Member Info for Lottohopes

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

I haven’t managed to read this yet, dated report but it may provide some ideas

Dusterman: I feel your pain in SXX. I would point you towards the “Risks” and “Opportunities” section in the Araguaia Feasibility study. It’s comprehensive. I can’t find any red flags but of course you have to DYOR. No indigenous people on asset land; mostly farming areas with few families. Good community relations history. Politically new govt is pro responsible mining. The infrastructure is very good, plenty of hydro power (this mining is power intensive some 560MW use annually if I remember correctly) mining method is simple surface excavation using diggers, no tailings or dams. Good luck

Former FTSE 250 co.

https://www.telegraph.co.uk/finance/2875691/LSE-to-examine-bank-chiefs-sale-of-Incite-stake.html

https://www.telegraph.co.uk/finance/2924522/Founder-steps-down-from-embattled-Evolution.html

https://www.google.co.uk/amp/s/amp.theguardian.com/money/2007/feb/04/business.theobserver

AIMtodeath: I don’t believe that to be true. The domicile of the share holder is irrelevant. The rules are based on where the issuer is based. In this case, it’s UK based and therefore 4%, 3% are to be reported. I may be wrong, happy to be corrected.

https://www.handbook.fca.org.uk/handbook/DTR/5/1.html

The 397k/400k “sell” yesterday was my bed and isa. The lack of transparency in indicating buy/sell is ridiculous, but it suits those in the drivers seat. Vermelho PFS will allow market to attribute value to our second asset. A lot of the infrastructure needed is already around given its next to Vale assets. Before PFS is released, big buyers who want in will get it at a lower price. And as always nervous PIs will happily oblige. Just my two pence. DYOR.

In the 2016 Araguaia PFS, utility-infrastructure expense in the capex was a modest $35m (it included a 35km power line). The reason being a 500kv transmission line had been planned along the assets (Paraupebas to Miracema) by Spanish Co Abengoa. Unfortunately Abengoa filed for bankruptcy in 2016, but held on to its Brazilian power line assets, hoping to restructure debt. Eventually it’s power transmission line business (over 6500km) was auctioned and purchased by TPG in 2018.

http://www.publicnow.com/view/CE5D513BA2C7B0B229AC960F766E0F9569860812

Abengoa filing for bankruptcy, led to HZM having to rethink the power line, and it has gone for a self built 122km 230kv line from Xinguiara. The utility-infrastructure cost jumped up from 35m to $106m. The Abengoa assets being purchased by a financial group, gives us some hope of the projects taking off again.

https://www.power-technology.com/projects/belomontehydroelectr/
Belo Monte dam coming online will need this infrastructure to distribute power within Pará State. IF previous Abengoa power line plans are re-opened, infrastructure costs for miners in the area would reduce significantly. I expect these power lines will benefit Vermelho too.

Shear class: good post. Two issues pulling down Solg price right now imho: cash balance of $22m (as of last week in latest presentation). Secondly Cu prices disconnect from PEA projection of $3.30/lb. (I know gold is improving, but project is 65:35 Cu:Au ratio). Whilst HZM is rerating in the midst of a Ni recovery.

On SDT, as you say it’s got 855kt, but we know it’s not envisaged as a stand alone project, intends to add tonnage to either project. Let’s not forget HZM consolidated several land areas around the old GAP (Glencore Araguaia Project), so there must be further exploration upside (not that we need it, with over 4MT Ni).

*vermelho is better grade than Araguaia.

Good question MJ, I have no idea. But not long to find out: I reckon we will hear a bit more about the financing within Q4 19, although they have said it will all be in place by Q1 20. After all, with Ni in a good phase, HZM management are in a strong position at the negotiating table. 2.25% fetches $25m, the cash/equity portion of capex being 35% of $443m is $155m. The 25$ raised is for early works and not part of the capex. Assume no further savings on capex, although JW has indicated savings are possible, and Brazilian govt contributions also very likely.

At the same proportion of royalty, that’s barely 14% royalty on JUST stage 1 level production to raise 155m$. (I know it’s not that simple to extend the numbers, but just saying). I think this initial deal was merely an indicator to the market of the calibre/financial prowess of institutions (Orion being just one, and there being competition) involved in the process. There is still a significant portion of shares amongst PIs and these will get gradually get transferred into institutional hands, whilst project moves into construction phase. The phase 1 project at 14.5ktpa was a realistic set up befitting the ambition of a junior aiming to become producer, on its own back. But with Ni in ascent, market sentiment changing as the battery revolution is taking off, I think a major partner will come in, and the full 29ktpa (ie 2 RKEF facilities) will be built from the start. Simon and JW have repeatedly emphasised the “scalability” here. All just my two pence whilst we wait. Infact Vermelho is bigger and better grade than Vale. Much better infrastructure around Vermelho given Vale has other projects in the region. It was aiming to be their flagship project. DYOR.

