Member Info for Jiving

"..before there can be a deal"

Thanks Extrader for the update re-AT. My hunch is AT is keeping a low profile at present, we are clearly at a sensitive stage. Its Africa, I assume corruption is the norm & it literally goes with the territory.

The company has set itself the objective of securing a strategic investor by end Q1 2024, but sadly since listing in November 2010 the company has set itself many objectives it hasn’t met. The simple reality is a strategic investor’s preferences & red lines are just as important as ZIOC & Glencore’s - all sides need to agree on all major issues to proceed. I am extremely optimistic about where we are in discussions & hope we are 80-90% done & agreed. The ZIOC management/BOD cashing in their chips in October, the appointment of a CEO & AT’s tweet from Riyadh all point to substantial progress. There are 3 key areas that both sides need to agree:

1. Price. We need to raise development capital to launch Stage 1, likely some $600-800m needed. A strategic investors entry can be based around ZIOC share price or project value. If this hadn’t been agreed in principle we would not have made progress enough to merit appointing a CEO.

2. Structure. What % is the strategic investor going to want/accept. If they wanted 100% or 51% then there would be a major issue if ZIOC was only prepared to offer say 20%. This plus key related issues of operational control, BOD seats etc need to be agreed before real progress can be made. We know Manara is happy with 20%, Bob Wilt at FMF: “..while buying minority stakes of up to 20% in assets overseas.” Again we would not appoint a CEO if the structure was not agreed & accepted in principle.

3. Offtake. For some investors - strategic & otherwise - this is not an issue. For others including Manara it is a central issue, Bob Wilt at FMF 2024 “..but all of these investments are predicated on an offtake…” So no offtake = no investment. But there is a further condition, whilst the primary aim of the offtake is to supply Saudi domestic industry, any surplus will be marketed by a small internal operation, FMF again “…there is going to be some level of trading to manage the books of offtake minerals we have.” In stating this publicly Wilt is essentially setting out another red line - offtake surplus will be marketed by Manara not a third party.

This of course is a potential point of contention with Glencore who, as a result of the ZIOC merger agreement, have 100% of the offtake rights to Zanaga ore over the life of the mine. Their modus operandi is to seek a distribution monopoly for a particular mines offtake, so they may have a fundamental issue with allowing Manara to market their surplus. In any conflict of opinion I would hope the Glencore traders eventually see sense but greedy traders can misjudge - sure we have all seen that. So in conclusion I hope we are nearly there, but I am concerned there may be a serious issue regarding offtake, that needs to be resolved before there ca

Hi Trans, I forget the name you used to post under "**investor". I dumped my COPL in early 2022, except for a v small holding which I dumped later. NFX I have stayed with & think there is a good chance it will come good.

Differing views are exactly what a discussion forum should be all about FFX. I was also very unhappy about Dan's removal & things went downhill rapidly after that - not helped by Covid.

Small point, I think we are in an infinitely better place "..than....in summer 2022", I wish the intervening 3-4 years had never happened but we are where we are - it could have been worse!

Extrader, did you get any response you can share from AT on your 2 questions from 17 January? They are not seeking anything remotely involving insider information but of course he can see why they are being asked!

And a lot happened in those 3 years that no shareholders could have wanted or expected. The repeated management changes, the disappointing set of 002 results, the disastrous financing deal. The nadir was in the summer of 2022 when after Riddell's resignation we had no Chairman & nobody prepared to accept executive responsibility. At that stage you dont have a viable company, certainly not one that is going to be taken remotely seriously by big pharma's.

The critical event was Julian & Dan becoming Chairman & Executive Director and with Maddie trying to make the best of a bad job. Namely no internal lab, extremely meagre finances (& little chance of any new equity funds) and not yet enough test results covering key areas to have a minimally acceptable dataset to realistically approach licensing partners. So since then they have managed to produce that minimal dataset for 002 (& possibly 004) and from September have begun the key marketing process we have all been waiting for since re-listing. Its been a bumpy ride but we are in an infinitely better place than we were in summer 2022, & the 3 of them have frankly done a very good job to get us to this position given the circumstances.

