Member Info for Lottohopes

Numbers are disappointing no doubt. Especially GyroMetric not selling much. But there isn’t any sell off or big drop in sp. Over 50% of shares in safe hands. Management has some £900k of cash invested here. And the main attraction going forwards is the wind turbine trials, one of which is happening late 2019. I’ve posted previously that the two majors likely involved are Siemens Gamesa and GE. The trials are unfortunately not in our hands. Costs at Geocurve have been rationalised: staff reductions, synergy with Landscope, better use of the P2U kit etc.

Deployment of the condition monitoring systems in turbines if adopted at fleet level, will be a game changer. Global companies. Big IF agreed. I haven’t seen any evidence of this excitement having dimmed. So I have no issues holding. Please DYOR. Good luck all

Audio: I always take everything on bbs with a pinch of salt. I think you missed my sarcasm. I do my own research and you are welcome to review my posting history. Good luck

Yes Caledonite: the climate change groups are very powerful and bent. Entire hordes of crooked IPCC scientists in dozens of countries producing tainted research. The oil gas industry on the other hand are honest and transparent. Regardless of “opinions” the facts are out there. Wind energy is spear heading the renewable revolution in the UK: levelised cost of energy dropping. Over £500m invested in ORE type facilities providing world class research. As always DYOR.

Batteries will be much more than just cars. One of the challenges of renewables like wind and solar is storage to ensure stable supply. This is being addressed and batteries is the answer.

https://m.youtube.com/watch?v=ETL1L3P-qG8

Old presentation (last year) but it helps explode the myth that Class 1 Ni comes from Sulphides and Class 2 from laterite ores (our assets). HZM offers exposure to BOTH steel industry Ni and battery grade Ni. (Class 2 and Class 1) In summary, historically Class 1 was from sulphides, and it was more reliable. But now, tech has moved on, sulphides have been getting depleted, and therefore laterite ore is the main focus going forwards, for battery grade Ni Sulphate (and cobalt Sulphate). It needs to be bereft of impurities, and sufficiently high grade. That’s been proven at Vermelho.

Ni Sulphate fetches a $4000 premium over LME spot price, and longer term contracts are $2500 dearer than spot. Note this is right now. One can imagine what happens in a few years time, when battery production really takes off. Similar premium exists for Co Sulphate. This is why battery manufacturers are rushing to secure supply, via off take agreements (at financing stage), often for 100% of output, years down the line. It’s only a matter of time before western Cos join their Chinese counterparts (who are ahead of the game, and securing off takes very early in project). Question remains will we see the likes of VW, BMW, Tesla eye up stakes in mining companies or atleast project level stakes, in the not too distant future. Vermelho has different upside in terms of off take/strategic partner. These are my opinions only. Please DYOR.

https://m.youtube.com/watch?v=s39SRTx3NZQ

Quite a topical discussion, from earlier this year, and one of the panel members was Orion manager Phillip Clegg. He says unequivocally that all the pieces of financing apart from a slice of that equity stake, can be arranged by Orion. So a buffer raising 20-25% of total finance package for equity purposes seems absolutely necessary, and HZM of course have Teck+glencore on their register. Teck’s average is just shy of 11p. I don’t see either of these majors allowing a fire sale at a cheap price. It of course doesn’t have to be these two chipping in. There’s Vale. And Vermelho is located in what I would call a Vale mining district: with Vale having several mines there, owning rail lines, shipping containers, port facilities, stakes in hydro power dams etc. They know the state. In the same paragraph Phillip also mentions opportunities for M&A due to value disconnect (which fits us too imho).

22:20: Philip also mentions “strategic” metals being looked at, at much earlier stages by financing groups including battery manufacturers who like to enter JVs and become partners for the offtake. It’s described as a way of navigating poor share price, when the fundamentals are compelling. Remember Endeavour has been on the finance side since Oct 2018, so Orion will likely have been in private HZM discussions when this interview was held May 2019.