Thank you for the posts tonight. JM was clear in saying the Orion deal was only the start of a relationship. It applies only to stage 1, ie 14.5ktpa. So ramping up from the start with a partner will lead to further talks and cash imo. Phillip Clegg echoed this: “We look forward to supporting Horizonte as it enters the next phase of development of its world-class PORTFOLIO of nickel assets.” As AIMtodeath says, we might share the financing with a partner and this will lead to a smaller dilution. Note the use of the word portfolio rather than merely an asset. HZM has been very astute and visionary in consolidating the land packages, striking superb value deals at the bottom of the market with majors. The same skills will get us the best deal possible in the current market, of that I have no doubt.

FWIW I don’t think nickel can stay low, as others have commented. But the supply demand equation takes its own time. I m just saying HZM is a good candidate for development even at lower Ni. At higher Ni, it will rocket. No doubt the prevailing price whilst negotiations are active is a big bonus. Celestial timing as I said before. Imho only. DYOR.

Just wanted to share my perspective on another factor. The so called hurdle IRR which makes projects attractive to would be investors including banks/institutions/majors. The grades of ore in all commodities are generally dropping. Costs including energy costs are going upwards. The bench mark expectation on returns will have to drop. Central banks think printing money is the answer. There’s tonnes of cheap money sloshing around. Pathetic savings rates. Admittedly cheap personal loans too. 2018 saw criticism about Araguaias IRR. I realise we are in a mini run on Nickel, but this may easily run out of steam, atleast short term. Investors in projects like HZMs assets will have to accept lower returns. Reality check needed. Just my two pence observations...

https://www.linkedin.com/pulse/too-high-hurdle-neal-brewster

https://www.afr.com/companies/mining/miners-consider-lowering-the-hurdle-on-projects-20190827-p52l5o

So I m wondering how the two mines might work together and how work will progress? Originally, Vermelho was intended to be RKEF similar to Araguaia. More recently, the company has focussed on Class 2 Nickel for the steel sector at Araguaia, and battery grade Class 1 Nickel at Vermelho. Vermelho can be fast tracked, it was on the verge of being built.

Theoretically, IF both came online simultaneously, then ore could be swapped. The limonite at Araguaia could be utilised immediately by Vermelho (instead of the current plan to store it, until later). And by the same token, the saprolite ore at Vermelho could be trucked to Araguaia. A major producer partnering on both projects would support the financing. Not sure we would give up that much upside, but it would capitalise on the boom over the next decade faster than previously envisaged.

A more conservative approach would be both stages at Araguaia going online together (with a major partner) producing 29ktpa and the cash flow funding Vermelho in 2-3 years. Last and most conservative approach would be just stage 1 at Araguaia coming online first with HZM going it alone, and stage 2 Araguaia rolling out from cash flow, after 2 years. And Vermelho coming online in a few years.

So where does the recent SDT deposit sit? In the SDT RNS, we were told it might feed high grade ore to RKEF process at Araguaia. But in the recent investor presentation post Orion, JM stated they were looking at adding it to Vermelho. So what’s planned at Vermelho? Which of these might happen? I m merely speculating here, so any corrections/comments/criticism welcome :)

Bloodshot: 6-8 years is not true here. The funding discussions started end of Oct 18, scheduled to take 9-12 months so we are nearer the end now. JM said the entire package will be in place by beginning Q2, to start construction in Q2 20. The construction itself will take 31 months. Endeavour were on budget and are more or less on time at FDN.

The mining is straight forward: open pits. No blasting, no caves. No tailing dams. Bulk of work is the processing plant/s, engg works from what I read. So all in all we are about 3 years from production in 2022-23 imho. Happy to be corrected on time frames

Just to add: the Snowden FS report on Araguaia states that the top part of the deposit ie limonite is not amenable to RKEF process, and recommends storing it for future PAL process. (1.18.3 section) So having these two projects with RKEF at Araguaia and PAL at Vermelho means ore can be trucked to and fro. Creating efficiencies in the process.