From March 2021 so heading for 3 years old. Share price at publication was 2.4p & 592m shares then in issue post placing. No longer available at Allenby's but copy still here:

https://nuformix.com/app/uploads/2021/06/Allenby-Initiation-Note-March-2021.pdf

Couple of relevant para's on valuation:

NFX DCF valuation of 9p per share post funding. Our DCF valuation of NFX includes only NXP002 at this stage. Using a 13% WACC gives a risk adjusted valuation of £52.8m, equivalent to 9 pence per share, and this assumes that a Phase I ready package for NXP002 is in place. Subject to financing, NFX anticipates that this milestone could be achieved within the next 18 months, but with multiple opportunities for licensing NXP002 prior to this. Prospects for an early-stage deal are good judging by precedent in the IPF space.

For simplicity, we look at the value of the asset as if NFX were to market the product, rather than via a licensing deal, to illustrate its worth to potential licensees. Our valuation of NXP002 as a preclinical asset using a 13% WACC gives a risk adjusted valuation of NFX of £52.8m which is equivalent to 9 pence per share (based on 591.6m shares in issue post funding). This assumes that a Phase I ready package for the asset is in place which is being developed over the next 12-18 months, subject to funding. We illustrate the main assumptions regarding launch date, peak sales and pricing in each geography, using a 10% Likelihood of Approval for this programme alone.

If a shrewd trader was able to buy in on the bid a few weeks ago @0.28 & dump recently on the offer side around 0.42 it would have been 50%, but whatever the share seems to have settled in a different price trading area. Lansdown no longer regularly dumping shares into the market, at whatever price they could get, also obviously helps the market.

Actually there is a rational reason for an upward move, which was reflected in the last research report on the company where they assessed what the likely $ size of any 002 deal would be & then attached a probabilistic formula to NFX achieving that outcome & came up with a target price. Now we have officially entered the R&D stage & have begun licensing discussions on both main drugs we are closer to a deal (or not) than we were in say summer 2023, and were due a re-rate on that basis alone. If you consider the financial repercussions of 'any' deal of any size on either drug ,they would be many multiples of the current market cap.

We have clearly left the 0.25-0.30 area we were stuck in for months. And it seems to be on the back of relatively small genuine investors, perhaps taking a position ahead of news anticipated in the first half. Also a noticeable absence of PnD folks. Ironically the Earl & Ria could have taken 50+% profits over a few weeks had they taken advantage of the move, without any need to post drivel 50 times a day.

Also might indicate previous tensions between MBS & the Emirates have eased.

The Edison report from 2014 stated that the Mining Convention negotiated that year had among its provisions:

1. For RoC a royalty of 3% of gross revenues;

2. The RoC has a 10% free carry interest in the project

Hi Extrader, C-B has its stake, which I have seen referred to as a royalty in research reports.

I did a brief search on Nagle & found no evidence either way.

Its desperate PnD stuff, there are a couple of 100k trades the rest are nonsense. Surely there is no money to be made on PnD trades on an illiquid stock like this, the Earl & Ria gave up. Is this some kind of low grade AI ' NT to buy' - like any human is going to then run off & buy because of that post?

If we have an outstanding issue stopping a deal it may well be to do with offtake. Glencore took control of 100% of the offtake rights at the ZIOC restructuring for a reason - this is where their primary ongoing interest in Zanaga lies. Capital resulting from an equity sale would likely be recycled back into financing their own critical restructuring: the splitting off of their controversial coal division.

From their public statements, Manara want both an equity stake & offtake in projects they invest in, it would be rational for them to expect/receive that in proportion to their equity stake i.e. 20% equity gets them 20% offtake rights etc. It seems possible that Glencore will retain the offtake rights of the Zanaga project outside of the strategic investors overall stake, so if the strategic investors end up with 20/40/60% Glencore would retain the balance of the offtake rights.

