Member Info for Jiving

Ex, one factor in Elphick & the gang accepting a 'discount' on their deferred remuneration is likely to have been Glencore wishing to avoid excessive dilution & insisting on a 'restrained' settlement. Given the size of Glencore's holding/vote they could never have got a disputed settlement through a vote at the AGM. A similar consideration may be playing out if Glencore are seeking loan repayment in equity rather than cash.

I was also hopeful that the sudden rapid deal they made on this issue was a sign that something was happening in the short term (ie within 2023), and await news on the Glencore loan & AGM date/meeting/vote as necessary conditions prior to any deal. IMO the crucial elements to any final haggling over project value (ie NPV) will be revealed by the Chinese EPC updates and by now any potential partner/buyout will have a very clear idea what they are prepared to pay.

This is great stuff Extrader. AT has kept things going pretty much single handedly for a long time & IMO deserves his cut. If we get even 50% of NPV he (& us) will be looking pretty.

Ex, my hunch is some of those changes partic in ME could be happening way before 2050. MBS & the UAE are moving at speed, as to be fair is Denis.

Its right for all equity investors to be concerned with a major geopolitical crisis like the current one - I made a similar point myself recently. An invasion of Gaza shortly seems inevitable & is likely awaiting further hostage releases and/or the arrival of the USS Eisenhower in the Eastern Med. Of course the worst could always happen (partic in ME!), however there are a number of reasons it may not cascade into WW3.

The possibility of escalation is of course present & the key player is clearly Iran. The main strategic aim of the Hamas massacre seems to have already been achieved - Saudi has dropped its recognition talks with Israel, & the existing Abraham Accords look decidedly dicey. Iran is at a critical point with its nuclear bomb/missile programme, something it has invested $10's billions in & vast time/energy of all types, a major strike on it now by Israeli or particularly US planes/missiles would set it back years. Hezbollah is far more directly controlled by Iran than Hamas & IMO the odds are less than 50:50 they would get involved when the Gaza invasion occurs. They clearly have lost any element of surprise & will soon face not just a fully activated Israeli armed forces (with Israeli civilians already moved out of the border area), but also 2 US carrier groups as well as additional land based US forces in the region.

Russia is constrained by its war of attrition in Ukraine, & China has traditionally had a policy of non-involvement in ME wars, which its difficult to see them changing & not whilst the US enjoys vast military supremacy on land & via carrier groups in the area. Their military ambitions are far closer to home & entirely involve their immediate vicinity - Taiwan, the Himalayas & the South China Sea.

Our main concern would be whether Saudi/UAE would be attacked by Iran in the event of wider hostilities. Its noteworthy that Iran-Saudi have had a Chinese induced thaw, arranged prior to Iran, Saudi & UAE joining the BRICS, which included the exchange of ambassadors. MBS & Raisi also had a telephone conversation on 11 October ie post massacre, potentially to seek mutual re-assurance of military intentions. Open military hostility between BRICS members would likely jeopardise their membership, which is something all 3 have gone to great lengths to obtain. Not saying the worst may yet happen, but there are countervailing factors at work potentially limiting a wider conflict.

Ex, thats important info on the Chinese BRI. It has looked for some time that Simandou has been struggling, the initial capital required for that crazy railway line has always hung over the project & continues to do so. IF the Chinese were to pull out of Simandou it would mean the CCP strategic objective of increasing Chinese owned iron ore worldwide would have made almost no progress since it was created. With ZIOC's Chinese EPC initiative it makes even more economic sense to potentially switch to a Zanaga alternative, especially when a significant portion of the projects initial capital expenditure would flow directly back to Chinese contractors & sub-contractors.

A consortium of say China/Saudi/Brazil would not only spread financial risk but also diminish political risk - neither Denis nor any of his successors could afford to move against such a politically formidable combination.

Marcus, I didn't create the negative events in the Middle East & the Congo & I truly wish they weren't happening, but as a LTH heavily invested in ZIOC I am very concerned about the implications for the company.

We desperately need to get this thing signed & sealed ASAP, we dont operate in a vacuum and local Congolese & ME issues could change everything to our detriment. The Glencore loan needs to be sorted whatever the 'cost' - if they demand shares in repayment they should get them, some 3% dilution to us is irritating but inconsequential so long we move things forward. Then we need the AGM done & dusted ASAP so that any strategic investor knows exactly what they are buying into. Personally I would accept 'any' terms currently on the table now, even if they 'might' be twice as much in 3 months time after haggling - of course I dont get any say or vote in the matter but that my instinct after 5 years in this thing.