To me, the fact Orion having signed off a royalty agreement 11 months into Endeavour being appointed, indicates the entire finance package must be very much visible, and only the finer details need working out. Secondly, Orion speaks of scale, stating it has to be sufficiently big in ambition/scale and of potential for an M&A type transaction, for their interest. Last but not the least, streaming-offtake is an area of great interest for Orion, and they launched a 500m dividend paying fund last year for just these types of transactions. I think we will see a strategic partner coming in for Vermelho soon after if not alongside the PFS. Just my two pence. DYOR.

I was listening to the Orion podcast and reading up a bit on royalty type agreements. Stating the obvious: Orion is certain the mine will be built and Ni produced. Otherwise it wouldn’t pay cash up front. It sees significant upside on its investment. On the risks of the mine being built, they have done our homework: diligence on country risk, taxes, management team and asset itself. Phillip Clegg struck me as up beat on Nickel future, stating he sees more upside next few years. All in all solid. Just my two pence. DYOR.

It’s entirely possible that both Majors and HZM have torn up previous funding plans and had a rethink in light of recent market conditions. This may lead to delays in news, but I would expect some guidance or update from co, whilst we wait.

Endeavour were appointed end of Oct 18. They were scheduled to take 9-12 months. In an optimistic Ni market, I don’t see why they would take much longer. I think the financing may well come together before end of Q1 20. And some additional news may be being worked on, alongside the PFS. Just my two pence. DYOR

Agreed Luke2 and Wasarunner: these assets were painstakingly accumulated one after another, from various cos big and small, during weak phases of the cycle. I don’t think they will be sold cheap.

The MD&A (Management Discussion and Analysis) and AIR (annual information report) are available on SEDAR. I recollect these mention that JM gets twice his annual salary as a bonus (ie £432k as annual salary is 216k) on a change of control transaction. I couldn’t find any other incentives (obviously apart from the options being cashed as I expect T/O price to be far north of the options). Happy to be corrected

Phillip Clegg of Orion: “We look forward to supporting Horizonte as it enters the next phase of development of its world-class PORTFOLIO of nickel assets." Plural: assets. Of course Orion wants in on both projects. I think there’s plenty of competition and HZM is in a strong position at the negotiating table, thanks to the grades/tonnage/jurisdiction and most important the Ni market at present. This is what is creating any perceived delays, choosing the route which is best value for share holders.

All valid points Wasarunner...sadly it’s often the case that PIs leave the story and institutions hold on for bigger gains. I must confess I got lucky: I saw this on Twitter a few months ago, and started buying, so here I haven’t endured the pain of ones conviction being tested (I have in Solg lol). The project is break even at a nickel price just below 10k from what I remember, so if this fails to attract finance, I doubt there are any other projects which will produce. JM is understated in interviews, matter of fact and never rampy. The SDT deposit was a surprise update for me. Same with Orion payment upfront. Underpromising and over delivering is a good strategy. Good luck all, especially the patient holders.

Wasarunner: agree, if only PFS comes, not sure it will rerate. I think Vermelho has higher capex but some of this might be offset by better returns. It will produce Class 1 Ni, which has a $1000 premium over Class 2 (Vale financial results quoted figure), secondly battery Ni Sulphate fetches approximately $2/lb premium over baseline I read somewhere.

On the other question asked: how soon can project become self sustaining: this is discussed under “economic analysis” in the Araguaia FS. Opex after initial outlay is $87m/year. The fact they intended to build phase 2, after end of year 2 should give an idea of how quickly cash position will change. In the FS, the figures on net cash flow are impressive (with just 14.5ktpa) between year 5-10 (year 0 is presumably now, so year 1-5 includes build time). Of course most of us lack patience and want a ten bagger yesterday :) Just my two pence. DYOR

Agree, this is for sale. Stating it’s a “meaningful” 50-60ktpa production scenario, is a scale that appeals to Major/s. Of course if HZM is indeed going for development themselves, key appointments will need to be made next few months, in each skill set, ie construction etc. JM has also pointed out that projects sometimes get built by a junior before being bought. This uncertainty of direction/timeline allows us to buy at few pence a share. The Orion deal was imho to give the market a sense of underlying value and to convey we are capable of financing this ourselves. Just my thoughts. Sorry for flooding bb with so many posts

This is the best part: the outcome isn’t merely binary ie take over or going to production ourselves. Majors tend to leave exploration to juniors (it’s risky and often wipes out the junior); instead majors often pick projects to take to production after they have been derisked.

