Member Info for Jiving

Hi Extrader, I have always thought we needed a major developer/operator with specific sector & terrain experience to be a part of the project. Either of them would fit the bill, AA has learned the hard way about building a 500 mile pipeline & the Internet is full of background on their serious time & cost overruns. The advantage they might have over Vale is cash, but of course Vale has the key relationship with the cash-rich Saudis.

They coughed up $6b for an off-plan iron ore mine that still needed many critical licenses when they bought it. Frankly we look to be further along than Minas Rio was when they splurged $6b, and our route to market seems way shorter & easier - there's was 500km to the coast. I think we have all the ingredients for a consortium & the world is short of projects at the advanced stage we are currently at - ie going from FS to FEED.

"Oh and shorten that ridiculous spread to encourage more people"

Yep 'cause at the moment the pumpers can't dump at a profit. Also more suckers needed.....

Earlier this year Vale agreed a deal with AA to incorporate their Serpentina mine with Minas Rio in return for a stake in the larger mine. Vale CEO commented:

“We are pleased to partner with Anglo American to support the growing demand for high quality iron ore as our clients accelerate their transition to low carbon emissions steelmaking. Minas-Rio is a Tier-1 asset that will benefit from great synergies with Serpentina’s deposit and Vale’s logistics and we are confident this partnership will unlock significant value to all of our stakeholders. We plan on allocating our share of the high-quality pellet feed to our pellet plants in Brazil and in the future to the Mega Hubs producing iron ore briquettes.”

https://www.angloamerican.com/media/press-releases/2024/22-02-2024b

Minas Rio pellet feed is 68%, see P16:

https://web.archive.org/web/20110718194831/http://www.investis.com/anglo_report_pdf/AFM-Minas-Rio-FINAL.pdf

So iron ore at 68%, a largely pelletised product & connected to the port via a 500km pipeline. Interesting precedents, these guys know how to build & operate a very similar mine to Zanaga.

AA could be another potential developer/operator given they already own/run the giant Minas Rio mine in Brazil - complete with slurry pipeline. I note with interest the acquisition cost (ie prior to all development costs) to AA of the Minas Rio mine was estimated at $6b - a useful marker! And of course with this disposal they have just freed up capital.

https://www.mining.com/anglos-minas-rio-the-most-expensive-iron-mine-on-the-planet-82312/

".. just thinking ahead to when Zioc gets delisted’"

We need more of these optimistic posts....

"Let's meet in the middle - 5.55p!!!" Actually we may be closer than that, I hope so!

My full theoretical value for a full buyout with ZIOC achieving a 100% NPV valuation on a Stage1/2 with a 50:50 formula is $5.52b or approx 636p a share. I am just being cautious in pitching a 50% NPV deal at 318p.

Elphick is historically very much a 100% NPV guy. Some time ago I read an article on Glencore stating on projects where they held a majority or a substantial holding they went for 100% NPV or withdrew the project from the market till they could get it! So believe me I am hoping the last 2 years of, I suspect prolonged haggling, & painful waiting for us have led to a deal closer to 100% NPV than half that!

"The Strategics are a done deal."

This is exactly what I mean when I suggest we may have reached a conditional agreement with 'strategics' in late August & we are awaiting them getting their 'bunnies in a line'. This would explain the congratulatory nature of the infamous June interview, the July 1 placing with various insider parties taking precise amounts, Marty's option award & Glencore not bothering to appoint a second director. Also as you have pointed out Marty's once active Linkedin profile is now essentially dormant. But is it a finite 'conditional offer' ie they have 3 months to sort things or open-ended, obviously I hope the former.

MM it looks like we independently posted on the same subject - valuation - at the same time - 15.27.

There are many possible price/structure arrangements that could occur, but there are two more likely than others - a full buyout of 100% of the mine; or the purchase of 50%+1 by the Saudi consortium, leaving 50%-1 with ZIOC shareholders.

1. Buy-in - essentially reproducing the original deal with Xstrata from 2010 (that was reversed back into ZIOC in 2022). This time 50%+ is sold in return for a lump sum based on the Stage 1 NPV. This would leave ZIOC shareholders with just under 50% of a mine financed through Stage 1 & into the self-financed Stage 2 (& beyond).

Valuation thoughts: if we sold half the mine @ 100% Stage 1 NPV that would be $1.84b cash paid to ZIOC. I am taking a very cautious valuation of 50% NPV of Stage 1 which would mean $920m paid to ZIOC. Our 50% of the equity cost of Stage 1 ($600-700m) would mean we would need to retain $300-350m for that purpose, potentially leaving the balance to be paid as a special dividend to shareholders. Crucially we would also retain 50% ownership of a fully financed mine. Elphick’s expectation has always been that the 50%+1 owners would bid for ZIOC’s remaining stake once Stage 1 is finished & we are moving to Stage 2 - in which case our 50% would likely be worth approaching 50% of Stage 2 NPV. As with the original Xstrata deal Elphick may well build an NPV clause into any agreements.

2. Buyout of 100% of the mine. Based on the scenario above, a maximalist negotiating stance by ZIOC would seek a full buyout price of half of 100% of Stage 1 NPV, plus half of 100% of Stage 2 NPV. This would be $1.84b for half of Stage 1, plus $3.68b for half of Stage 2, totalling $5.52b.I stress this is the maximalist approach & I would work on a more cautious valuation of 50% of the respective NPV’s totalling $2.76b (approx 318p a share). However, I note that Elphick has always aggressively pursued 100% NPV valuations & Glencore are of a similar mindset.

