Member Info for observer842

The way I see it based on @tomcat's measure of value:

"Completion of Strategic Investment by Ganfeng" (14 October 2019)
https://www.lse.co.uk/rns/BCN/completion-of-strategic-investment-by-ganfeng-beh16g5s9j9y3fv.html
===[
Completion of the last of the relevant approvals has now been obtained and Bacanora has now received the £21,963,740 of funds from Ganfeng in exchange for a 29.99% equity interest in Bacanora Lithium PLC and a 22.5% JV investment directly in the Sonora Lithium Project ('Sonora')
]===

"SONORA LITHIUM"
https://www.bacanoralithium.com/projects/sonora-lithium/
===[
Sonora Lithium ltd (“SLL”) is the operational holding company for the Sonora Lithium Project and owns 100% of the La Ventana concession. The La Ventana concession accounts for 88% of the mined ore feed in the Sonora Feasibility Study which covers the initial 19 years of the project mine life. SLL is owned 77.5% by Bacanora and 22.5% by Ganfeng Lithium Ltd. SLL also owns 70% of the El Sauz and Fleur concessions, which are held by Mexilit S.A. de C.V. ('Mexilit’).
...
Table 4: Mineral Reserves: (Cut-off grade of 1,500 ppm Li)
Total LCE 4,515
Total LCE attributable to Bacanora 3,676
[Total LCE attributable to KDNC 4,515 - 3,676 = 839]
]===

How much Lithium reserves did the £21,963,740 buy?

It bought 22.5% of 3,676kt = 827.1kt

leaving 3,676 - 827.1 = 2,848.9kt

and it bought 30% of 2,848.9kt = 854.7kt

Adding the two together: 827.1kt + 854.7kt = 1,681.8kt

Therefore by this measure our 839kt of reserves are worth:

£21,963,740 * (839kt / 1,681.8kt) = £10.96m

Same calculation based on measured and indicated resources:

===[
Table 2: Measured and Indicated Mineral Resources
Total LCE 5,038
Total LCE attributable to Bacanora 4,119
[Total LCE attributable to KDNC 5,038 - 4,119 = 919]
]===

How much Lithium measured and indicated resources did the £21,963,740 buy?

It bought 22.5% of 4,119kt = 926.8kt

leaving 4,119 - 926.8 = 3,192.2kt

and it bought 30% of 3,192.2kt = 957.7kt

Adding the two together: 926.8kt + 957.7kt = 1,884.5kt

Therefore by this measure our 919kt is worth:

£21,963,740 * (919kt / 1,884.5kt) = £10.71m

Corrections appreciated!

Replace "£3m facility" with "$3m facility"

@dougal My understanding from the accounts is that YA participated in the £845k CLN's by converting £100k of the existing £199k at 2017 year end which had been drawn down from the £3m facility in previous years. Presumably they and possibly us, saw this as a better option than the alternative of having to (in theory) pay back this amount with interest.

In terms of the statement in the accounts: "The Directors do not expect to use the remaining facility in the foreseeable future". My take on the foreseeable future in this sense is up to but not including any game changing progress/news.

I don't know if we'll use the facility to take us to production, or whether something more attractive will come along. Perhaps a JV with our European collaborators? Perhaps something related to Oct? Who knows? We can but speculate, but even that gets tedious without new news to unpick... Come on JG - throw us a bone! ;-)

Ob.

The thing about unloved AIM shares (and I've been in a fair few!) is they tend to be massively discounted to what would on any other market be a fair price. When the share eventually becomes loved again (and there is no guarantee this or any unloved share ever will!), the increase in share price has to far outweigh the lost opportunity cost of those who held rather than chasing elsewhere over that period before their de-risking sells begin to balance the buys from those wanting in post a re-rate.

A 6 months progress report wouldn't go amiss, after all this was said nearly 6 months ago: "The Company will provide a further update in due course."

Key points:

===[
The Drawdown facility relates to the facility entered into during the prior year with YA Global Master SPV Limited. The facility is unsecured and carries an implied interest rate of 10 per cent per annum, repayable in 12 equal monthly instalments.
...
The terms of the issue of warrants are governed by the Debt Facility agreement, which specify that for every tranche drawn down, the Company is required to issue 25% of the value of the drawdown based on the interbank rate at the nearest possible date and using the average Volume Weighted Average Price (“VWAP”) of the Company for the five trading days immediately prior the date of the agreement.
...
Based on those terms, were the Company to drawdown the remaining $2,600,000...
]===

Oh. I am talking silly. Ahem. I should read more closely... LoL.

LoL! Note 1 of the annual accounts. But I know you know that :-)

So you'll know we have $2,600,000 of equity funding available from YA (@25% discount to 5 day VWAP) should we choose and they allow us to use the facility. :-)

I've always found it hard to wrap my head round the fact the CLN's are interest free and conversion is at the full discretion of the Company. There must be some who firmly believe in our future or had their arms strongly twisted to accept those terms!

Indeed conversion of the CLN's would be a good start @dougal. But as we've discussed before it's in the interests of the note holders to leave the conversion to the last possible moment whilst the share is below 0.0933p (higher of either 0.07p or a discount of 25 per cent. to the previous trading day's closing market share price) as the attached warrants (at the conversion price of the CLN) expire after 12 months.

I think you misunderstood me @dougal - rumour or unofficial reports of progress can really shift an AIM share price (look to the Zimbabwean miners for recent evidence of this) meaning the market cap when it comes to funding, by whatever means, could be multiples of what it is today. This is good for shareholders holding today or those buying in now as it means that should the funding be equity based the dilution is less.

