Member Info for observer842

Great to hear KC mention the possibility of doubling production. If this intent was officially RNS'd it would increase WHI's fair value (valuation today based on $12,500/t LiOH and their estimated project risks) from 129.8p to around £2 as this possibility is currently included in the DCF valuation at 10% risk, whereas it would immediately rise to 50% risk if it were nailed on.

https://www.europeanmet.com/wp-content/uploads/2021/02/20210212-FN-EMH-090221.pdf
Table 1: European Metals Holdings Valuation

I presume this was aimed at me: "I have not appreciated the comment today on this forum that I do not know what EBIDTA is - that was pretty out of character. I am not the type to say this and that about myself but certainly that was pretty not nice to say the least."

Apologies if I have upset you, that was not my intention. You say on multiple times to check and report errors with your posts. I spotted this phrase when glancing through "So, all I said to show him that modelling is only $61/t, lets say it is double to $120/t, then at max EBITDA will double and that also means a very reasonable figure". The word "max" indicated to me that you believed a doubling of iron ore prices would place an upper bounds on the EBITDA of double. i.e. in practice I thought that you thought it would lie somewhere between the same and double. Since this is not the case (it's likely 3.3x) I thought you would like to know, especially since a consequence of this is that rising iron ore prices is spectacularly good for the EBITDA metric all else being equal. :-))) Hopefully that explains why it appeared to me that you didn't appreciated the meaning of the E in EBITDA in this context. There's no easy way to teach someone to suck eggs. I could have stayed quiet, but what happens if you really didn't understand? Surely you would prefer I speak up?

Ob.

This is what I posted on the other board. It was a post intended to promote discussion and research, which it did. It encouraged @tradecraft to engage and share his spreadsheets and painstakingly decoded copies of the tables at the back of the JRP. I pointed out a few oversights and overall I stand by the possibility that at full Amapa production, and with a good wind (!), KDNC's share price could be £5 to £10 if iron ore prices are similar to today's. In reality they may be higher, they may be lower. We don't know. Did I mention that foreresearched is forearmed. ;-)

observer842 22 Jan 2021 17:30
===[
It feels like most holders think 40p to £1 is possible when we take 20% of Amapa - 40p if iron ore prices are low, £1 if they are high. I think it's worth considering what next. I'm beginning to think that if iron ore prices are similar to today's we might see a share price in the £5-£10 range at full production and assuming we own @49% of Amapa.

Discuss.

The more holders that are able to convince me with decent reasoning this is possible the more likely I am to hold on to all of my shares rather than starting to top slice on @20% news as I, as I'm sure many are currently planning to.

Calculators and comparators at the ready!

Foreresearched is forearmed. ;-)

Ob.
]===

I wonder if the 0.3Mt 62% is a typo in the RNS. It was 0.9Mt in previous RNS's and the January corporate presentation. I suspect on balance it is a typo. The JRP (official court document) used 0.9Mt 62% Fe and 4.4Mt 65% Fe

@news. I don't know why you seem to getting so worked up. IMHO it is completely reasonable to make projections based on whatever price and assumptions you want to, and especially today's spot prices. No one in their right mind thinks it will stay exactly the same - it will go up, and it will go down. Up, down, up down. LoL. State your assumptions. Show your workings. Allow them to be challenged. We all learn. ;-)

@news.
" I see you agree with my iron ore price at the moment of US$174/t and NOT $200/t per eyeguy."

You are both right. 62% is around $174/t, and 65% is around $200/t. The majority of what we will be selling is 65%.

"As for the BREAKDOWN to show me that it is 3x rather than 2x, well, of course I have NOT taken the stockpile etc at their different figures. After all, it is hypothesis, and UNDER-CUT OF FIGURES that I showed of 2x is better than 3x."

We can leave it at this, but I encourage you to understand what EBITDA means, and how doubling of sale prices does not lead to doubling of EBITDA. Simply put if you sell something for 100 and it cost you 80, then you have an EBITDA of 20. If you double the sale price to 200, but your costs stay the same, the EBITDA has increased 6x to 120. Someone please correct me if I'm wrong!

Ob.

@news. You ask for us to check your posts. I'm checking when I can. This is simply not the case:

"So, all I said to show him that modelling is only $61/t, lets say it is double to $120/t, then at max EBITDA will double and that also means a very reasonable figure"

It is EARNINGS, not REVENUE before interest, taxes, depreciation and amortization. Earnings include OpEx. By my estimates if prices doubled (x2), then EBITDA would 3.3x

Ob.

