Member Info for Mumbles2021

Hi looked a bit concerning to start with, but looks more like they want to operate their rare earth industry without Chinese dominance

Good morning Theo, my thoughts are that the events have unfolded since the recent appointment of Fernando Marino as operations director. He comes with very good credentials. Smelling something not quite right and not unsurprisingly not revealing the extent of the issues until he was sure of the facts. Considering he was appointed End of August, getting to the bottom of the issues, getting them verified and then producing a cost estimate of the impact of the project within 6 weeks. The board maybe deliberating for another week before releasing the RNS. This is not an unreasonable time frame. To me, there are questions as to how they got there in the first place, but the actions taken to appoint Fernando points to an appreciation that they need more oversight than was previously being provided, and a timely issuance of an RNS when a event with very significant materiality was realised.

For your info SP, he is still banging on about the 25% royalty on sales which is a complete mis-interpretation of the license. The royalties are 2%, the 25% is the CIT rate that will be applied to profits, as they are to any other Angolan enterprise. These will be split 20% to the central government and 5% to the Huambo province government. I raised this with Pensana over 2 years ago and it was clarified then. Needless to say i carried out my own verification. The terms of the license are the Standard terms applicable to extractive industries in Angola, with some investment incentives that are also available by Angolan statute if conditions are met. The official communication is in Portuguese, where that published is an English translation. In the event of any dispute the original Portuguese notice takes precedent. If you would like to register with another excellent site, an overview of the mining laws can be found here https://www.lexology.com/library/detail.aspx?g=589459c9-3d0c-4fb8-9a40-73dee3b78ed8

However the relevant info states

Royalties

As a general rule, royalties are levied on the value of minerals extracted at the mine head or, when processing takes place, on the value of concentrates, at the applicable rate:

1. strategic minerals: 5 per cent;

2. precious stones and precious metallic minerals: 5 per cent;

3. semi-precious stones: 4 per cent;

4. non-precious metallic minerals: 3 per cent;

5. semi-industrial and artisanal diamonds: 3 per cent; and

6. construction materials of mining origin and other minerals: 2 per cent.

Rare earth concentrate comes under section 6, as “Other minerals”

I have acces SP, but then again i paid my subscription… t

As i said (although i said TImes) you have quoted Mining weekly. But PRE has not issued any RNS with any amount. Suspect you spent 20 minutes googling to find that link

Valuation, there was no intention from SP to inform this board of anything it was, as usual, a misleading statement designed to malign and mislead readers. There was announcement re support from the ATF as stated, however, there was never any announcement of the quantum (other than a rumour in the times). The RNS this week clarified the quantum and some of the terms and was therefore material and justified.

It was 1.72 in July, under the same funding conditions, obviously taken a tumble since then to 125 in September

Trickydicky, i think you put it far better than i did. If i was underwater like a lot of holders are here, i suspect i would be feeling the same. Believe me, I know how it feels when a company puts a totally non-sensical financial update out that doesnt reflect the true position, and the market punishes the SP accordingly and immediately

Bebeto, hence the price

Trickydicky2, based on the current 20p, and the previous fully funded £1.75, that would give the same chance of winning the same return by putting 4 numbers on a roulette wheel. But that would be pure chance. HZM investors have far more information as to whether to risk their cash. My point was not that there is no risk, but that the risk discount is way over done.

Headder, you hit the nail on the head. The perceived risk being attributed to HZM due to the recent RNS far exceeds that attributed to Canada Nickel. Hopefully some future news will de-risk and the SP will increase accordingly. With due deference to the LTH’s, the current risk/reward profile for HZM is off the scale. But for me the discount currently being inflicted on HZM does not reflect anything like the true position. As with any share, i wouldn't bet my life savings, equally HZM is probably offering one the most attractive risk/reward ratios in the market today. This is a good project.

Eloro, I was starting to worry that you had all given up. At least you have come back for anther a tree shake. I guess it's a bit difficult to make any money with zero liquidity or volume.

As an aside, to my previous, a $260 million valuation would immediately be equivalent to 75p per share.

There has been some speculation on the timelines in previous RNS and expected timelines. Most were speculation based on conversations immediately after the March interim results. These assumed that ABSA bank would complete Due Diligence for the financing in September, with expectations of announcements in October at the latest.

I heard over the weekend that the commercial and technical due diligence will be completed at the beginning to mid-November and that negotiations on the term sheet will be performed in parallel, planned to be agreed upon when DD is completed. The DD docs and the agreed terms are to be sent to investment committees for consideration in mid-November with the expectation of a decision within two weeks.

After re-reading the company RNS's contents dated the 27th of June and the 21st of August, the company is meeting the timelines identified in those documents.

The financing RNS on the 27th of June stated that the target was for funds to be in place at the end of the year. A combination of wishful thinking and interpretation of initial comments assumed that this was for Longonjo and Saltend. Others were correct in reading that this referred to Longonjo only.

There was also some concern about how the company had managed to reduce the CAPEX by $ 100 million. Again, after re-reading the operational update RNS dated the 21st of August and getting clarification, the RNS is explicit about how Pensana is achieving this.

