Member Info for observer842

I've been having a think about Sonora of late, and I'm baffled at just how little value the market appears to be placing on our JV's in the light of increasing demand and prices and recent comments from their CEO that they intend to increase production rates from those stated in the Feasibility Study of 2018 of 35ktpa to 50ktpa. It seems to me that for whatever reason KDNC shareholders are needing to see this, and the likely consequence of this for KDNC, in writing before they attribute reasonable fair value to our 30% holding in our market cap. Is that a fair assessment?

I've personally started to take this into account in my valuation of KDNC and on the back of this and other factors, such as EMH increasing value not being fully recognised in our mcap and consequences of increased iron ore prices on the economics of the Amapa project, have been buying strongly of late, averaging up in fact. We really should be in the mid-20p's pre-Sonora, pre-Amapa, pre news. Now. IMHO. DYOR. The rise on Friday raises the prospect the market might be reevaluating its stance. Though part of me hopes not, as I'd likely de-risk a little in the mid 20's, when I'd rather wait for news and de-risk much, much higher! LoL.

Ob.

I note that in the FS it was envisaged it wouldn't be until year 5 that 35ktpa was reached, and now: "So we could go from, starting work to being a 50,000 tonne a year lithium producer within 4 years". :-)

Anyone got thoughts on whether it would be beneficial to simultaneously mine from the north end of the pit (50% BCN, 50% Ganfeng) (Figure 15.4.1: Mineral Reserve Pit https://www.bacanoralithium.com/pdfs/Bacanora-FS-Technical-Report-25-01-2018.pdf) and from the south end of the pit (35% BCN, 35% Ganfeng, 30% KDNC), and meet in the middle? Got examples of where this is done in mining operations of a similar nature?

A reminder:

"Bacanora Lithium | China Mining Club | EN/??" (21 Oct 2020)
https://youtu.be/FNjRt-HKa2s?t=928
===[
We can scale it up, we've looked at production profiles from 17,500 to 35,000 to 50,000 tonnes a year of lithium [carbonate] equivalent, and each construction phase is about 18 months. So we could go from, starting work to being a 50,000 tonne a year lithium producer within 4 years. And that is the plan. I mean obviously we're looking at the markets and how quickly they're growing, but, yes, Ganfeng has invested in us because they see us being one of the largest producers in the world within the next 5 years supplying a high grade product that will go straight to the Asian market.
]===

From looking at the resource area in the Feasibility Study it looks likely to me that the majority of the additional ore in any @50ktpa (or greater!) 19 year (likely greater!) plan over that in the current 19 year life of mine plan @35ktpa will be from the joint venture areas currently owned 35% BCN, 35% Ganfeng, 30% KDNC.

Page 130: https://www.bacanoralithium.com/pdfs/Bacanora-FS-Technical-Report-25-01-2018.pdf

I'm curious to see how this will play out. Two's company, three's a crowd? What will be the going rate for the JV once Ganfeng (finally!) release their engineering studies, and mining plans become solidified? $1m per 1%? Seems low. $10m per 1%? Seems high pre-production!

Whatever the value, with the demand for lithium going exponential I suspect the Sonora JV's could be like gold (lithium!) dust in years (months?) to come!

Ob.

At least doubling if the iron ore prices at the time were those used in the RNS's and presentations ($61/t and $80/t). When we take up our 20%, and given enough publicity and understanding by the market I can see us going over £100m mcap if it happens with iron ore prices over double these as they are today, and almost certainly when we take up 27%.

http://www.custeel.com/en/csi.jsp
===[
Date Seaborne index 62% Fe fines Seaborne index 65% Fe fines Seaborne index 65% Fe pellets premium
2021-01-08 171.50 191.20 45.70
2021-01-07 170.70 188.00 45.70
2021-01-06 168.50 185.80 44.00
2021-01-05 167.00 185.00 44.00
2021-01-04 164.40 181.00 44.00
2020-12-31 159.20 173.50 44.00
]===

Futures:
https://www.cmegroup.com/trading/metals/ferrous/iron-ore-62pct-fe-cfr-china-tsi-swap-futures_quotes_globex.html
===[
DEC 2021 135.98
DEC 2022 103.50
DEC 2023 86.72
]===

And the downside if Amapa falls through??? The KDNC gamble at the moment really is a no-brainer IMHO. But DYOR. And follow it! IMHO. DYOR. HNY! ;-)

Ob.

