Member Info for observer842

"Amapa Iron Ore Project - Update" (2nd Nov 2020)
https://www.lse.co.uk/rns/KDNC/amapa-iron-ore-project-update-n2zvfpszx20hasf.html
===[
The scoping study continues to advance. Alongside the preparation of the mine schedule, we will be preparing a condition and engineering study on the beneficiation plant and a review of the tailings storage facilities. The Investors have appointed Wardell Armstrong LLP ("Wardell Armstong") to supervise and prepare the scoping study. We anticipate, subject to travel restrictions associated with COVID-19, to have the scoping study completed after we execute our final settlement with the Bank Creditors.
]===

It was shortly after this announcement, and the announcement of the Updated Mineral Resource Estimate that our directors bought in over the following month :-))

"Update on Zulu Lithium Project" (17th Sep 2018)
https://www.lse.co.uk/rns/KDNC/update-on-zulu-lithium-project-3kpny87d59bjh17.html
===[
Cadence completed its due diligence, however, and as a result, it was unable to reach final terms with Premier.
]===

Here are the workings for the more ambitious schedules - still only for 19 years, which is obviously conservative given the size of the resource, but makes comparison and discounting easier.

1. 603kt LCE (17.5ktpa 4 years, 35ktpa 15 years)
2. 890kt LCE (20ktpa 2 years, 50ktpa 17 years)
3. 1,590kt LCE (20ktpa 2 years, 50ktpa 3 years, 100 ktpa 14 years)
4. 2,390kt LCE (20ktpa 2 years, 50ktpa 3 years, 100 ktpa 6 years, 200ktpa 8 years)

One simple method for estimating an NPV value is to pick a realised cash flow per kt of LCE and discount it for the mining plan schedule. I used $3,000/t (consider it after all costs and taxes if it seems too low!) and 50% previously, but other values are available. ;-)

1. Percentage of the 603kt LCE associated with the JV is 11.95% (page 138 of the feasibility study), which is 3.6% to KDNC, 21.7kt LCE. (KDNC 3.6%, BCN 48.2%, Ganfeng 48.2%). KDNC value 21.7kt * $3,000/t * 50% = $32.5m

2. Assume 50% of the 287kt of additional LCE in 1 above is from the JV area.
KDNC 21.7kt + (287kt * 50% * 30%) = 64.8kt LCE (KDNC 7.3%, BCN 46.35%, Ganfeng 46.35%) KDNC value: 64.8kt * $3,000/t * 50% = $97.2m

3. Assume 70% of the 700kt of additional LCE in 2 above is from the JV area.
KDNC 64.8kt + (700kt * 70% * 30%) = 211.8kt LCE (KDNC 13.3%, BCN 43.35%, Ganfeng 43.35%) KDNC value: 211.8kt * $3,000/t * 50% = $317.7m

4. Assume 90% of the 800kt of additional LCE in 3 above is from the JV area.
KDNC 211.8kt + (800kt * 90% * 30%) = 427.8kt LCE (KDNC 17.9%, BCN 41.05%, Ganfeng 41.05%) KDNC value: 427.8kt * $3,000/t * 50% = $641.7m

Better @mr.james? ;-)

Clearly my own estimates based on my own assumptions - please do let me know if anyone spots any mistakes in reasoning or calculations! DYOR. IMHO. LoL.

I'd personally be quite disappointed if we let Sonora go for anything less than $100m now the cat is poking its head out of the bag on their expansion plans!

Ob.

The number of views is now 4,906 - which made me discover these interesting explanations:

https://www.quora.com/Can-the-number-of-views-go-down-on-YouTube

Forgot the link: https://www.bacanoralithium.com/pdfs/Bacanora-FS-Technical-Report-25-01-2018.pdf

@MLQ. In essence Bacanora's CEO Peter Secker has been hinting at expansion plans for a few years. Towards the beginning of an interview he gave last week he hinted at mining rates greater than the current 17.5ktpa/35ktpa, but then when pressed later on he said:

"Bacanora Lithium (BCN) +$100M Raised & Gangfeng JV Finalising" (5,424 views 5 Mar 2021)
https://www.youtube.com/watch?v=9QbwF23vluQ&t=1347s
===[
So we are going to start at 20, hopefully grow to 50, maybe look at 100,000 tonnes down the track
]==

which kicked off the (mostly my!) excitement here . That's because if you look at page 130 of the feasibility study my interpretation is that the faster they mine the ore, the earlier, and in greater quantities it will be mined from our JV. Currently around 3.6% is associated with KDNC. This will almost certainly increase if they increase the mining rate - it's hard for it not to really as IMHO they wouldn't have even included the 3.6% in the plan if they could have got away with just using their LV area, so it's quite likely some, perhaps more than half (and very likely so if they increase to 100ktpa) of this additional ore will come from the JV areas.

