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I wonder if they have been waiting for this EU patent prior to applying to the EMA for orphan status?
Digging around I came across this interesting quote, which may explain the need to achieve this status:
"The most powerful exclusivity right available to medicinal products after patent protection is orphan drug status."
https://www.taylorwessing.com/en/insights-and-events/insights/2021/10/orphan-drug-protection-clarification-needed
Everything since the Glencore deal 18 months ago has been choreographed to create a competitive situation & entice bidders to pay the highest price based around the 2024 FS. Elphick is a skilful & artful negotiator, and the details that have come out over the months (AT re Saudis at Xmas for example), are only notionally aimed at us & really aimed at interested parties, in that instance letting the Chinese know there were serious Saudi talks going on.
So I see everything geared towards having at least two serious competing bids - likely a Saudi/Gulf (maybe including Japan & Vale) consortium vs the Chinese. Not only is the FEED suggestion likely a teaser to entice broader bids, quite possibly so also is the whole Marty start-up, buy-in project: designed to squeeze out bids for a full buyout without blatantly stating that goal.
Incidentally, I obviously hope & indeed expect, a strategic investor or consortium to 'at least' provide the equity finance for Stage 1, particularly if they fear they are in a competitive situation. I am actually really hoping for a full buyout bid, why would China go for 20% of the project & not 100% ? They easily need that or their demand & have two clear strategic aims dictated from Xi & the Politburo increase Chinese ownership of foreign iron ore mines & develop a green steel industry that includes access to quality ore.
But on a worse case basis we may end up initially with just the finance for the FEED - that still saves us a horrific dilution of up to 50% if you build in a discount to market if we tried to finance via equity. Anything is better than nothing, incremental progress is better than no progress.
ATG the RNS of the 30 April specifically highlights strategic investors funding FEED as per "....strategic investors to consider funding of the next logical Project phase, being the front end engineering and design.....". Its actually underthinking not to consider it as a real possibility - given the company highlighted it in an RNS from 3 days ago, clearly they think a strategic investor might take that route rather than finance the equity portion of the first stage - so we investors need to consider it as well.
Its an interesting issue Marcus - it surely depends on the extent of the strategic investor commitment? I was anticipating the minimum strategic investor commitment would be the equity portion of Stage 1, the full sum we now know is estimated to be $1.93b. The majority of that will come from project finance & the equity portion should be around 30% ie $579m (Edison btw also worked on the basis of 30% equity:70% project finance in their reports). But if all a strategic investor is initially going to commit to is $22m for FEED, I can see that being positive but not setting the world alight.
Pretty stunning market reaction to our near doubling in NPV. The bid side has been continually hit the last 3 days with 100k+ orders. If management have confidence in their 2024 FS they should begin pitching to specialist funds, including those that invested in the original IPO at 156p - if they saw value then surely surely they should see considerably more value now?
The FS RNS made it clear that the FEED is intended to be funded by strategic investors & not internally. Relevant quote:
"The Company believes these positive results provide much greater confidence in the Project's economic feasibility ....and with this, provides a key catalyst for potential strategic investors to consider funding of the next logical Project phase, being the front end engineering and design (FEED) program ..."
Its an interesting explanation Older, but these transactions are usually exactly matched time/amount wise by the broker after taking their fee. Today's has quite a price/time gap, maybe it was a DIY job? Whatever its not great seeing 0.17 on the bid side regardless of the cause.
Mitch, I got the impression from MMs message that this presentation was aimed at stockmarket investors rather than strategic investors. The new 2024 FS dramatically changes the existing ZIOC investor presentations which have all been based on the prior 2014 FS. So it would be appropriate to inform long suffering investors, who have after all paid for it, how the new 2024 FS alters plans & outlook. From the earlier message it seems strategic investors will have access to the full 2024 FS once they sign an NDA, so the new presentation is unlikely to be aimed at them as interested parties would already have access to more detailed info.
ATG I would be happy with 9p by close today, but investors dont seem to be biting on the FS news. I wonder if the company will start pitching to specialist fund managers as well as PI - after all back in the days of the 156p IPO we had institutional investors including specialist mining funds among our core investors.
Essentially this is being set up as a bidding contest. Existing interested strategic investors, & presumably any that surface with todays publication of the appetiser figures, will all have the same common figures on which to base their bids - an excellent way of bringing this to a successful conclusion.
Elphick may not be great at actually running mines (see GEMD share graph since IPO), but he is superb at marketing mining projects (see IPO prices for GEMD & ZIOC) & also all the tactical manoeuvers needed to create the optimum conditions for persuading bidders to pay top NPV based prices for projects.
Thanks MM, thats important info from AT. Tactically he is using the full 2024 FS to draw out all interested parties, they have to formally approach the company to get the full report. Then sign an NDA & are then under lockdown until the report is made public - which is entirely in Elphick's control. Interesting he uses plural 'Strategics' - hopefully confirming we are in a competitive situation.
