Member Info for observer842

The more I research Amapa, the more I think we need to get the word out. But if it's possible (very likely according to @Ivybush) existing shareholders will be offered opportunity to share in any equity raise, perhaps we should all keep stum? LoL. Anyone seen my pipe? Oh, it's where @Bannor stuck it last night.

I heard it was 9 hours. The rotten liar!

Approval and Homologation of the Judicial Reorganization Plan of Zamin Amapá Mineração S.A. (Dev Mineração S.A. – under Judicial Reorganization)" (5 de September, 2019)
https://dsmlaw.com.br/en/2019/09/05/approval-and-homologation-of-the-judicial-reorganization-plan-of-zamin-amapa-mineracao-s-a-dev-mineracao-s-a-under-judicial-reorganization/
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After a long meeting, which lasted more than 9 hours, more than 90% of the creditors approved the plan.
]===

I suppose 10 hours is more than 9 hours. LoL! ;-)

Thanks @Ivybush, that's very helpful. Can you clarify what you have written by making the distinction between 1st set of prerequisites and the second set? Looking at page 10 of the latest corporate presentation might help jog your memory?

https://www.cadenceminerals.com/wp-content/uploads/2019/07/Corporate-Presentation-KDNC-June-PPT-PUBLIC.pdf

Ob.

And if I'm reading this right, in theory we don't need to raise the $3.5m until *after* we start shipping the iron ore. Did anyone pick this up at the AGM?

"Interim results for the period ended 30 June 2019" (27th Sep 2019)
https://www.lse.co.uk/rns/KDNC/interim-results-for-the-period-ended-30-june-2019-tuxhatxf9w5wq4y.html
===[
Our investment is conditional on several key preconditions the first is the approval of the judicial restructuring plan ("JRP"), which was completed at the end of August. Once the remaining pre-conditions relating to the reinstatement of a concession on 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. This will enable the start of the shipping of the iron stockpile.
]===

You are of course right @Bannor - the BoD need to redeem themselves in the eyes of many!

Anyone who attended the AGM know if this question got asked?

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Q: Do we have to escrow the $3.5m before all prerequisites are met? If not, do you think it will be more beneficial to existing shareholders if this is raised before or after all prerequisites have been met and announced to the market? Do the BoD plan on participating? What about extending the opportunity to existing ordinary shareholders?
]===

I'm currently of the opinion, and page 10 of the latest corporate presentation seems to back this up, that the $3.5m does not require escrowing and is only payable *after* all prerequisites are met. Which means there are in fact 3 scenarios:

1. Raise $3.5m before the first set of prerequisites are met.
2. Raise $3.5m after the first set of prerequisites are met (when we own 20%) but before the second set of prerequisites are met.
3. Raise $3.5m after the second set of prerequisites are met.

In terms of what is best for existing shareholders I believe it's 3, 2, 1, with 3 being the best as the share price *should* rise as the project de-risks. My understanding is that @Bannor believes they'll do 1 and soon, as it'll benefit anyone (likely them too) joining in the placing which we (collectively!) voted to allow them to do without us joining in. I thought (hoped!) not 1, but for some reason (only human) I didn't realise there were 2 other possibilities. Did anyone else pick up on this?

I'll be disappointed if they raise at 1. Delighted if at 3, and somewhere in between if at 2.

Come on BoD, time to redeem your integrity in the eyes of long suffering holders!

Ob.

I hope you take this lightheartedly @Bannor, but it does amuse me every time you bring up that old chestnut. Either @Kiran knew, or he didn't know. If he did know, he'd be a fool to admit it because officially he shouldn't know. And if he didn't know, then I, like presumably you, would be very surprised if they managed to wall such matters without him at least catching some wind of what was occurring on the other side. But maybe he really is that squeaky clean and arranged to be fully out of the loop on all such matters related to BCN whilst he was on the BCN BoD? The records probably say he was. But was he fully? I doubt it. Assuming he's only human. LoL :-)

By the way, I do believe there is a good chance you are right and I am wrong. If they raise before we own 20% of Amapa then, worryingly for me that chance increases.

Thanks for your honest and frank post @Bannor. It's interesting to get insight into what others believe. My belief is that the consolidation wasn't in order to raise the $3.5m, I don't think consolidation will help much with that. However, I think it will help us look much more attractive when we are looking to raise significant funds to take us from 27% to 49% when looking to bring an institutional on board, should everything go according to plan of course - assuming we don't cash out elsewhere to increase to enable this increase.

Two views make a market.