I corrected it in the post at Mon 14:38.

@news, you are missing the point... You implied if the iron ore price doubled, the EBITDA would double too. This is simply not the case.

"KC : I think it’s USD 5 - but we can aggregate." He probably means a share consolidation. e.g. 2 shares become 1.

Absolutely @EyeGuy. Amapa comes good in today's economic environment and we may see one helluva revaluation in our share price, especially if EMH continues to rise towards £2 (which may be on the cards, especially if they announce plans to double production - see recent broker reports) as it means we have equity in there we could use to take us to 27% and then potentially to 49% of Amapa without dilution :-))))

And if EMH goes up by £1, that's 13p on our share. :-))) I've been getting a very good feeling after understanding the consequences of the "shifts" and of doubling capacity, as outlined in the recent broker reports:

https://www.europeanmet.com/technical-reports/

It's nice to see, but I think we've got more bags in us from Amapa coming good in the current economic climate ;-)

Perhaps @tomcat, but futures rose more than present, so perhaps not!

Fe 62% futures are now greater than $100/t out to May 2023 :-)))

https://www.cmegroup.com/trading/metals/ferrous/iron-ore-62pct-fe-cfr-china-tsi-swap-futures_quotes_globex.html

Lithium, Rare Earths (NdPr), and iron ore :-)))

http://www.asianmetal.com/LithiumPrice/Lithium.html
http://www.asianmetal.com/RareEarthsPrice/RareEarths.html
http://www.dce.com.cn/webquote/futures_quote_en.jsp?varietyid=I

If EMH goes up by 10p, by all rights ours should go up by: 19,747,740 * 10p / 148,349,098 = 1.3p - but perhaps lagged, eh @Dallas ;-)))

I mostly agree @EyeGuy, though I suppose I should pick you up on: "The only thing to come off will be tax.". ;-) There's obviously $168m CapEx and the NPV10 of $106m of unsecured debt and whatever NPV10 of secured debt (likely $135m nominal, but less when discounted to present if some paid back in later years) is negotiated with the banks to "come off". Though if we can get the ore at the private port shipped in the current economic environment the realised estimated $60m (net of costs) @$80/t Fe 62% should be much greater and go much further than originally anticipated since iron ore prices are currently over double that, BRL:USD exchange rates have moved significantly in our favour and the baltic dry index is substantially below the recent peak in 2019.

Clarification: "based on current mining schedules," should have included other caveats!, at least: "based on current mining schedules and stage of project".

As to the value of each JV, based on current mining schedules, it's nominal, single digit millions, low teens at best IMHO. What we (me at least!) are keeping an eye on is the future demand of Lithium and Rare Earth's, and the likely expansion plans of the JV projects, and in the case of Yangibana plans to drill some more in our JV areas. Of course if our BoD recognise these likely expansion plans during negotiation then they should be able to command more than "low teens" for a sale, otherwise holding on to the JV's and, or negotiating a decent mining agreement would be preferable. And to complicate matters, selling for "low teens" might be preferable, even if we believe it is worth significantly more if we have plans to utilise that equity more favourably elsewhere, if the alternative was not at all or heavy dilution, say. Just my thoughts...

LoL @degsie. I took it to mean that it might be worth zero as we might have sold it to Ganfeng!

@news. You appear to be unwittingly underplaying the significance of elevated iron ore prices. If the iron ore price doubles, the EBITDA more than doubles. Also, $61/t Fe is a conservative price demonstrating that the project can be profitable even at these low prices.

The EBITDA of $136m is based on 0.9Mt@$61/t Fe 62% and 4.4Mt@$80/t 65% (JRP document). If a Fe 62% of $122/t was used, the 65% Fe might be expected to be around $140/t in which case the EBITDA would INCREASE by:

($122/t - $61/t) * $0.9Mt + ($140/t - $80/t) * 4.4Mt = $54.9m + $264m = $319m

So a doubling from the conservative $61/t Fe62% to $122/t (spot is currently around $175/t) may lead to the EBITDA increasing from $136m per year to $319m + $136m = $455m, which is 3.3x as much :-)))

I've spotted a few other flaws in your reasoning, but you write so much I haven't the time to pick up on everything! LoL. ;-)

Ob.