But to answer your question. you haven't missed an official announcement. However, since when does AIM wait for official announcements? LoL ;-) Though in this case I doubt we'll see any action until there is one, or perhaps our BoD comments on what PS said in the interview, and possible consequences for us.

Ob.

LoL @mr.james. sexdecuple = 16x increase https://en.wikipedia.org/wiki/Tuple. 4x from the project rerating towards it's NPV, 4x from increasing to 50ktpa and therefore using more of our JV and sooner. Just back of the envelope estimates I find useful, and hopefully a few others will too. I'll take a look at the other scenarios at some point, though it's much less likely that expansion plans for 100ktpa and more so to 200ktpa make it to official studies...

Thanks @EV_Bull. It may go without saying, but if BCN's market cap were to rerate towards its NPV, then I'd expect this quadrupling to be conservative. e.g. if BCN went from 40p to £1.60, then we could be looking at a double quadrupling of the contribution to our share price. A sexdecupling. ;-)

I doubt our share price will react much if at all to what was said in the recent interview: "So we are going to start at 20, hopefully grow to 50, maybe look at 100,000 tonnes down the track" but I do wonder if when these plans are officially RNS'd whether whatever the market is currently attributing to Sonora in our market cap (£3-5m?) might quadruple. Now there's a thought.

Foreresearched is forearmed. ;-)

Ob.

Some interesting thoughts there @tomcat. I wonder if it is fair to approximate the net present value of the 21.7kt LCE associated with KDNC in the current mining plan by multiplying it by a cash flow per kt of LCE and discounting by some factor. If I recall correctly we (the BoD) have previously valued our portion of the project (according to the current mining schedule) at $30m, so how does $3,000/t and 50% discount sound?

21.7kt * $3,000/t * 50% = $32.5m

In which case my (apparently conservative! ;-)) scenario of, ~10% KDNC, 45% BCN, 45% Ganfeng, where total mined in the 19 years increases from 603kt to 890kt increases our NPV to:

890kt * 10% * $3,000/t * 50% = $133.5m

Another way of looking at this is that although the expansion plans are good for BCN shareholders they are potentially 4 ($133.5m / $32.5m) times as good for KDNC holders over the current plans :-))))

But is it a fair way of looking at things? And if so what about even higher mining rates and life of mine?

Ob.

@LoL @mr.james what did you have in mind? I could run the number for other scenarios if you like? How about:

20ktpa, 2 years, 50ktpa 3 years, 100 ktpa 14 years.
20ktpa, 2 years, 50ktpa 3 years, 100 ktpa 6 years, 200ktpa 8 years.

Or are you thinking BIG! ;-)

Ob.

@news. May I ask you to do one thing as a favour. Take a deep breath, get a cup of your favourite brew, and sit down and slowly read what I have written on here since Monday - just my posts, and assume that I was trying to help. Read with a smile if you like, I tend to post with one as it helps with the mood I find. I was trying to help with your understanding, but I think you misinterpreted something I said and thought I was attacking you. I wasn't. Peace out! :-)))))

Yes, I was trying to educate you out of kindness, as you have educated me plenty over the years. Apologies if it hasn't come across this way. As to my estimates, if it plays in our favour then I'll be quite disappointed we aren't over £5 a share when Amapa is at full production.

Nice spot @jimb! As for lithium prices, I expect to see this measure to increase most weeks for some time to come:

"FASTMARKETS MB LITHIUM HYDROXIDE MONOHYDRATE: MIN 56.5% LIOH2O BATTERY GRADE, SPOT PRICES CIF CHINA, JAPAN & KOREA, $/KG)"
https://www.lme.com/en-GB/Metals/Minor-metals/Lithium-prices
===[
(MIDPOINT)

DATE PRICE (US$ PER KILOGRAM)
04 March 2021 10.50
25 February 2021 10.00
18 February 2021 9.50
11 February 2021 9.00
]===

Let's hope rising Lithium and Rare Earth prices can be realised by our BoD for full effect!

Ob.

According to page 138 of the DFS:

https://www.bacanoralithium.com/pdfs/Bacanora-FS-Technical-Report-25-01-2018.pdf

603kt of LCE is recovered over the 19 years of which 88.05% is from the 50% BCN : 50% Ganfeng area, meaning 72.4kt in the JV area. 21.7kt associated with KDNC

If the new plan was say 2 years @20ktpa, followed by 17 years @50ktpa (clearly it could be for much longer, but keeping it at 19 years makes comparisons easier!) then the total LCE recovered would be approximately:

2 * 20ktpa + 17 * 50ktpa = 890kt LCE

Meaning there would be an additional 890kt - 603kt = 287kt LCE

I think it's quite unlikely that all of this would come from our JV, but the majority might. I think a sensible lower bound might be 50%, with the upper bound (obviously) being 100% (but quite likely lower!)