Flying now.

Spot:
http://www.custeel.com/en/csi.jsp
===[
Date Seaborne index 62% Fe fines Seaborne index 65% Fe fines Seaborne index 65% Fe pellets premium
2020-12-21 176.50 187.60 29.30
2020-12-18 163.80 174.10 29.30
2020-12-17 158.60 168.90 29.30
2020-12-16 156.60 166.90 21.30
2020-12-15 155.30 165.40 21.30
2020-12-14 153.60 164.10 21.30
2020-12-11 159.80 170.10 21.30
2020-12-10 157.60 168.90 21.30
2020-12-09 150.40 161.90 31.60
]===

Futures:
https://www.cmegroup.com/trading/metals/ferrous/iron-ore-62pct-fe-cfr-china-tsi-swap-futures_quotes_globex.html
===[
DEC 2021 143.78
DEC 2022 115.72
DEC 2023 100.81
]===

Keep an eye on the iron ore market. Huge jumps upwards last night. 6% or so.

"Bacanora Lithium | China Mining Club | EN/??" (21 Oct 2020)
https://youtu.be/FNjRt-HKa2s?t=928
===[
We can scale it up, we've looked at production profiles from 17,500 to 35,000 to 50,000 tonnes a year of lithium [carbonate] equivalent, and each construction phase is about 18 months. So we could go from, starting work to being a 50,000 tonne a year lithium producer within 4 years. And that is the plan. I mean obviously we're looking at the markets and how quickly they're growing. Yes, Ganfeng has invested in us because they see us being one of the largest producers in the world within the next 5 years supplying a high grade product that will go straight to the Asian market.
]===

EMH will be getting drill results before Christmas...

As suspected, sounds very much to me that they are PLANNING on going to at least 50ktpa :-)))

"Bacanora Lithium | China Mining Club | EN/??" (21 Oct 2020)
https://youtu.be/FNjRt-HKa2s?t=928
===[
We can scale it up, we've looked at production profiles from 17,500 to 35,000 to 50,000 tonnes a year of lithium [carbonate] equivalent, and each construction phase is about 18 months. So we could go from, starting work to being a 50,000 tonne a year lithium producer within 4 years. And that is the plan. I mean obviously we're looking at the markets and how quickly they're growing. Yes, Ganfeng has invested in us because they see us being one of the largest producers in the world within the next 5 years supplying a high grade product that will go straight to the Asian market.
]===

Presumably the vast majority of the new ore beyond that in the current 19 year life of mine plan @35ktpa is from the JV area currently owned 30% KDNC, 35% BCN, 35% Ganfeng?

Thanks to @r7632 on the BCN board. ;-)

Ob.

Great spot @r7632. In relation to growing to 50ktpa (and beyond) he says "And that is the plan". Presumably the vast majority of the new ore beyond that in the current 19 year life of mine plan @35ktpa is from the JV area currently owned 30% KDNC, 35% BCN, 35% Ganfeng?

Both spot and futures are still VERY favourable for Amapa, futures increasingly so since the EBITDA was estimated to be $136m per year off Fe 62% of $61/t when prices are over double that to April 2022.

"Approval of Judicial Restructuring Plan Paves the way for the Restart of the Amapá Iron Ore Project." (30 August 2019)
http://irservices.netbuilder.com/ir/cadence/newsArticle.php?ST=REM&id=2887382

Keeping those fingers tightly crossed as I'm sure most on here are!

