Member Info for observer842

Congratulations to the BoD on this significant milestone. However, the final most financially important negotiation of stage 1 has yet to come IMHO. And it's one we have to be prepared to walk away from. The conclusion may perhaps come as early as this week as I suspect we weren't going to announce news had it not been spotted on the weekend (why not announce it on Wednesday, Thursday or Friday?). Having said that it feels like the odds are good we'll own 20% of the Amapa project before the year is out, but I'm not counting any chickens just yet. I am counting how many things I've got crossed though! :-)

I doubt we'll raise the $3.5m to take us to 27% until after stage 2 of the preconditions are met (and hopefully announced to the market!) which is now scheduled for some time in Q1 according to the interview, but I'm not ruling out a smaller fund raising before then if we don't decide to (part) sell an asset. And besides it's possible that Yangibanana's time may have come to tide us over and negate the $3.5m? We'll get whatever HAS are willing to pay for it today. We know it's getting more valuable as the project de-risks, so perhaps now is the optimal time for them to make an offer we can't refuse? Personally I think not.

When (if!) we get that 20% I'll crank up the old hand-me-down calculator to show how it enables a share price of £5-10 to be on the cards once again after the ahem, fumble of the last few years, enabled by a half decent revenue stream to KDNC in the early 20's from this project - assuming we can finally get the snowball rolling before it melts on take off this time round! Mixed metaphor anyone? :-)

Good luck all.

Ob.

Fair enough @Bannor. I'm only trying to be helpful. @Frankie persuaded me to share and help fellow suffers, I mean long term holders, even though it's not actually in my personal interests to do so at this moment in time. And it seems that doing so has come up trumps from various angles this weekend. Hopefully the share price doesn't react until I get a chance to change my sex to non - but if it does, c'est la vie eh?

LoL @Bannor! I don't blame you. For the benefit of others (I know you won't believe anything until you see it in an RNS or money in the bank) I'll spell it out using more words.

2020 $30m to the project from iron ore stock piles (this is more like $35m at today's prices)
2021 $30m to the project from iron ore stock piles (this is more like $35m at today's prices)
2021 $138.30m of (mostly) debt raised for the remainder of the CapEx. This will likely be paid back over the life of the project, something like $15-20m a year?

===[
Rehabilitation to be completed by the end of 2021 with new production in 2022. Full production by 2024 of 5.3 million tonnes ("Mt") of iron ore per annum.
]===

2022. Revenue from new production - minus CapEx repayments. = potential free cash flow
2023. Revenue from ramping up of production - minus CapEx repayments = potential free cash flow

===[
At full production and using US$61 per tonne of 62% Fe Amapá is forecast to have:
- an average net revenue after shipping of US$266 million per annum,
- and an average EBITDA of US$136 million per annum.
]===

That EBITDA is very conservative based on today's prices which are around 50% higher than those used in that calculation.

===[
The JRP schedule contemplates the majority of the historic liabilities will be paid from free cash flow in years 5 to year 17 of operations, which represents a discounted NPV10 debt value of approximately US$106 million. The JRP also caps the trade creditor liabilities.
]===

2024. $136m - minus CapEx repayments, and minus around $40m in historic debt repayments.

Estimate of historic debt repayments is my own take. If an average is used the $40m is less.

So depending on Fe prices and the ramp up to full production we might see cash flow to KDNC in 2022 and probably by 2024. But as I said, it might be beneficial overall at that point to reinvest in the project to double the 5.3m ktpa. Of course there might be no harm in taking some cash out then if this is more beneficial to us than reinvesting. Perhaps we'll use it to take us to 49%?

Ob.

Thanks @degsie. Fingers crossed! :-)

@Bannor. It's worth running through the numbers if you believe it's 7 years before the project has free cash flow. By my reckoning it could be 2023/4 depending on the CapEx debt repayment schedule, and Fe prices at the time. We'll be wanting to reinvest it though to increase the ktpa if this is an option. But even if it is as far away as 7 years, I'm pretty sure our share price will rerate significantly on the way to full production making equity raises less and less painful. Are you able to follow my calculations?