The initial plant has been scaled down in size and modularized. The reduction in size and concept has required considerable re-engineering, hence the extended timeline. The interim result is that at the end of year two, the facility will have an initially reduced capacity, designed to be scaleable to increase the capacity to the initial design in the third year by adding additional modules. Cont in post below ……

Longonjo is considered a standalone project for financing purposes, and an off-take contract has been agreed with a non-Chinese Far Eastern concern for the produced MREC to satisfy the cash-flow requirement.

Pensana will retain 66% of its Equity in Longonjo. If the strategic investor's valuation at the beginning of the year of $260 million is considered an independent valuation, the 19% holding Pensana is giving up is valued at $ 50 million. In this instance, the Angolan's $80 million contribution would be split between $50 million equity and $30 million debt.

This finances Longonjo with a zero requirement for capital from Pensana shareholders and, consequently, no dilution at Holdco level. There will be some reduced attributable cash flow to Pensana from Angola operations. However, it is 1/3 of the dilution that would be attributable if Pensana were to issue shares at current prices and has the added benefit of leaving Pensana's other Angolan assets (i.e. Coola) untouched.

Saltend:

The initial reduced capacity at Longonjo will meet Saltend's lower requirement for feedstock in the initial startup phase, with the increased capacity in Angola coming online as Saltend ramps up production after commissioning.

The $150 million green bonds are still available, representing 60% financing of the expected $250 million final project cost. It is unclear where the balance of funding will come from. It is fair to assume that there will be a capital raise.

As recently as today, conversations have occurred with Ms Nusrat Gani, the Minister of State for Industry (Department for Business and Trade). The UK government are very keen on this project happening. In addition, via the Critical Minerals international alliance, the US State Department has been making exciting noises regarding 15 global projects, one of which is Pensana. These points, together with an unsolicited approach by a US interest, suggest that once Angola is over the line, financing Saltend will be much more straightforward.

Not Bullish, or bearish. just making the point that there are far more options avaialble to all the stakeholders without decimating the PI's, as this would almost defintitely require a haircut by the banks and that is an last resort. Further loans are possibly but unlikely as they would be junior to the exiting facilties in place. i guess the additional project size would allow an added percenteage, but only if the cashflow generaton supports it. A limited equity position in the OPCO, that does not affect the controlling interest of HZM, would allow an investor to recoup their investment without impinging on the existing seniority in the payment waterfalls for the debt holders that further loans would.

there hase to some dilution but not at the level that the doom and gloom merchants are predicting. It all depends on how much the shareholders want it to work. This project is only one of a portfolio, It affected the SP but of it is sorted at a local OPCO level, the impact on the SP at holdco level will be a proportion of the expected contribution to the HOLDCOs bottom line.

Captain, you and i are both on the same page. I dont believe it will be the Chinese as they will invest for the offtake rightts, exactly the same as Glencore, which i doubt they will want to dilute

Captain Swag, that is a very viable option and one that the other major shareholders are likely to back. It doesn't require a capital raise at these current levels, it also doesn't require an EGM and a shareholder vote. I would put my money on Glencore as well, as they have the offtake rights and want the trading volumes, which is where they see the value, not in the mine and processing profits. 50-100 million up front, (which they will get back in directly paid dividends before the PI’s).

Glencore are in for the offtake, im sure that have exclusivity on the offtake rights for the mine life, or for as long they are are equity holders. I havent looked at the holding structure properly, but im very sure that each of the projects is a standalone legal entity with HZM as the holding company. There is no reason why equity cant be sold down in the specific project, without going back to the shareholders and without affecting the loan covenants on the project financing., This does not affect the HZM equity holdings in the other OPCOs. it WILL reduce the future cashflows accruable to HZM from the Line 1 project and obviously that impacts the SP . How much depends on how much cash is required and to the terms agreed. but what it DOES NOT depend on is the current SP, and consequently has no effect on dilution at HOLDCO level. I cant see Glencore giving up their 26 year cash cow for for the sake of $150 million upfront, and getting 50 million annually of the attributable free cash flows for the whole mine life. Trading companies do not invest in these projects to make their profits from the mines, they do it to capture the trading volumes which is where the real profits come from, last year was a case in point. The banks are not going to walk away, they've got too much skin in the game, and Glencore are in for the long haul. But there is no such thing as a free lunch. Some future cash flow will have to be given away, but i cant see why 150 millon USD would justify more than an 30% additional stake directly in the mine, considering the forecast are that this would return 350 million of the forecast NPV8, more than repacing the reduced from their holdings in HZM PLC. This is speculation, but their are far more ways to stucture this than the doom and gloom merchants seem to be suggesting.

Hi Tony, for me it emphasized the execution risk aspect that needs to be considered after finance and that its not a won race once finance is achieved. Hence the 20% discount Liberum analysis applied to the Pensana prospective NPV even after finance is achieved.

At the price HZM was a no brainer at the levels it sank to this morning. Even if they had to give 90% of the project away to other investors, the NPV compared to a company valuation of £45 million, still made sense and i didn’t feel the banks would walk away considering the amount they were on the hook for. Apologies to the PRE holders