Spot:
http://www.custeel.com/en/csi.jsp
===[
Date Seaborne index 62% Fe fines Seaborne index 65% Fe fines Seaborne index 65% Fe pellets premium
2020-12-16 156.60 166.90 21.30
2020-12-15 155.30 165.40 21.30
2020-12-14 153.60 164.10 21.30
2020-12-11 159.80 170.10 21.30
2020-12-10 157.60 168.90 21.30
2020-12-09 150.40 161.90 31.60
2020-12-08 149.20 160.60 31.60
2020-12-07 147.70 160.10 31.60
]===

Futures:
https://www.cmegroup.com/trading/metals/ferrous/iron-ore-62pct-fe-cfr-china-tsi-swap-futures_quotes_globex.html
===[
DEC 2021 125.44
DEC 2022 112.88
DEC 2023 102.83
]===

Notice how they are increasing across the board now. Compare with the 7th, indicating higher prices are starting to be expected medium term. :-)))

===[
DEC 2021 112.78
DEC 2022 98.93
DEC 2023 90.29
]===

Indeed @Barksy. We own 23,259,751 EMH shares and @46p these are worth £10.7m or 7.2p, meaning if the EMH share price doubles ours should go up by 50% to over 21p a share. But possibly more as I've previously mentioned a valuable EMH should mean more value for existing KDNC shareholders if (when Ob, when. Think positively!) we get the opportunity to increase our Amapa holding to 49%, once we've got to 27%, from 20%, from 0%...

LoL @EyeGuy. Not sure why you are being so conservative with your in-ground assessment! ;-)

"Updated Mineral Resource Estimate for the Amapa Iron Ore Project" (02 November 2020)
http://irservices.netbuilder.com/ir/cadence/newsArticle.php?ST=REM&id=311428202001057764
===[
On a global basis, and not restricted to a pit shell or cut-off grade, BGS has modelled an additional 800 Mt of Indicated and Inferred Semi Compact and Compact Itabirite that lie predominantly below the existing Itabirite resource. This provides a significant opportunity should future metallurgical and optimisation test work show the material can be upgraded economically to a saleable concentrate.
]===

Of course I jest, it's not part of the MRE, but I'll not be forgetting about this monster potential if Amapa comes good! :-))) As neither will those looking to take our share of Amapa off our hands for $$$m I'm sure. ;-)

Ob

Exactly @mr.james. If we pull off Amapa in the current iron ore market (prices still rising!) my bet (and I have put serious money where my mouth is) is that this share re-rates fantastically - possibly over £100m mcap even before 27% now. I guess the market just doesn't believe we can close the deal. It may be right, but if it is wrong...

I've always like this line: " In a second step, according to Sodré, it could be expanded to 11 million tons. "

There are many court cases open @mmm. My understanding is that the discussions with the banks is something else which when complete will then be ratified in court. At that point we will opt to take our 20% (we could take it now if we want, but that would be foolish as it would release the $2.5m from escrow prematurely), but no doubt there will be challenges still open in the courts - in particular the successful challenge over what interest rate should be used to inflate historical debts over time. All IMHO and possibly incorrect as it's complicated!

Indeed @mmm, and interesting read which was discussed on here at the time and the conclusions subsequently validated when we got hold of the JRP. Most notably:

===[
The lawyer added that he will have two more installments that Cadence will pay for the project, one of R $ 27.5 million and the other of US $ 85 million, resources that will be totally reversed to put the operation on its feet.
]===

It's the JV, not Cadence. Also it's US $27.5m cash and US $85m debt. Minimum. DIP financing B and C respectively. This is what has led some to conclude it will be at least $24m to take us from 27% to 49%. With the $3.5m difference taking us from 20% to 27%.

I'm not quite sure what you mean @Cause. Simply put a doubling of spot and futures (equally for each future point in time) would expect to double sale prices. LoL. I suppose you can't be asking that as it's too obvious!

Are you asking what futures are?

https://www.investopedia.com/terms/f/futurescontract.asp

Spot:
http://www.custeel.com/en/csi.jsp
===[
Date Seaborne index 62% Fe fines Seaborne index 65% Fe fines Seaborne index 65% Fe pellets premium
2020-12-10 157.60 168.90 21.30
2020-12-09 150.40 161.90 31.60
2020-12-08 149.20 160.60 31.60
2020-12-07 147.70 160.10 31.60
2020-12-04 145.40 156.60 31.60
2020-12-03 137.90 149.80 31.60
2020-12-02 136.60 148.20 31.60
2020-12-01 132.80 144.50 28.10
]===