Member Info for moneyhawk

In the last interview DW said that the HRZ results would probably be complete in a few weeks and should be able to give an update to the market late April.

Now past that, so is the delay because
1) its just taking longer than expected,
2) they have got the results but everyone who needs to be involved is too busy dealing with the farmout to work on it at the moment, or
3) they have got the results, shown them to the 'preferred bidder', and they also want the HRZ. So both bits of news are now delayed pending some more negotiations to tie it all together.

All 3 dould be possibilities imo.

DW didn't rule out a joint conventional/HRZ farmout, which is maybe a bit surprising since he was also saying its normally a matter of weeks from the stage we're at to close a deal and the HRZ wasn't ready to be farmed out. Maybe he was just avoiding disclosing any possible details of the farmout, so was deliberately not ruling anything in or out. But maybe there had already been discussions on the HRZ with the bidder, and subject to positive HRZ results the deal would be expanded to cover both.

Yep, could be anyone, DW hasn't given anything away to allow even an educated guess to the bidders identity.

Fair point about connco though, they do already have a lot of exploration acreage to work through. Not sure it rules them out, but it may have an impact on what they are prepared to offer and the priority they would give to exploring additional acreage in the short term. BP on the other hand said earlier this year that they are planning to keep Prudhoe Bay going for another 40 years. Acquiring some additional prospects could well be high up on their agenda as part of that plan.

http://www.alaskajournal.com/2019-02-06/bp-aims-40-more-prudhoe

You could be right, and it'd be interesting to know if Sable is running behind schedule with the government approval not received yet. I would suspect most of the time needed would be around ordering plant equipment which has long lead times, so that part could be underway as they have been given access, meaning there won't be a delay. But if there is, then in reality it probably wouldn't make a huge difference. Starting in December would then be shortly followed by a shutdown over Christmas and the new year, so might not really be much in it between starting in December or January/February.

But then news of the next project could be dropping any time. LC has been talking about copper/cobalt for a long time now, and sounded more confident than ever on a deal in the last interview.

Olddad, it's always possible that something previously unknown to all parties may be uncovered. Afterall, its why due diligence is carried out.

But if that happens, probably very unlikely it would be terminal to the negotiations. Our leases are shown on the offical records and maps, we're a listed company so all the companies records should be in order etc etc. So if anything does get picked up is likely to be very minor, such as a document being incorrectly filled, the wrong date somewhere, or other minor issues that can be easily corrected.

Re the 500 day average time - The same company has also published another analyst summary of farm out agreements, which states a median time of 330 days (as opposed to a mean time of 500 days). Probably much the same data, just a different way of looking at the average time it takes.

https://www.westwoodenergy.com/news/will-the-farm-out-market-shift-from-promise-to-performance/

Farmout started in July, so is getting very close to the median time of 330 days it takes for farmout agreements.

Difficult to know what will happen Sumo. I'm not really expecting news of Platcro PGMs starting to have a major impact, but it will hopefully add some value to the Mcap. The main key drivers for me are now FY results showing a group level profit, Kabwe production starting and the next project.

Possibly something surprising will happen in this years accounts though. We've raised all the money for Kabwe/Sable upfront, $22.5m/£17.2m from debt and the placing. But Sable is in staged payments, and not all the project expenditure will be hitting the books before the end of June. We've then got the $2.8m cash part of the Platcro acquisition to factor in, but overall we could end up showing a very healthy cash surplus as a result of the financing.

If it works out that way, it may be the trigger for the rerate with Kabwe's future earnings to be factored into the valuation.

But then again, this is AIM. It could happen long before then, or take until results are delivered from Kabwe.

I don't see '8 weeks' as a deadline DW has set, its only peoples interpretation of his 'weeks not months' comment. What I see his comment as meaning is that we're close to finalising the deal but its still going to take a little bit of time.

Besides, 8 weeks has probably already been and gone.

He wouldn't have issued the update at the same time as telling the party that they are our preferred bidder. I would guess that he would have made sure they still wanted to proceed before letting all the other bidders know. That could have all been put in motion a week or more before he announced it to the market, so we're now into 9 weeks. A bit like carrying out job interviews, you make sure your preferred candidate accepts the job offer before contacting everyone else.

I doubt we'll be getting cash anywhere near that amount in the conventional farmout, knock a zero off the end, then maybe in a best case scenario. Hopefully the farmee will be committing to a work program with funding of a few hundred million for multiple wells and 3D, but that won't be cash coming straight to us to spend however we want. More than likely the farmee will become the operator. The HRZ will then be farmed out later in the year on a similar basis, although we may get more cash with that one as our costs have been much higher with Icewine 1 & 2.

The SP suffered with Kabwe for two reasons. The main one was BMR and borrelli conveniently 'not receiving' the licence revocation letter. Secondly there was doubt over how we would fund it, especially since neither us nor BMR had much spare cash at the time. Our financial position is improving all the time with ever increasing earnings, so funding future projects will (hopefully) become less of an issue.