@100% KDNC's 21.7kt rises to:

21.7kt + (287 * 0.3) = 107.8kt

Meaning the ~3.6% KDNC, 48.2% BCN, 48.2% Ganfeng would change to:

12.1% KDNC, 43.95% BCN, 43.95% Ganfeng.

@50%:

21.7kt + ( 287 * 0.3 * 0.5) = 64.8kt

leading to:

7.3% KDNC, 46.35% BCN, 46.35% Ganfeng.

Somewhere in the middle is probably most likely, perhaps:

~10% KDNC, 45% BCN, 45% Ganfeng.

which would be nice! And if they expanded to 100ktpa....? :-)))))

All my own work and opinion. May contain errors. Shared in the hope someone corrects me if I am wrong. DYOR ;-)

Ob.

@EyeGuy: "At today’s prices it’s likely to be circa $3 billion from my calcs". I know tax can be taxing, but presumably this NPV is pre-tax? I would have thought (and by my estimates), it would be more like $2B? But what's a billion between friends? LoL!

IMHO The most important bit from our perspective is:

"Bacanora Lithium (BCN) +$100M Raised & Gangfeng JV Finalising" (5,424 views 5 Mar 2021)
https://www.youtube.com/watch?v=9QbwF23vluQ&t=1347s
===[
So we are going to start at 20, hopefully grow to 50, maybe look at 100,000 tonnes down the track
]==

Certainly worth looking at how growing to 50ktpa would likely improve our current NPV based on their 19 year 17.5ktpa growing to 35ktpa in year 5 plan, in which they plan to mine 88.05% from their 100% claim: ~3.6% KDNC, 48.2% BCN, 48.2% Ganfeng.

"Bacanora Lithium (BCN) +$100M Raised & Gangfeng JV Finalising" (5,414 views 5 Mar 2021)
https://www.youtube.com/watch?v=9QbwF23vluQ
===[
0:00? - Introduction
1:40? - Quick Macro Overview: Fundamentals & Forecast
2:35? - Company Overview
3:19? - Recent Raises: Terms, Discounts, Pricing, & Market Reaction
6:53? - Ganfeng Lithium Costing Numbers, When to Expect Them?
7:53? - Carbonate VS Hydroxide: Which Will Bacanora Produce?
10:06? - Facility with RK Mine Finance: Utilising or Releasing it?
10:48? - The Project: Process, Security, & ESG Considerations
15:18? - AIM Listed, USA Assets, Chinese Partner: Customers & Beneficiaries
17:31? - Clays Rising in Funding Lists & New Entrants Incoming
20:58? - Investor Checklist for Success & Barriers Before Investing
24:10? - Potential Listing in NA
]===

Must listen! ;-)

Perhaps @Eyeguy. I've got a fair few filters on, so hopefully I've caught most. The way I'm hoping this plays (THIS IS MY SPECULATIVE HOPE/OPINION) is that if iron ore prices, shipping and exchange rates are similar to today's when we take 20% we rise to around 60-70p raising to £1+ on 27% news and further project developments. Eventually rising to £5+ on 49% news (especially if this is achieved by selling an asset rather than dilution) and during the ramp up to or at full production. Nice to have a vision, but I'm not so naive to know it could play out horribly for us as it did when lithium dipped heavily a few years ago. Iron ore could dive below $40/t for instance. We can never know. Just fingers crossed we sign the deal imminently to take advantage of the current economic environment! :-))))

@EyeGuy:

===[
news- just to be clear no one including me is asking you to buy or sell shares in kdnc or other shares for that matter.
I am posting my opinion and showing my workings. if you believe we should use the $61 price of iron ore and base your price predictions on that then that's up to you. However imo it would be pointless to do that particularly as shipping starts any time and they will be getting almost 3 x that from each shipment. but again if you want to use $61 then that's your call fella.
]===

100% agree.

@News. There is no one on the other board that doubts what @EyeGuy and me have been trying to tell you: That shipping CAN commence before the agreement with the banks has been finalised - whether it WILL is another matter. We were trying to help you to understand why you were wrong on this matter (you are correct on so many other matters as you a well informed poster) in order for you to improve your understanding of the Amapa situation, which hopefully following our discussions you now have - neither me or EyeGuy have anything to gain in doing this, other than trying to help another poster, it's called kindness. :-)))

I really hope that explains why we kept at it, and as you say: peace out ;-)

Ob.