Member Info for Jiving

Thanks JackShaft, that a highly relevant background. Any thoughts on whether any discount to NPV would be based around the 12m or 30m figures for ZIOC?

i was also a City analyst for a while in equity capital markets. My very limited mining finance experience came when I worked for an Asian venture capital fund. We were attempting to finance a potash mine in N Thailand being promoted by 2 experienced mining engineers, it was to be a start-up with no mining co behind it. The project was too big for us on our own so we approached two (US & European) venture capital firms we regularly co-operated with, to jointly finance it. Both of them categorically rules out participation on the basis that major mining projects needed to be undertaken by large experienced mining co with depth of management & relevant greenfield experience. They were happy to contemplate a buyout of the project & then JV with an existing mining company (accepting lower returns btw). Their reaction is something I have always considered looking at the viability of the Marty start-up proposal - & Zanaga 1 + 2 is around 10x the size of that potash project.

Thats good stuff JackShaft, is it from the Internet & if so do you have a link?

We would be around stages 2-3, all permits & permissions are in place. The type of FS they are undertaking with the Chinese is intended to lead to an EPC contract which would suggest that project finance is likely essentially in place subject to the crucial $600-800m of equity finance being provided. So discount to NAV around 30%. But a couple of but's & if's.

i. Which NPV is likely to be the basis for negotiations Stage 1 @ $3.7b or Stage 2 at $7.4b - quite a difference! Also should any allowance be made for the unexplored 40% of the Zanaga mountain range which might make a Stage 3 production level up to 60m pa plausible?

I could see an argument that a buy-in partner would expect to buy a stake based on Stage 1 NPV - then all parties benefit from the future development equally at Stage 2. But a full buyout that leaves no interest behind for existing Zanaga shareholders, there I could see a rationale for basing negotiations on Stage 2 NPV.

ii. Are we in a competitive situation, with potentially two or more entities engaged in a de-facto bidding contest (a scenario that obviously requires time & patience to see through to the end), which could drive an eventual deal towards a minimal discount to NPV, so maybe a lot less than 30%?

The thing is Ex, that Elphick was a brilliant stock salesman back in the day - he sold his projects on NPV++. The GEMD IPO was at around 1100p (now 13p been lower), ZIOC IPO at 156p now 6.6p (& the IPO was sold primarily to mining funds who thought they knew what they were doing). In his day he was clearly a brilliant salesman/negotiator we just need him to pull that magic off one more time.

Interesting you say that Mitch/Shrewd because surely Elphick is in the same situ - he has sat on his big stake for 13+ years since listing and seen the share price go from 222p to 1.4p in that time & now at a majestic 6.6p. My biggest concern historically has been that Elphick/Glencore would be too pushy & greedy with potential investors but I am hoping both parties see that whatever the price on offer it's now or never. Also at least as far as Glencore is concerned they desperately need capital for all the big corporate M&A moves taking place (not least they have to pay up for their big Teck coal deal next quarter) they don't want greenfield projects so take the money & go elsewhere.

Unfortunately we dont get to choose the deal price, its entirely in the hands of Elphick/Glencore. The fact they have basically, it seems, delayed everything by almost a year to get the new +80% 2024 FS, strongly suggests to me they are going to negotiate a buy-in or buyout around those 2024 FS NPV figures. We must assume at some kind of discount but what: 25%, 50%? And which NPV - 12m or 30m or an average?

Just for comparison, 50p is just over $400m NPV. The IPO back in Nov 2010 @ 156p = NPV of $1400m, which at todays FX & share count would be around 172p a share.

This is more info on Kumba iron ore from the Anglo site:

https://www.angloamericankumba.com/products/iron-ore

Article on Glencore positioning itself with S Africa vis Anglo. FT had this to say on Anglo's iron ore interests:

"In contrast, Anglo’s South African iron ore business, Kumba, would be attractive to Glencore, shareholders and analysts have said. Glencore does not produce iron ore but trades about 100mn tonnes a year and is keen to grow. “It’s a great business that provides value for customers,” Nagle said at the conference. When Glencore sells iron ore to a client it can often sell them other steelmaking ingredients at the same time, like nickel, metallurgical coal and manganese, he added. “The benefit of having iron ore in the portfolio is not just from making money, but providing those customers with the commodities they need.”

https://www.ft.com/content/ac076f53-809b-431c-9465-efc355369e61

Eddsy I very much hope they have indeed got a full buyout incoming. Of course like others I have no specific evidence for that hope, other than if major players like Saudi & China are convinced the project is sound & meets their objectives why would they not want 100%? But what if they are indeed interested & competing with each other in a de-facto bidding contest, surely its in our interest to let that process continue even if it needs more time (& dilution). It looks to me that a calculating corporate strategist like Elphick could well have spent the last 18 months engineering just such a situation.

That is indeed a possibility Extrader. With the repayments we have made we have actually got considerable headroom - the loan amount is for $1.8m & as of 28 March we had only $736k outstanding. If Glencore are feeling positive & bullish about an imminent deal maybe they will be generous by extending & get us over the line without any more dilution, which dilutes their stake by the same proportion as it does ours.