It's for a capital raise. Hopefully one (large!) step closer to being fully funded. :-)

https://www.asx.com.au/asxpdf/20191209/pdf/44cdlc2q5265vl.pdf

Official source of the news release at:

"Government signs agreement to resume mining activities in Amapá" (Tuesday, December 03, 2019)
https://www.portal.ap.gov.br/noticia/0312/governo-assina-acordo-para-retomada-das-atividades-de-mineracao-no-amapa
===[
“We have already deposited $ 2.5 million in the judicial reorganization process. As we have the vision of the most sensitive points here in the state, we agreed to enter only if it was possible to fully pay the skilled workers in recovery. There were some conditions to be released. One of them was this Term of Agreement. Now we have to close the negotiation with the bank for the release of these values, ”he said.
]===

I wonder just how close we are to having the banking negotiation signed off? Personally I'm a little disappointed in @Kiran that the above news wasn't announced last week. Hopefully it suggests completion of stage 1 taking our holding to 20% is imminent! :-)

Here's my latest personal NPV calculation of the project. It's still based on the conservative values of $60m profit from the stock piles (it's likely closer to $70m at today's prices) and yearly EBITDA $136m at full production (based on 62% Fe price of US$61 when it is now around $90!), and a 10% discount rate. I'm still using an approximate repayment schedule which results in NPV0 = $225m and NPV10 = $105.73. More details around 12 Sep 2019.

Repayment schedule:
"Net Present Value (NPV)"
https://www.calculatorsoup.com/calculators/financial/net-present-value-calculator.php
===[
Interest rate 10%
Compounding 1
Cash Flows at End
Number of lines 6
0 1 @0
1 4 @0
2 2 @$40m
3 2 @$30m
4 2 @$20m
5 2 @$10m
6 5 @$5m
]===

Incorporating the repayment schedule into the NPV calculation:
"Net Present Value (NPV)"
https://www.calculatorsoup.com/calculators/financial/net-present-value-calculator.php
===[
Interest rate 10%
Compounding 1
Cash Flows at End
Number of lines 9
0 1 -6 (Initial investment by KDNC to unlock the project)
1 1 30.00 (Shipped ore in 2020)
2 1 -138.30 (CapEx of $168.30m minus shipped ore $30m in 2021)
3 1 50.00 (Estimate of first production in 2022)
4 1 86.00 (Estimate of ramping up production in 2023 - total of this year and last year estimated to be equivalent to a full year)
5 2 96 ( 2 years of full production in 2024 and 2025 of EBITDA $136m - $40m debt repayment)
6 2 106
7 2 116
8 2 126
9 5 131
NPV = $557.38m
]===

Varying the discount rate:

===[
NPV12 = $463.60m
NPP10 = $557.38m (for reference)
NPV8 = $674.61m
NPV5 = $910.64m
NPV0 = $1,564.70m (for reference)
NPV72.6% = $0 (The pretax IRR based on this method)
]===

@27% ownership we could be looking at an NPV10 attributable to KDNC of $150m. After tax call it $100m. All quite conservative assumptions, other than the discount for risk - which is quite subjective and why our share price today has yet to show any of this value. Did I mention we also have an option to take that 27% to 49% ownership? ;-)

All my own calculations. They could contain both logic errors or typos. Please check!

Ob.

This is great news. Thanks for sharing @CHRH!

@Bannor as well as what @tomcat wrote the reinvestment also corresponds to this from the last RNS related to Amapa: "It is estimated that these stockpiles have a net realisable value of approximately US$ 60 million, which will be reinvested in the restart of the Amapá Project.". It's no surprise to me and is why I've been following the Fe price so carefully recently, that $60m is more likely $70m at today's prices.

Profit from revenue flowing from sale of the stockpiles into the CapEx requirements should mean that the rest of the CapEx can be raised largely as debt rather than equity. There will be some dilution for KDNC for sure, but the higher the Fe price the less the dilution. The rail road was the one piece of the jigsaw that I had most concerns over as it was the piece I believed we had least control over the outcome.

@degsie, remind us again what the WHI discounted valuation for KDNC was based on us owning 27% of the project? ;-)

Ob.