MM regarding your various posts on FEED & what is going on in the background. I also sense that critical issues relevant to bringing the Zanaga project into existence are taking place outside the FEED process. We know the critical power, and now port infrastructure, projects are moving forward apace - neither has any commercial viability without new mining projects. Also the 2 August announcement of $50b of investment funds agreed between PIF & 6 key Chinese institutions. This is the critical financial infrastructure that needs to be put into place prior to arranging the key project finance for Stage 1. It will represent approx 70% of the overall investment amount, meaning equity investors will only need to contribute say $600-700m of the Stage 1 investment.

However, my take is that it is no longer ZIOC who is pushing the project forward but the new owners (100% or 51%), who critically have the financial clout to get all parties/partners moving forward. One possibility is that at the end of August we agreed a conditional offer with a Saudi consortium, which gave them, say 3 months, to complete essential tasks prior to going unconditional & public.

These could include:

I. Transactional due diligence - typically led by a major law firm, say Linklaters, to ascertain all titles, licenses, conventions, agreements are legally granted & that the company has fulfilled all conditions & obligations imposed on it;

ii. Agree actual rather than theoretical terms with a mining developer/operator (either Vale or Chinese);

iii. JV/Consortium - make sure all parties are on board for actual terms & timeline for the purchase & project;

iv. Allow the Chinese infrastructure time to secure all the agreements needed in RoC. Are we waiting for the Chinese KP2 deal + infrastructure being announced before we finally go ‘live’ as it involves the Zanaga project as well?

Extrader, I have similar thoughts vis the AGM date & its circumstances as in your post of 17.11. Elphick is a corporate finance guy who happens to work in the mining sector. If if we have a deal (buyout or buy-in) which requires formal shareholder approval I would anticipate it being fast-tracked in a similar fashion to the Glencore announcement 2 years ago ie back-back AGM + GM.

04.11.22 RNS Notice of AGM

23.11.22 RNS Acquisition of 100% of Zanaga

24.11.22 AGM

25.11.22 RNS Results of AGM (07.00)

25.11.22 RNS Notice of GM (16.36)

13.12.22 GM (09.00)

13.12.22 RNS Results of GM (11.45)

16.12.22 RNS Completion of acquisition (10.31)

The critical acquisition RNS was held back until the day before the actual AGM, to minimise the time the info is in the public domain prior to the conclusion of the second GM on 13 December. This is standard corporate finance protocol, particularly for buyout/buy-in announcements when numerous hedge funds, arbitrage traders, corporate spoilers ‘could’ get involved as the share is highly likely to continue trading on LSE post announcement. As I have set out previously I believe any deal will in practice be a ‘done deal’ as Elphick will have lined up the necessary 75% +1 in advance (in fact on 1 July). So any entity seeking to disrupt a deal could not obtain a blocking 25%+1.

If Elphick was to follow previous practice he would announce on 4 December prior to the 5 December AGM, the next day he would then give notice of GM to be held at least 14 days later. One possibility that theoretically exists would be for him to call a GM prior to the AGM on 5 December, say on 4 December for which he would only have to give 14 days notice. The latest announcement would be 14 days from that date ie 21 November. I found Vet10’s post of 14 Nov v interesting, as it gave a GM date of 29 November - which at 15 days notice is less than the 21 days required for an AGM. This suggested to me that possibly someone from the company was registering both GM & AGM dates in the system in anticipation of key news. No doubt we will shortly find out.

It has been relentless selling in size into the bid for the last 3 or so days, the share price had no chance of recovery from this. I am optimistically interpreting it as an LTH who has had enough & is downsizing, rather than any kind of insider selling. My rationale is when was the insider buying that would have then led to the insider selling - see 6 month share price graph?

The company listed 14 years ago today, on 18 November 2010, with an IPO price of 156p.

Thanks 99IC, so KP2 have a similar arrangement to ZIOC regarding Govt stake.

It does look like they are creating a basic state holding company for RoC mining stakes.

As they do not appear to have done this before it is potentially another revealing event ie they anticipate a need for such a vehicle 'now'. I am sure they are doing this for 'internal' reasons rather than to hand over in a Court case.

Could they not essentially settle the court case by simply handing the asset (s) back with favourable amended terms as a sweetener? The Thai Govt did something similar to settle an outstanding claim by Kingsgate.

KP2 share price is now close to exceeding the ZIOC share price.

Does anybody know if the RoC get a free stake in KP2 like they get 10% of ZIOC?

Vet10 this is noteworthy that they informed you 15 days before the 29 November. Perhaps a slip up, although we are of course due an AGM by the end of the year anyway.

Manara seem to have copper/nickel well covered, lithium initiatives under way but complete radio silence on iron ore. Yet we know that not only is their Baosteel JV actually expanding its planned output but there are also 2 other green steel projects in Saudi bubbling along, namely Essar & a mooted Turkish project. We had the flurry of activity by Saudi/UAE with Denis & AD Ports in Spring 2023 which seemed to indicate 'something' might have been planned with Zanaga but now 18 month later nothing public. I don't see what other projects Saudi/UAE could be targetting besides Zanaga?

It is worth revisiting the 'Iron Ore Quality a Potential Headwind to Green Steelmaking' study from a couple of years ago to see the clear dilemma potential green steelmakers face investing in vast new plants - that come online when 67% ore is in such short supply. For once we actually get a passing mention re potential supply outside the Big 4 producers:

"In Africa, Glencore owns 50% of the Zanaga Iron Ore Project in Congo-Brazzaville, and proposes to mine up to 30Mtpa of 66% Fe hematite and 68.5% magnetite. "

https://ieefa.org/sites/default/files/2022-06/Iron%20Ore%20Quality%20a%20Potential%20Headwind%20to%20Green%20Steelmaking_June%202022.pdf

Congratulations to KP2 holders. It just shows mining deals can be done in RoC - IF you have the right management team who can accept the reality of their situation & not seek unreasonable & unrealistic price/structure terms.