I agree that no-one in their right mind is going to "fund" our products to production without hard demonstrable evidence. Although some have more money than sense! ;-) As I've stated before, I think the funding is likely to be from a direction much closer to home than some may realise.

@dougal. I'm pretty certain the market cap will be many multiples of today's should the company be able to convince us all (me included!) it's made good demonstrable progress with the various products we are pursuing towards commercialisation. Just one good believable RNS is all it will take... Better still, rumour of a deal signed - AIM loves a good rumour more than it loves good news. Buy the rumour, sell the news - unless it's blow your socks off good news of course! LoL ;-)

@dougal It's almost 6 months since the last product update. A lot can be achieved in 6 months. But since the BoD has kept us in the dark it's probably wisest to assume nothing has been achieved since then - certainly the market seems to be taking this view. But perhaps that's exactly what they want us to think since as we've previously discussed a subdued share price likely benefits them if they and the CLN holders convert *before* the news is released more widely and the share (hopefully!) soars. Come on John Gunn. Do we really have to wait until the end of December to hear a dicky bird from you?

Thanks @tomcat. My understanding is that the iron ore can start shipping after the first set of preconditions have been met at which time our $2.5m is released from escrow and we own 20% of the project. Once the second set of preconditions have been met we are required to provide $3.5m to take us to 27% of the project. The BoD could raise this $3.5m (by debt, by equity, or by a combination) in 3 time ranges - the first of which could be as soon as tomorrow:

1. Before the first set of prerequisites are met.
2. After the first set of prerequisites are met (when we own 20%) but before the second set of prerequisites are met.
3. After the second set of prerequisites are met.

I believe it's in the best interests of existing shareholders that they do 3, though they may have very good reason (which I will no doubt lap up!) do 2. I really hope they don't do 1... It's possible, though I think unlikely, that we might get invited to join in any equity element of the raise.

Ob.

Take 2:

Ballpark figures might be something like this (off of the top of my head!)

CapEx to raise after reinvestment of iron ore stock piles around $100m. Let's say 30:70 equity to debt. This means if we wanted to keep our 27% stake we'd be looking to contribute $8.1m and Sino would be looking to contribute $21.9m. Let's say they raise by selling up to 23% of their shares and we use our first right of refusal to take our holding to 49.9% (we might get less % for $21.9m - or we might get the full 49.9% for less than $21.9m, it's going to depend on lots of factors!)

So from a further investment of $8.1m + $21.9m = $30m we get about half of a (fully funded) project with an NPV in the high 100 millions, potentially a billion with a good wind.

But I get ahead of myself. It could all fall through long before then...

Just idle speculation. DYOR. All other speculation welcome.

Ob.

Thanks @degsie. In hindsight the estimate I just made of $6.9m to take us from 27% to 49.9% seems like nonsense. Must do better off of the top of my head - I'll have another go in a minute...

Ballpark figures might be something like this (off of the top of my head!)

CapEx to raise after reinvestment of iron ore stock piles around $100m. Let's say 30:70 equity to debt. This means if we wanted to keep our 27% stake we'd be looking to contribute $8.1m and (depending exactly on the terms of the CapEx equity raise) a further $6.9m would take us to 49.9% (though I suspect it'll cost us more)

So from a further investment of 8.1 + 6.9 = $15m we get about half of a (fully funded) project with an NPV in the high 100 millions, potentially a billion with a good wind.

But I get ahead of myself. It could all fall through long before then...

Just idle speculation. DYOR. All other speculation welcome.

Ob.

Thanks for the clarification @Ivybush. Personally I'd be surprised if we were included in the $3.5m raise (part of which might be debt according to your recollection of what was said at the AGM). It's the larger raise we might be expecting in 2020 when our share price is (hopefully) higher than today's to both fund our share of the CapEx and depending on various other factors take our holding from 27% to 49%. Page 15 of the July corporate presentation.

Indeed @Ivybush, the order is spelt out in the RNS:

"Cadence Minerals PLC - Approval of Judicial Restructuring Plan - Amapa" (30 August 2019)
https://www.lse.co.uk/rns/KDNC/cadence-minerals-plc-approval-of-judicial-restructuring-plan-amapa-omqcte36gtcervm.html
===[
Cadence Amapá Project stake

Once the preconditions relating to the railway licenses and bank creditor arrangements have been met, the US$2.5 million investment placed in the judicial trust account will be released, and Cadence will own 20% of the Amapá iron ore project. Cadence's next stage of investment will be a further investment of US$3.5 million on the grant of all operational and environmental licenses for the Amapá Project, at which point Cadence will own 27%. Cadence also has first right of refusal to increase its stake to 49% in the Amapá Project.
]===

I was just trying to unpick if the BoD had given any indication at which point we might raise the $3.5m. Some think imminently. I'm now hopeful it will be after *all* preconditions have been met. And that we get opportunity to join in (which @Bannor has always been for if I recall correctly).

Just my thoughts, but I'm of the opinion that the share price is currently suppressed either because the market is waiting for confirmation of the preconditions being met or/and it expects an equity raise before the first of these have been met.

If one person thinks it (at least @Bannor) then you can bet your bottom dollar lots of others are thinking it, and acting on it.

They may be right.

Ob.

Not sure why we'd want to keep unfermented grape juice. Ahem. schtum