Both on the desktop website and mobile website there is a symbol that looks like a clock with a turn back time circular anticlockwise arrow on it below the traditional filter symbol (a funnel).

Ob.

Have you discovered the "playback" option yet? It's a little annoying but I'm sure you'll have fun all the same :-)

Lady Demet: https://www.myshiptracking.com/?mmsi=538006903

I think I'm going to downgrade my barge capacity estimate to around 2kt for the large barge and 1kt for the small barge based on this:

"Different Types of Barges Used in the Shipping World" (October 2, 2019)
https://www.marineinsight.com/types-of-ships/different-types-of-barges-used-in-the-shipping-world/
===[
BARGE with size 180 FEET:
This barge is least preferred as it can transport approximately up to 2000 Metric Tons of cargo. It has size specifications as follows: Overall length of the sideboard is 180ft (52.67m), Breadth of 50ft (15.24m) and Width of Ramp Door is 5.00 m. It has the dead weight of 1500 tons with 5tons/square metre deck strength

BARGE with size 230 FEET:
These are generally called small-medium size barges and can carry up to 4000 Metric tons of cargo. It has size specifications as follows: Overall length of the sideboard is 230ft (70m), Deck Load of 8.0 tons / Square metre (uniformly distributed load) and the forward Sideboard of 2.44 m 8 feet.
]===

which would mean around 20-40 barges to fill a 40kt Handymax.

Cheers @tomcat. I think the wikipedia image is of what looks like an industrial port to the right of the small tourist port to the right of us.

I'm not sure about the other one. Any thoughts?

I've just noticed that the size of the barge at the port in the google maps image is much larger than the one in the bing maps image. Do I win Sunday's spot the difference? LoL.

Google: 60m by 15m
Bing: 45m by 10m

I think I might be a bit out with my barge capacity estimates! Perhaps by as much as a factor of 10 too large. Anyone else got any estimates before I have another stab?

The point being the interim solution was in place in 2013, and then stopped in 2014. So it should be a simple matter of starting it up again. Should :-)

Cheers @tomcat - I knew I'd seen the use of the word "barge" somewhere. Here's the full quote from the original 21st May release:

"Cadence Minerals PLC - Heads of Terms - Iron Ore Mine, Amapá" (21st May 2019)
https://www.lse.co.uk/rns/KDNC/cadence-minerals-plc-heads-of-terms-iron-ore-mine-amapa-b7c3tm3d9s7u1nj.html
===[
In March 2013, before the acquisition was completed the port facility suffered a ground failure which interrupted production and mining subsequently ceased in March 2014. Anglo American completed the sale in November 2013[7]. During 2014, reconstruction work commenced at the port with some iron ore concentrate product being shipped during Dec 2013 and into 2014, via an interim barging solution The Amapá Project borrowed US$135 million senior debt from a banking group led by Intesa São Paulo and rebuilt 70% of the port.
]===

Actually it's stated in the RNS. LoL. From the 30th August one: "The approval of the JRP was a key step to Cadence's investment into the Amapá iron ore project. The project was formerly owned by Anglo American plc ("Anglo American") and Cliffs Natural Resources ("Cliffs") and consist of a large-scale iron ore mine, beneficiation plant, railway and private port ("Amapá Project"). Before its sale in 2012 Anglo American valued its 70% stake at US $462m in its 2012 Annual Report (100% US $600m)"

And in terms of ownership see the 7th June one: "Cadence Minerals (AIM/NEX: KDNC; OTC: KDNCY) is pleased to announce that further to its announcement on the 21 May 2019 it has entered into a binding investment agreement ("the Agreement") with Indo Sino Pte. Ltd. ("Indo Sino") to invest in and acquire up to a 27% interest in the former Anglo American plc ("Anglo American") and Cliffs Natural Resources ("Cliffs") Amapá iron ore mine, beneficiation plant, railway and private port ("Amapá Project") owned by DEV Mineração S.A. ("Amapá")."

@Bannor. I'll have to dig up the evidence but my understanding from what I have read is the port attached to the project's yard was privately built to ship the iron ore and is privately owned by the project. The state owned port is to the right of that. It was only the private port which suffered the port collapse.