RE: Iron Ore up28 Dec 2019 13:18
The iron ore price is indeed quite interesting at the moment @MyLastQuid. A summary of my 14th December ballpark estimates of what the value of Amapa to KDNC might be based on a 27% holding (we also have an option to take us to 49%) and 10x multipliers of yearly after tax profit flow.
£100m using a conservative value of $47/t 62% Fe Fines - and appropriate premiums for what we plan on shipping.
£500m using an optimistic value of $93/t 62% Fe Fines - and appropriate premiums for what we plan on shipping.
My sextuple recently changed to over septuple on the back of the Reinstatement of Railway Concessions at Amapa and these eye watering estimates. Clearly there is still risk involved before we achieve 20% of the project and the iron ore at the port can start to ship, but in my very humble opinion that risk, and later risk around rail and mine rehabilitation, is far outweighed by the magnitude of the potential rewards.
In terms of why the share price is falling of late, I tend to agree with @Ivybush that the market is doing its AIM thing and is worrying that a capital raise will come before Amapa news taking us to 20% stirs the share price into action as others come on board realising we are massively undervalued - the news might even go mainstream. And it might be right, we have circa £200k of the @12p convertible loan notes to pay off on the first of every month from Wednesday: "Cadence will initially only pay the interest on the Convertible Loan Note until the 1 January 2020, after which 50% of the outstanding balance will be paid back over 8 months (1 August 2020). The outstanding 50% will be paid back on 1 September 2020.".
The current balance is from the 15 July 2019 RNS: "After this draw down the outstanding balance on the Convertible Loan Note is US$3.98 million"
Personally I'm willing to gamble we'll get to 20% before February's payment is due, finding January's £200k down the back of the sofa rather than via an equity raise, so I'll likely continue to top up at prices that seems like good value to me. Additionally it's possible we'll get new year EMH, MMS, Yangibana or Sonora news boosting the share price from here and raise off the back of that. Other options are available such as renegotiation of CLN terms or increased debt, which might be acceptable from here if on similar terms (convertible @12p) and the BoD are particularly confident it won't drown us. Additionally raising short term funds through debt rather than through equity might be attractive from a tax point of view should we need to offset it against profitable sale of an asset or two. :-)
Ob.
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