But what if they are haggling over the marketing rights for any surplus that arises from Manara’s % that is not used as feed for their own green steel industry? Glencore might want to retain marketing rights to that surplus, whilst Manara have stated at the FMF they intend to have their own small scale marketing operation handling any surplus. In that light Bob Wilt’s comments could be seen as a line in the sand vis Glencore (whom he mentions by name):

“.. but all of these investments are predicated on an offtake… so there is going to be some level of trading to manage the books of offtake minerals we have……We are not envisioning going into competition with Glencore or Trafigura, our vision is just to manage our own book,” Wilt said.

https://www.mining.com/web/saudi-arabias-manara-minerals-fund-plans-metals-trading-arm/

I note in that article it states re-Manara “..while buying minority stakes of UP to 20% in assets overseas.” So it is possible that Manara’s portion of any consortium will be limited to 20%, of course there may be other partners taking more. After the December AGM 20% is the amount the BoD can issue at their discretion to a strategic investor - at any NPV-related price above $3b that would provide the equity needed for Stage 1.

Example below of 4 mining agreements that were held for release until the FMF. If they do this for these key intra-governmental MoU's, why not some private sector ones?

As the RNS's have recently pointed out the company expect to sign a strategic investor MoU this quarter; the Glencore loan agreement is only extended till 31 March 2024; & we have a new CEO who 'should' be on the BoD but is not pending developments. AT has apparently been in Riyadh since 20 December & you dont need to arrive 3 weeks in advance to attend a 3 day conference. If its not going to happen in the second week of January it is likely to happen very shortly.

Future Minerals Forum: Saudi Arabia inks key mining agreements with 4 nations

RIYADH: The Saudi Ministry of Industry and Mineral Resources has formalized collaborations in the mining sector by signing memorandums of understanding with four countries during the third international ministerial roundtable. The MoUs include agreements for cooperation in the field of mineral wealth with Egypt’s Ministry of Petroleum and Mineral Resources, Morocco’s Ministry of Energy Transition and Sustainable Development, and Congo’s Ministry of Mines of the Democratic Republic. Additionally, a separate MoU for cooperation in the field of geology and mineral wealth was signed with Russia’s Ministry of Natural Resources and Environment.

https://www.arabnews.com/node/2439051/business-economy

Always great link, that sounds like he is outlining the structure in theory as a teaser. Then shortly the Zanaga 'international consortium' will be introduced putting theory into practice (MoU): with the Saudis at the core along with various partners involved in the broader green steel project - UAE, China, Japan etc.

So many variables involved in producing an NPV that takes into account all the factors in play, realistically there is a wide range of values, & then you have the discount a strategic investors is likely to want for getting the whole thing started.

But turn the issue on its head & look at it from the perspective of a Saudi consortium. To put some figures on the table; work on the basis the Saudi consortium take the 20% primary stake off the company based on NPV of $4b so $800m. They also want/need offtake as feed for their new green steel industries, so as a quid pro quo I would expect them to obtain offtake in proportion to their shareholding: but 20% only gives them 2.4m tonnes @12m & 6m at 30m. I would expect them to require/need more; hence a parallel sale from Glencore's stake of say 24% = $960m (leaving Glen with 20% equity & 1 BOD seat), that 24% would also come with offtake.

So the Saudi consortium would have bought a fully diluted stake (allowing the effect of 20% primary dilution) of around 40% for $1760m of a then self financing green iron ore mine with a pathway to 30mtpa. Not only do they get critical offtake of 12mtpa they also get 40% of the profits, crudely call that $100 a ton long term, thats $1200m pa attributable to them over a 30 year life & with the possibility of doubling that to 60mtpa (24mtpa their share) in future. All for an initial investment of $1760m. Not big money by Saudi standards to secure a key feedstock for a new industry & highly profitable as well.

From Glencores perspective they have secured a capital return of nearly $1b, kickstarted a major project that they retain a 20% stake in & also keep the offtake rights to not just their remaining 20% stake but also the 40% balance owned by Elphick & PIs.

Incidentally Edison in their August 2014 report estimated that the project would be funded on a debt: equity ratio of 70:30.

99. I know your estimates are markedly higher than mine, and based on the higher prices quoted the NPV would be markedly higher. But if you are looking at 30 year cashflow you need to take account of commodity price volatility peaks/troughs. In one of the Edison reports I saw reference to a long term iron ore price index which I believe is used to iron out these fluctuations for NPV purposes. Of course even if all parties agree on a project NPV, the strategic investor can insist on a discount to NPV. BTW obvs I hope ZIOC/Glencore are pushing for your NPV valuations as the basis of a deal rather than my lower ones.....