The Dennis succession is long awaited & its likely there are a number of aspiring contenders, the last brutal civil war ended as recently as 1999. Likewise the Gaza situation has pushed the whole ME into its most dangerous & precarious position since Yom Kippur in 1973, that had dramatic global economic & political consequences then & Gaza has the same catastrophic potential now. We may not have the benefit of time.

"Rio Tinto was first granted a Simandou exploration licence in 1986"

Good update Soup & good call. I wonder why they have specifically obtained a Japanese patent for NXP002?

Extrader. The company owning 50% of the Zanaga mine was listed in its entirety: ie all 280, 415, 976 of them, but only a minority of the shares were 'placed' & freely traded ie 39, 815, 258 of them. This is quite a frequent occurrence (partic in privatisations etc) & doesn't change the fact that the share price & market cap represents the market valuation for the entire company's share capital (ie its not a liquidity or a free float issue). It's a separate issue that only a minority of shares are in the free float - most of which were then placed with major institutions (who largely held until the GLEN takeover of Xstrata). Thus the free float indeed had limited liquidity & may indeed have played a price in driving the price to 222p & a valuation for the entire Zanaga mine of approx $2 billion. It seems likely the share price has been driven to extremes of over-valuation & for a long time under-valuation.

The fact of concentrated ownership (58% by top 2) - nowadays with ZIOC representing 100% of the mine - means they will negotiate with 3rd parties essentially as a private company. No buyer/partner/bidder can obtain even 51% let alone 75% without their agreement. We PIs are essentially piggy backing off the private sale of a major undeveloped iron ore mine that has once been valued in the market at $2 billion.

So its highly unlikely any discussions will take place with strategic bidders on the basis of share price - 2x, 20x, whatever, but around the standard NPV based valuation for a pre-development mine with all licences & environmental studies in place & with all the key aspects of the development structure & finance being finalised.

Starlight.

There are an awful lot of variables at play here, which makes predictions exceptionally difficult, even by AIM standards. The views & hopes of small investors, of course, count for effectively nothing - even more so here when two investors control a majority. Those two key legacy investors will be the ones negotiating any transaction & it is their pricing expectations that will be centre stage. Clifford Elphick, for example, did not sell the vast majority of his holding at IPO in 2010, so clearly anticipated getting a better price - suggestions at the time were that he was aiming for north of £5 at Stage 1 completion (a price that would of course have applied to all ZIOC holders regardless of price they paid or how long they held).

And there is one crucial characteristic of ZIOC that gives us cause to expect that an eventual takeover will not be based around our current (low) market capitalisation. That is that the two main shareholders, Glencore & Elphick, own 58% between them (after recent issue), so no bidder can gain control of the asset without them on board - & if they insist negotiations are to be based around project valuation & not ZIOC current market valuation - well thats, that.

After all, many major mining assets that are not listed, change hands at prices based around project valuation that can reach $ billions - Simandou being one example in the same sector as Zanaga. Its also noteworthy that the 50% of the Zanaga mine that was listed in the IPO in November 2010, was for an exploration asset that was in a far less developed state than it is currently. That was listed at 156p a share giving a market cap of £437m or double that for the entire 100% of the mine ie £874m - at the then FX that gives a valuation of almost exactly $1.4 billion. The all-time high (from a brokers report, maybe intraday) for the share is 222p or a market cap of £621m, double for 100% so £1243m & a USD valuation of over $2 billion. So historically the Zanaga mine (in a pre development state) has already been valued by investors as high as $2 billion! This surely leaves open the possibility that major global investors could value it at or above those levels today & that the 2 key holders/negotiators of 58% of the share capital would seek a valuation at or above that level?

Better phrased: "...Now realistically our best bet would be to seek a PHASE i NPV with some allowance made for forgoing any participation in PHASE ii..."

Extrader, as in so many issues regarding ZIOC, its important to recognise we PI's have no idea what discussions are taking place let alone what the outcome might be - I dunno, you dunno, we dunno. I actually completely agree that from the perspective of all parties concerned: various ZIOC shareholders including GLEN & potential strategic investors; it makes most sense for there to be a complete buyout of Zanaga, leaving behind no minority interests apart from maybe maybe a small royalty for GLEN.

But it's a logical option that we may proceed with ZIOC ending up a minority partner in a Zanaga consortium. After all this was the original Elphick plan when he did the deal with Xstrata, basically remain as a significant minority stakeholder (having cashed some chips in at IPO) with the intention of being taken out at a substantially enhanced NPV when the project has completed Stage 1. That no longer seems a viable option any longer, times have changed & being a minority in a Western owned consortium is way different than in a Chinese or Saudi one. But I can see that it is a negotiating pose he might want to adopt in order to extract a higher pre-development takeover price.