Actually I have got some useful info & links on China ore plans & mine valuation which I will condense ^ post in coming days.

No ATG it is you who blindly & consistently have been missing the simple point I have been making all along & which you now finally acknowledge - that we have the T3 mechanism in place to meet our forthcoming obligations if nothing else happens soon, phew at last. What you & others have been arguing is that there is a deal coming shortly that will make it unnecessary - yes I have consistently said I 'hope' thats true - but neither you or anybody else has provided one shred of evidence that it will come before we need to meet our financial obligations. The fact no T3 has been triggered yet could be 2 things; i. what you & others (including me) hope is that an announcement is coming soon; ii. that it is just a sign that Elphick is fine tuning it to the last reasonable moment. As I keep saying - you dont know whats going on, I dont know whats going on & Elphick may still not know a deal date.

Eddsy & Danny no points to make as ever.

Stating simple facts - ie that the company has short term financial needs it has to meet - is not making a fuss, no rational person should be even challenging it. Its only 2% dilution why act as if it something that has to be avoided, would you rather accept a 20% worse deal than a 2% dilution?. The challenge remains - if he dont trigger T3 how do we pay company expenses beyond June & how do we repay the loan by end July IF there is no strategic investor announcement - answers please?

Shaun they haven't taken it yet because they are leaving it to the last reasonable date to trigger it. Previous tranches were not sold daily but in blocks when they were needed - that is the whole point of this mechanism. We could easily sell T3 in a month if we had to, the discount might be higher but it could be done - thats how markets work that how equity capital markets work. Placing capacity & price is a function of average daily liquidity & discount. Its why companies issue large % of capital at higher discounts - there is nearly always 'a price', so we could place GBP800k of shares on 30 July but we would pay a high discount, I think the T3 drip feed approach is better as the discount is lower.

Shaun if you look at the figures I have given for the daily sales needed to repay the loan (170k a trading day over 10 weeks) you can see they are easily doable relative to recent active days ie Tuesday at 1.16m or the 3 month average trading volume of 487k daily. So there is still time for T3 to be used to meet the company's proven financial needs in June/July. Absolutely we had no need to do T3 in March or April as we & Elphick must be always hoping the strategic deal will be announced & the need for T3 will disappear. But in the absence of that announcement nobody has yet given an alternative way of financing the company's expenses or the loan repayment except via T3.

So to be clear like others I hope an announcement of a strategic investor will come shortly, but if it doesn't we have the T3 in place to meet our coming financial obligations & that is already in place & is less than a 2% dilution. Which begs the question why does anyone make a fuss about this trivial 2% - its not 20% it 2% - & if we need more time to get a better, more valuable deal isn't it worth it (if say we got a 20% better price in August, isnt that worth a 2% dilution?)

Absolutely its all there ATG & I completely understand what the figures & simple arithmetic are telling me & everyone else. The RNS of 28 March sets out two inescapable short term financial facts - we have $491k left to pay all the company's expenses, and when that runs out we need to raise funds. That RNS also clearly sets out that we repaid a big chunk (nearly half) of the Glencore loan in the prior quarter & there is $736k to be repaid by 31 July & money has to be found to repay that by then. But phew the company has already prepared for these eventualities as it has T3 of the share sale waiting to repay them IF necessary. So its great news for realistic investors we know IF there is no strategic investor deal by the time we need funds we have a mechanism in place to provide those funds. There are no 'hoped for' or 'obvious' financial solutions presented in those RNS's outside of the above.

Marcus I am not wedded to any view, I am open to different alternatives but I believe in reality not wishful thinking. Sadly unlike many posters who are seemingly wedded to the idea that the company can run on air when it runs out of money & history shows that isnt possible.

Here are a couple of questions you you Marcus.

i. They had $491k 28March, they have heavy monthly costs due to increased activity & anew CEO to pay for. Do you accept that at some stage the company's money will actually run out, & when that money runs out how is the company going to pay its bills?

ii. The loan repayment date is 31 July with $736k outstanding, the two previous quarters have seen substantial repayments, where is the money going to come from to repay the loan Marcus?

Please point me to an actual real source that confirms this "So there must be some other inward investment ..", 'must' dosnt cut it without a reliable source its not 'must' but 'hope'. The majority of share sales of the last two tranches appear from trading patterns, to have taken place over relatively short periods. On Tuesday we traded 1.16m shares according to Investing.com, this is my placing estimate I gave yesterday that shows the company could easily repay the loan from share sales by 31 July. "At 7p a share he would need to sell some 8.5m, over 10 weeks that would be 850k a week which is reasonable to achieve." And 850k a week is 170k a trading day.

Vet10. We dont know if there is a Chinese offer, just like we dont know there is a Saudi offer. I was using a theoretical bidding contest between the two to illustrate we have no idea what is going on behind the scenes & more time might be required under certain circumstances.