Country risk is an important valuation issue, but in the modern world it works both ways. In theory African projects should be discounted for political risk vs Australia/Canada. But China for example wants to strategically disassociate itself from dependence on US allies for essential commodities, so in reality where can they turn for major projects but Africa? China therefore clearly accepts African risk, as it appears do the key ME investors from both public statements & financial commitments. I see even the Japanese trading houses are re-assessing their unwillingness to invest in African projects. Where are the other sizeable high grade iron ore projects that are in at such an advanced development stage they can move rapidly towards production - beggars/choosers.
We have waited a gruelling 10 months for these figures, and at an 80% overall increase in NPV they are way past my wildest hopes of around a 50% increase. They clearly mean nothing to today's market, but Clifford Elphick has made everyone wait for them for a purpose - they are the basis on which he will conclude a strategic investor agreement. Of course any investor is likely to pay a discount to NPV but it will be a discount to 2024 NPV not 2014 NPV.
Hi Ex
The NPV statement in the April 2011 presentation was post-IPO, so it was a specifically forward looking statement referring to either a buyout or a buy-in - both of which were clearly intended to be based on the increased NPV that would flow from Xstrata's drilling programme. That increased our measured, indicated & inferred resources on that portion of our mining licence that it was focussed upon, with some 40% remaining essentially unexplored. The famous NPV clause in the JV agreement with Xstrata also clearly made the calculated project NPV the actual share purchase price between Xsatrata & ZIOC, should Xstrata wish to move towards full ownership. Again the critical valuation for a takeover recognised by both parties as being the prevailing NPV at a particular stage in the projects evolution.
Right across the mining industry pre-development projects attract in strategic investors based around the project NPV, that was certainly the case with the various blocks that have changed hands in the Simandou project over time, indeed IFC even built in a put option to sell back its stake on that basis.
The only way I can realistically see us PIs being 'squeezed out' is if there was a bid to go private arranged by Glencore/Xstrata, but frankly it looks like we are too late in the game for that. Aside from Glencore owning 100% of the offtake (likely swapped for a small royalty in a takeover), all shares rank pari passu & we will get the same takeover price per share as Glencore/Elphick & if there is a buy-in we will suffer the same dilutive effect per share & the same post-transaction market price as they will.
So all our discussions with strategic partners - both minority buy-in variety & full buyout - will be based on the new 2024 FS based NPV figures. Two qualifications - first, as per 99's post below, project NPV vs shareholder attributable NPV (I suspect the figures are project NPV). Second, potential strategic investors will of course seek a discount to NPV; the extent of that discount is IMO entirely dependent on the degree of competition between bidders.
Agree completely 99 - all the key variables from the calculations are missing. It could be this is intended as the appetiser, if an interested party wants details they need to contact ZIOC management.
Regarding project NPV vs shareholder attributable NPV, the final Mining Convention gave ROC a 10% non-dilutive shareholding and a 3% royalty. In the event of a full buyout, my hunch is Glencore will swap their 100% offtake for a small royalty (they have done this before) so say around 2%. How do royalties deduct from NPV - no idea - so I roughly work on around 85% of project NPV being attributable to shareholders.
I don’t see any reference to the crucial iron ore price used in the 2024 FS figures. But looking at the latest updates to the 2014 FS figures contained in the 2019 Zanaga Presentation, if you take $110 as the base for FE 65% then the same NPV figures are
12m pa NPV (2014) $2085m
30m pa NPV (2014) $3943m
So the 2024 FS NPV figures: 12m is 1.76x 2014 FS; & 30m is 1.86x 2014 FS. Showing how the market has moved rapidly in our direction financially. Add to that our project has immense scarcity value as the only major high grade iron ore mine at an advanced stage of development literally ‘ready to go’.
To illustrate the central part NPV plays in Elphick’s thinking, whether its buy-in or buyout its always based on NPV. Here is the key section from the very first Zanaga presentation in April 2011. P.1 Investment Highlights:
ZIOC has complete flexibility in funding obligations
• Takeout at NPV; or
• Dilution at NPV during construction;
Exactly nibj, we know for sure the Chinese have had them for some time - as they are doing the majority of the FS & have provided the power (& already know port details from past involvement). AT has acknowledged they were talking to the Saudis so it is v likely they have been aware of them for some time. But now the world can see them so if FMG, the Japanese etc want to act now they can see the basis for their bids. So we must be rapidly approaching the crunch point in negotiations, Elphick is Mr NPV & has always stressed all strategic investor negotiations revolve around NPV, the more competition the less any discount!
Incidentally I was specifically referring to NPV when I said the 2024 FS figures were nearly twice 2014 FS.
Well they came through & the figures are stunning. First take, they are almost twice the 2014 FS figures:
12m pa NPV = $3681m IRR = 26%
30m pa NPV = $7357m IRR = 28%
This is what we have been waiting for & this is going to be the basis for any buy-in or buyout partners.
Elphick "We look forward to presenting these results to the various strategic partners we have been engaging with and advancing our discussions further with them as we look to progress towards front end engineering and design of the project"
https://www.londonstockexchange.com/news-article/ZIOC/feasibility-study-update/16446302