LC seems more positive than ever on a Copper/Cobalt deal. Could be close to being announced?

Having just done one deal with Glencore. I do wonder if they're one of the companies we're talking to about their tailings? Could be relevant, the Zambian government seem to be putting pressure on Mopani Copper Mines over one of their tailings dams - a company owned by Glencore and First Quantum.

https://zambiareports.com/2019/03/04/govt-threatens-sanctions-mopani-waste-discharge/

A bit of digging around, and that tailings dam for Nkana has a capacity of 181M tonnes. Makes kabwe look like a small operation with only 6.4M!

TT, I don't disagree with that. I'm talking about our reporting year though, year ending June. So the estimate of £11m is for Q3&4 2018 plus Q1&2 2019. I think the November JLP presentation will also be going on the reporting year, but not sure about the Shard forecast.

I'm not expecting quite as much from Q2, purely because we don't know when DCM will be fully up to speed and the level of earnings to be expected. But very rough figures, Hernic could be pushing close to 2.5m and platcro chrome close to 1.5m.

Either way, its very positive that all the indications point towards a discussion about how much earnings 'will' increase, rather than 'if' they will increase!

In total BMR have probably raised a bit over £700k from selling the remaining JLP shares. Do wish you luck here, but its not a lot of cash for an acquisition after Borelli has taken his cut for all the hard work he's put into selling the shares at a low price.

Can't be completely certain what price BMR got, but over on the JLP board we thought that BMR had fully exited on the 21 March, just before the sable announcement, with a trade of 17.7m shares which had all the indications of a placement with an II (as JLP describe it). Prior to that, the pattern of several trades in January pointed to BMR selling at 2.25/2.3p, the same price as the sale that triggered the last TR1 from BMR.

Welloil, that's what I've read into it as well. Don't really understand why LC would want to do that, based on the previous project ramp ups I don't think many would have been expecting the fine chrome to be showing strong positive earnings in the first quarter of operation. And it also takes away from the positive of how successful an acquisition Platcro has turned out to be.

Thinking ahead to the Q2 and full year figures, so far this year we're showing £7.17m project earnings. Q2 could maybe see around £4m earnings so we finish the year on approx £11m earnings. This compares to £5.03m for the whole of last year, meaning a 120% increase from last year, and before Platcro PGMs and Kabwe start to add to the figures.

Seems to be in line with the November presentation, which projected project earnings for 2019 of about $15m (at current rates approx £11.5m). The same presentation is also projecting +$40m in 2020 and $75m in 2021

Other main thing to note here is that there will be no more quarterly updates, moving to more detailed operational/financial 6 monthly updates. Could mean that there will only be interim's and annual accounts going forward, something to bear in mind for when to expect to see the next figures.

Overall, figures about as expected with earnings just over £3m for the quarter, and provides plenty of scope for Q2 to be another significant increase in earnings.

Looks like Hernic recovered a little in March. Jan and Feb earnings were £1.1m (£0.55m per month), so March produced £0.8m earnings. Hopefully this quarter will be back to Q4 levels or greater.

The biggest news in this, which was suspected, is confirmation that BMR are fully out and no longer hold any JLP shares.

Yes, with the benefit of hindsight it would have been better for DW not to give guidance on the timescale he was aiming for. But then having an open ended timescale with no guidance would inevitable result in some people expecting it to be wrapped up in a few weeks from starting, and other people saying its going to take years.

Difficult for us to judge why its taken longer than he advised. Maybe it was possible, maybe it was never possible, we don't really have the info to know that with any certainty.

But what we do know is that during the farmout process the estimated gross resource increased from 1.9B to 2.9B following the seismic inversion (announced 23rd Oct 2018). That's a pretty big increase by anyone's standards, and DW has stated that this was the reason for the time extension requests. Its possible that this may have also had a significant effect on who was seriously interested and what they were prepared to offer as a farmout deal, hence more time needed.

The statements from DW on it refer to us running a fast track process for the farmout, but was also made clear that if someone wanted more time then they would get it.

Need to remember that we're trying to get a deal in an industry that is used to working in months and years for this type of deal, so if DW were to push to hard with fixed dates and shorter timescales than usual he might just be shown the door and we'd get no deal.

That trade was possibly a sell. Delayed from 8.15 yesterday, trade price 3.55 and the Bid/Ask at that time was 3.55/3.70.

Posted yesterday, some analysis of farm out deals:

https://www.westwoodenergy.com/news/westwood-insight/frontier-success-sparks-the-exploration-farm-out-market-into-life/

According to this it takes an average of 500 days to complete a farmout deal (approx 71 weeks or 16.5 months).

In other words its a process that normally takes a long time. Our farmout started approx 10 months ago, and all indications from DW are that we are now in the final stages of that process.

LC is normally very good with the figures, I'd have thought if the slides were wrong he'd have picked up on it when preparing for the presentation and corrected it.

I still think its referring to output capacity (in a typically unclear way), and the projected annual amounts of Zinc, Lead and V reflect that it won't be operating at full capacity all the time.