HZM board have been open and flexible, and acknowledged that a major may well want a controlling stake. In other words HZM would still exist, likely carrying on exploration (there are still 4 areas unexplored and no reason why more land packages cannot be acquired in upcoming auctions) and would get a free carry on the project by giving away a chunk of say Araguaia. This would potentially lead to dividends in a few years and continuing prospects of upside from exploration. Just my two pence.

Wasarunner: I looked at Onca Puma from a resource numbers perspective.

Onça Puma deal value was USD 0.23/lb in the ground. HZM has over 4MT in M&I Ni. That’s over 8.8 billion lb. Current Mcap of £70m (86m USD) gives a value just shy of 1 cent per lb. I’ve ignored the cobalt. At the same 23c value, we get to 115p/sh.

Bloodshot: thank you for your comments. It did take a fair amount of number crunching and I think it’s extremely conservative numbers. Noteworthy that Vermelho was Vale’s flagship project. They drilled over 152,000m and majority of the resource is in measured category. High quality metallurgical work was done over 5 years. JM has commented that this project alone should attribute £100-150m to Mcap. Posters often get carried away (I m equally guilty as the next person) with value numbers and it is fair to challenge our perceptions. However what I find more fascinating is none of those raising concerns about the risks here or unrealistic expectations, have commented on the numbers I posted. DYOR. Good luck all

I notice quite a few posts querying value. Always a difficult one, especially as invested readers will have a bias towards higher value. This is slightly more objective than finger in the air ;)

https://www.edisoninvestmentresearch.com/?ACT=19&ID=19909&dir=sectorreports&field=19

Page 7 shows that market attributed (to measured Tonnes Nickel) 0.93% of the spot price in 2017 when $10,250/t Ni, and 1.03% when $10,325/t in 2016. Let’s take 0.93% of spot. At $17,225/t that’s $160/t.

Similarly 0.16% of spot price attributed to in situ Ni in Indicated category. That’s $27/t at today’s price.

SDT Deposit
Measured: 14.3MT at 1.31% contains 187kt
Indicated: 56MT at 1.2% 672kt

Araguaia deposit
Measured: 18.1MT at 1.35% 244kt
Indicated: 101.1MT at 1.3% 1.314mt

Vermelho
Measured: 161.4MT at 1.34% 2.162mt
Indicated: 6.4MT at 1.29% 82kt

Total measured: 2.593MT Nickel
$45.55/t was 0.93% of the spot price in 2017
0.93% of today’s spot price ie $17,225 is $160/t
This gives me $414m value in situ for 2.593MT of Nickel.

Total indicated: 2.068MT Ni
0.16% of today’s spot price is $27/t
This gives me $55m value in situ

Roughly $469m or about £361m value. Could be wrong, but this is the most objective pre production numbers I could find. Except this was in a 10k bear environment, and the battery revolution is closer each day. By the time this hits production in 2 years, we will be at the cusp of change. Imho only. Please DYOR

Razel: it’s the PFS coming out, not FS. The sp tanked last year because of 2 reasons: what was seen as a marginal IRR (just below 20% I think), and JM stated that there were PIs not happy with the numbers. My guess is he was referring to Richard Griffiths, who had kept selling through 2018. So a big seller added to the poor nickel sentiment. This occasion, Ni is in a different place. We hope that the seller/s are nearly exhausted and the numbers are better. The grade and infrastructure is better than Araguaia. Battery product has a premium to other Ni. Let’s see what emerges.