One problem is how do we dodge the project valuation implicit in our market capitalisation! After that there are three key NPV based phases - i. pre development NPV; ii. Stage 1 completed NPV & iii. Stage 2 completed NPV. Elphick's original strategy was IMO to seek a combination of i & ii. Now realistically our best bet would be to seek a stage i NPV with some allowance made for forgoing any participation in stages ii.

Past analysts estimates of pre-development NPV from early 2010's were mostly in a range around $2 billion, of course prices, circumstances, everything has changed since then, but that's the pre-development figure I use as a basic valuation guide. (travelling all day so no more from me today)

Bear, I share your concern regarding a possible JV where "all the rewards are kicked even further down the road". Whatever happens - & the 2 RNSs clearly point to 'something' happening & soon - is better than nothing happening by a huge margin. But all outcomes are not equal, a JV whereby remaining ZIOC shareholders end up with a minority stake with China/Saudi, is not frankly something I would stick around to find out the outcome: endless dilution I suspect. Thus, I am hoping for a complete buyout, so all the development reward & off-take belongs to the strategic bidder (China, Saudi, Japan...) & whoever they bring in to build & operate the mine (Vale?).

Cashing in their chips before market price moves higher, & just as importantly clarifying the exact number of shares outstanding (if all options are exercised), the BOD of course will know how many (if any) of the Shard first tranche has been placed at any time. Important to establish prior to strategic partner buying all or part of the ZIOC share capital. IMO we are in the end game as soon as the Chinese costings come in, it may be essentially over by December.

So we have our answer on BOD & management options, key points:

"The New Equity Issue will result in a total of 27,615,163 new Ordinary Shares all being issued at 5.29 pence per share, equating to approximately 4.56% of the Company's current issued and outstanding share capital."

"Following admission of these new Ordinary Shares, the total number of Ordinary Shares and voting rights in the Company will be 632,989,909."

"Following the grant of the New Options and the exercise of options described in this announcement, the Company will have 7,403,675 Options outstanding."

So just over 640m shares outstanding when all options exercised. Making every $1b of project value = approx £1.29 per share fully diluted.

Hi Extrader

As you note there seems to be some haggling going on - maybe Glencore doesn't want any significant dilution - the prime reason for their loan after all? Elphick has run a very tight, anti-dilutive regime - in 2019 he was paid £7k in director's fees & the NEDs £5k. The rest will come to primarily whatever AT is paid, did he work during lockdown, is the cash/equity swap at market or another formula. Too many variables, but now I think lower 8-15m shares say ! Glencore have not yet signed off on the loan extension so could be some tradeoff's going on - but think of the dilution we have dodged as a result of the loan with some $1.2m used.

Which means we 'might' be looking at a dream bidding contest between Saudi state iron/steel interests vs Chinese state iron/steel interests. Will they compete or co-operate via a consortium, both have close working relationships with Vale who could be project organiser/operator for either?

If Glencore extend their loan agreement into early 2024 as mentioned, & the BOD/management are looking to confirm their share allocations at the November 2023 AGM, all parties are set up for finalising negotiations around Q1 2024 as per their timetable.

Extrader on 9 July made these observations regarding the possible Chinese EPC partner being part of the giant BaoWu group (Chinese state owned):

"A google search had previously thrown up this co, KISCO, working with Ausenco, the slurry pipeline specialist behind the Minas Gerais pipeline in Brazil that resembles ZIOC's requirement.

https://ausenco.com/projects/da-hong-shan-scada-system-for-high-pressure-slurry-pipeline/

It turns out that the client, Kunming Iron and Steel Group Co KISCO was acquired by Bao Wu Steel group a couple of years ago.

https://www.argusmedia.com/en/news/2183760-chinas-baowu-acquires-kunming-steel-eyes-shandong.

(2) BaoWu is front and centre in the field of novel iron ore processing technologies, witness its flirtation with Aussie producers RioTinto (cf Simandou) and FMG (cf Belinga)

https://stockhead.com.au/resources/ground-breakers-baowu-plays-the-field-in-search-for-green-steel-partner/

and its recent contract with PIF/Aramco for its first overseas 'green steel' plant

https://www.scmp.com/business/china-business/article/3219364/chinas-baosteel-signs-deal-saudi-aramco-pif-build-green-steel-plant-part-belt-and-road-initiative

It looks pretty much as though BaoWu Group, acting through its KISCO and Baoshan Steel subsidiaries, is the Chinese iron ore technical expert engineering firm ("Chinese EPC Partner").."

What are your thoughts Extrader on no of shares to BOD/management - its going to be nearly 5 years for the BOD & 4+ for Trahar, given the share price over that period, maybe 50-60m shares? Alternative to having them forgo cash for shares would have been shares placed instead at a discount to market, plus brokers fees, so we would have been hit anyhow with dilution.