Bit of reading to understand the Nickel deposit types etc.

https://www.kitco.com/commentaries/2018-09-04/Nickel-Laterite-s-Integral-Role-in-the-Coming-Nickel-Boom-Part-1.html

https://www.kitco.com/commentaries/2018-09-13/Nickel-Laterite-s-Integral-Role-in-the-Coming-Nickel-Boom-Part-2.html

So what I say the significance of this for us? HZM assets are all Laterite type. Investors have tended to believe that Sulphide deposits are key to the battery market, and supply the Class 1 Ni. And that they are cheaper on costs than laterite. HZM website (Nickel notes section) tries to clarify that this trend is changing, and that laterite mining is cheaper than sulphide type over the last few years. Sulphide deposits are fewer and farther away in the production pipeline.

Vermelho was developed as a Tier 1 flagship asset by Vale, after over 5 years of studies, $200m spent, and a capex estimate of $1.2b. But this was when it was stand alone. They sold it to us, because they went for INCO which had an entire suite of Nickel assets. Incredibly, we have paid only $2m in cash, and the rest (6m) is deferred until first commercial production. This demonstrates the cyclical nature of the market.

The more superficial limonite ore is amenable to Pressure Acid Leaching (PAL) process, yielding battery grade metal solutions. Whilst the (few metres) deeper saprolite ore can be processed via the Araguaia unit, using RKEF process. The latest resource estimate SDT will likely be added to Vermelho in stage 2, as per JM’s investor call last week. Both these processes (PAL and RKEF) were demonstrated to market via studies by HZM. So this allows the co to save on capex, which is predicted to be cheaper than the Vale estimates. Other savings are because of neighbouring mining projects in the region, due to which infrastructure (highways, power lines etc) is well developed (Vale assets I believe). All in all, the synergy between these two projects will I believe lead to good savings on costs. The tonnage also is aiming to be more modest (think Vale was aiming for 46ktpa, we are aiming for 18-20ktpa op)

I noted also in the interview with proactive investors some time back, JM stated that battery manufacturers tend to get involved in these type of projects much earlier, ie at PFS stage. So it would not be unrealistic to expect some news on this front within the next few weeks-months. Just my two pence. The day to day fluctuations in price become less relevant if one understands the narrative and is able to hold. A bit more patience needed. DYOR. Thank you to all insights from posters here. Good luck all.

Just been reading on the cobalt market, looks like it will be the rate limiter for the battery revolution. Cobalt demand is projected by some to increase by a factor of 2.25 over the next decade, due to Li ion battery demands. (BNEF figures) Globally cobalt production is a by product of copper/nickel mining. Lower copper prices will act as disincentive for copper mines coming online/staying open or upgrading output. A big chunk of cobalt comes from DRC (some 60% of global). 30% of Congo’s cobalt is artisanal, and the decimation in cobalt prices disincentivises this activity. Govt has steeply increased the tax on big miners.. Co prices have seen big drops from 2018 highs. Glencore is shutting down Mutanda: 199kt copper and 27.6kt cobalt. Global output of cobalt was 126kt in 2018. In other words, 22% of global out is down next year.

https://www.bloomberg.com/news/articles/2019-08-06/glencore-plans-to-shutter-giant-cobalt-and-copper-mine-in-congo

So a downward pressure on Co supply, demand increasing significantly bodes well for Nickel projects with Co as accessory. DYOR. Good luck all holders

What I found interesting was that all four people asking questions at the investor call last week were from institutions. If big buyers want in, games will be played. Always DYOR. Pleased for all long term holders, well done folks!

So been doing a bit more digging on this Richard Griffiths, presumably the same person associated with Beeson. Sold 8.3% in Incite, and told the market a few months later, stating it was an “administrative oversight”. Hilarious. Good riddance if he’s selling and plans to tell us next year ;)

https://www.telegraph.co.uk/finance/2875691/LSE-to-examine-bank-chiefs-sale-of-Incite-stake.html

https://www.theguardian.com/business/2004/sep/11/mobilephones

https://www.telegraph.co.uk/finance/2924522/Founder-steps-down-from-embattled-Evolution.html

MJB: I don’t understand it at all, but I gathered that Indonesia wants to increase its export value, by processing the ore in country as you mention. So they want to export steel, EV batteries etc instead of giving away upside. Also they have big ambitions to challenge China in the EV revolution. Secondly, in the past Philippines has stepped up when Indonesia closed its export of ore. Now, one of the biggest Philippine miners has announced its shutting its mine due to depletion. Estimates that this will drop exports to China by 300-400kt per year.

Onça Puma (Vale) operations are suspended. (Mining was suspended since Sept 2017, and all processing stopped earlier this year, pending the court case where Vale is accused of polluting the local river and affecting indigenous people) That’s a 53ktpa production down. So supply bottlenecks, demand rising.