when you can effectively shut them out completely?
The way I look at the situation there are 2 events which will define the future for us: 1) Will the Bots Govt follow through on the tender and thus press ahead with CBM? 2) If so, will TLOU or Sekaname be the successful bidder? Focusing on 1, I think we can forgive them the false start of the previous tender process even if none of us expected or wanted it. Things are different this time. Aside from the very obvious credibility question that would be presented by their not proceeding, we know that they have learned from the first process and from the recent advert someone kindly brought to our attention on here that they have/are in the process of appointing a govt advisor to assist with the tender appraisal process. For me whether to invest is based on personal risk appetite around the above. Some will think both are too risky and stay out of the game, others will think both are a slam dunk and stay in regardless. Others, quite naturally, will go through a continuous cycle of risk appraisal trying to read the risk from various actions and inactions and this is likelly to lead to nervousness. Personally I find the Bots Govt credible and sincere albeit understandably keen to get it right which is why I am invested here because, when combined with the advanced nature of TLOU versus Sekaname, I think they are a natural fit to help the Govt deliver in a mutually beneficial manner. On more immediate matters, I’m not necessarily expecting an event defining RNS post Friday, if at all. I’m expecting it to be a serious meeting whereby the Govt can clearly set out expectations, emphasise requirements and probably state they will be no extensions (Sekaname requested one last time people will recall). There can be communications galore once awarded - until such point I’d expect cards to stay close to chests and rightly so.
“Gets us into the grid” is the operable phrase there JTD. Understood that some may think 10MW is a lesser number than 100 but to get 10 would be transformational as a proof of concept and I think the share price would reflect this. Once the first 10 is nailed down things can be wicked up but this is a not a modest undertaking and the growth needs to be manageable and sustainable, not least from a funding perspective as the floodgates should open once the tender is awarded Ps thanks for your response Tidd
It is a fair question. Having watched this forum for some time people seem to have become paranoid because of this individual’s various personas (and to be clear he does seem a bit bonkers at times). Regardless, I’m here to play the ball and not the man so intend to stay out of any pre-existing beef. My view: the Botswanan Govt is not stupid - they don’t invite people to tender that own nothing. Sekaname is owned by Kalahari Energy and, as at May 2015, were described (with Tutan) as holding leases over thousands of km2 in Eastern Botswana. They had (or have had) several shareholders with senior connections to Botswana. KS Energy were previously described as being a sister company to Sekaname. KS Energy and Sekaname were formerly partners in the joint venture that was awarded the operation and maintenance contract for Orapa in July 2008 when it was diesel powered and KS Energy still run Orapa to this day. So why TLOU? Their reserves are the only certified reserves in Botswana I believe. Whilst I’d like to see them aspire to 100mw, the talk of 10 and then 50 is a credible step plan to get there. If 10/50mw to 100mw feels challenging then no certified reserves to 100mw is more challenging by an order of magnitude. I believe Tlou are better placed than Sekaname to deliver but this is of course my view and intends no disrespect to the latter, quite the contrary. Happy to engage in fact based discussion on any of the above. Name calling - not so much.