ATG. To be clear when I say 'hold back to the last minute" I am (as indicated multiple times in recent posts) meaning the last minute that gives him time to raise funds in a RESPONSIBLE fashion. So IF he has to repay the loan on 31 July of course I am not saying he would hold back until 30 July, but would begin the process many weeks ahead - ie like late May or early June.

None of us 'know' that the strategic investor will come in May or June or July - if you do ATG please state the actual evidence for that date & 'obvious' doesnt cut it - just like obvious hasnt cut it for the last 13+ years. One thing we do know as a simple arithmetic fact is that our funds of $491k on 28 March will run out at some stage soon, we also have a loan repayment date of 31 July. Just as we dont know the date a strategic investor might sign quite possibly neither does Elphick & ZIOC - because the situation may be rapidly changing as the decision time approaches.

What if the Saudis request a month to put together a higher bid than the current Chinese offer - should the company decline & say no we will go ahead with a lower offer because it saves us doing a minor inconsequential 2% dilution? You dont know the endgame ATG , I dont know the endgame and quite possibly Elphick doesnt know the end game. Everything could be in play to the last moment, & the last moment could therefore inevitably be extending into summer. ABC ATG.

Extrader yes you are correct it should be after. I don't see that paying lawyers/consultants in shares at current levels is any less dilutive than selling them into the market.

ATG I also think we are in the final stages of negotiations with strategic investors but those investors may now be revealing their end game. Perhaps they negotiated initially for a buy-in, but now want a full buyout & that changes the equation. Similarly, maybe we have competing bids that need more time to iron out? The reality is we dont know the state of play & past fantasising (I include myself in the wishful thinking brigade at various stages in the last year btw) about an imminent deal has proved faulty. We are indeed running on gas & soon that will run out (phew glad to see someone sees my simple arithmetic point), Elphick will hold back to the last minute on T3 but circumstances will force has hand at some stage in the next few weeks. As I keep stressing, its about less than 2% dilution & the market impact of the selling only impacts short term traders not LTH - so who cares?

The reason they haven't have taken it already, is because they only need it when they need it to pay their bills & not until. 'Something has been on the horizon' for 13+ years & thats where it still remains. The moment their $491k cash balance is depleted they have to raise funds to pay bills & their only way of doing that is via share sales in T3. It is simple arithmetic when that moment occurs, if it happens before a strategic investor RNS so much the better, but our very limited $491k funds are running out & then its share sales or bankruptcy.

Shaun you are missing the point again. The company has bills to pay & a loan to repay, they only had $491,000 in cash at end March. That does not last forever right & it certainly does not repay a $736,000 loan or that would be minus $245,000 on its own. The only way they pay monthly bills & repay loans is by selling shares. When that $491,00 is spent they sell shares or declare bankruptcy, my hunch is they will sell shares before then!

1. They didnt take tranche 3 straight away because they were waiting to see if a strategic investor could be announced in the period after tranche 2 ended. But if it didnt happen in time, then of course they will have to launch tranche 3 to pay their bills. They may not know exactly when they will get a strategic investor, competing investors may be putting forward different competing, complicated bids - it may take many more months to finalise!

2. They only have $491,000 of cash at end March. They must have a minimal limit which they cant go below I would guess something like $200k. The Glencore loan aside, the company is spending money every month (I would estimate say either side of $150k a month) so the cash will run out eventually. If we are not out of money to pay monthly expenses at end May we will be shortly afterwards.

3. Two instalments of the Glencore loan have already been repaid, it looks to me highly likely that the final $736,000 could be repaid on 31 July - thats the pattern established over the previous 2 quarters.

When you have bills to pay, you have to get money to pay them. We had $491,000 on 28 March that will not last forever!

Shaun, very happy to answer your point. First off lets remember we are discussing a less than 2% dilution here, its not a that big a deal. Second, I assume that Elphick like the rest of us would prefer not to be diluted & will hold off from further dilution as long as he can, but he also has to meet obligations like potential loan repayment & increased monthly costs - you cant run a company on air - right?

i. Because the two previous tranches took 9 months does not mean we do not need tranche 3 soon - it all depends what bills we face & when. Some 56% of money raised from the previous two tranches went on repaying $1.163m of the Glencore loan. If the remaining $736k needs repaying by 31 July then Elphick has to be utilise tranche 3 because we dont have the cash otherwise. At 7p a share he would need to sell some 8.5m, over 10 weeks that would be 850k a week which is reasonable to achieve. Indeed thats why I raise the question now he needs the time to do that smoothly.

ii. Our monthly costs have increased substantially from the days it was just AT & a low key operation at the mine. We now have a CEO, & also various consultants potentially attending meetings with strategic investors worldwide. We hope they are travelling to China & Saudi at the very least which all costs money. Plus third party people like expensive lawyers are needed at some stage. End of Q1 we had cash of $491k, that does not last very long Shaun & where do we replenish it from but the share subscription?

Eddsy as ever you dont have any point to make.