As pointed out on the EMH board I find this order of events interesting:

"European Metals Hldg - Funding Agreement & Potential Partnership with CEZ" (16 July 2019)
https://www.lse.co.uk/rns/EMH/european-metals-hldg-funding-agreement-and-potential-partnership-with-cez-li47day77kzl2h5.html
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The funding facility takes the form of a convertible loan ("Loan"). The key terms of the Loan are as follows:
Principal amount: EUR 2 million.
Maturity date: 31 December 2019.
Interest rate: 7.5% per annum compounded annually.
]===

"European Metals Hldg - Successful Placing to Raise £750,000" (14 August 2019)
https://www.lse.co.uk/rns/EMH/european-metals-hldg-successful-placing-to-raise-750000--jhyeo3y55ykhvx1.html
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European Metals Holdings Limited ("European Metals" or "the Company") is pleased to announce that it has raised gross proceeds of £750,000 via a share placing ("Placing") to UK investors.

The Placing's issue price of 18 pence per share (~AUD 0.322) represents an approximate 12% percent discount to the closing AIM price on 9 August 2019. A total of 4,166,666 new ordinary shares of no par value ("Ordinary Shares") in European Metals have been placed with new and existing investors ("Placing Shares"), by way of the issue of depositary interests representing Placing Shares ("Depositary Interests").
...
The Placing is intended to allow the Company to continue to develop the Cinovec Project with the greatest degree of flexibility whilst the CEZ Group continues to conduct due diligence on the Company and the Project (refer to ASX and AIM announcement dated 16 July 2019).
...
European Metals Managing Director, Keith Coughlan said "Following the announcement of the interest shown by CEZ Group, we have received further funding proposals from equity investors. As the CEZ financing can only be used for project development the Board felt it prudent to take the opportunity to strengthen the balance sheet whilst in offtake discussions and to fund ongoing company level costs. We look forward to updating the market with regards to the CEZ due diligence which we believe will see them become a significant partner in the future development of the Cinovec Project."
]===

"Annual Financial Report" (30 September 2019)
https://www.lse.co.uk/rns/EMH/annual-financial-report-s2kg2xpfzqelgaq.html
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The Company currently has no intention of drawing down the convertible loan, and the option to do so lies entirely with the Company. Although the decision to convert the convertible loan would stay with the lender, the directors believe that the convertible loan will be converted, not requiring the return of the funds received. The directors will review this assessment closer to the maturity date of the loan, should the loan be drawn down.
]===

I find the "greatest degree of flexibility" and "no intention" interesting. If EMH rebounds strongly so should we given our considerable holding. :-)

Ob.

Thought I'd do a "@Frankie" and stream some consciousness triggered in part by @Bannor's post on trust, but also what I posted yesterday.

From my perspective I class AIM posters broadly into several categories. Those that
1. Don't hold, and have no intention of holding,
2. Don't hold, but would like to hold medium to long term when funds become available.
3. Don't hold, but would like to trade an AIM spike.
4. Hold, and are in the process of selling.
5. Hold, and have no interest in selling or buying in the short term.
6. Hold, and are in the process of buying more.
7. Hold, and would like to buy more when funds become available.

I'm sure there are all sorts of combinations of the above for example a 4 might turn into a 1, 2 or 3 - and no doubt others can think of categories I haven't.

The way I see things (TM) if everyone who posted, posted from their own selfish (in the strategical sense) point of view, I believe each of the above should:

1. Post negatively. Reasoning: presumably they hold elsewhere meaning new funds heading to shares are more likely to move in that direction.
2. Post negatively until bought. Reasoning: lower share price means more bang (shares) for their buck.
3. Post negatively, then positively when in, then negatively when out to repeat. Reasoning: shares pushed artificially lower by bad sentiment tend to spike up higher when sentiment changes on good news.
4. Post positively until out. Reasoning: higher share price means more buck for their bang.
5. Post positively. Reasoning: Long term success of the company is in their favour.
6. Post negatively until finished. Reasoning: lower share price means more bang for their buck.
7. The trickiest position (the situation I'm in) - As I mentioned yesterday I'd say if the poster is reasonably confident that an equity raise will occur after news worthy of boosting the share price then they should post negatively. But should they manage to negatively influence the share price and an equity raise occurs at the lower share price then they devalued their existing holding. It's a fine call between getting the most bang for their buck without their previous buck getting banged! (LoL! again)

Before anyone complains about manipulation and me instructing people what to do, this is as I see it from a theoretical point of view, perhaps it's codswallop in practice as people aren't logical at the best of times, I've seen many a share where I'm reasonably confident posters hold but are willing to cut off their collective noses to spite the BoD and the company - but perhaps they've done a good job of hoodwinking me and don't hold (1, 2, 3) or are about to, or are in the process of buying (6, 7).

End of stream.

Writing down the above was useful for me - not sure about anyone else. Perhaps I won't hit the Post Message button? What do you reckon @Frankie?

Ob.

That's my reading too @Ivybush. You say "from year 5 to year 15". Is that a typo on your behalf or are you saying that the RNS has a typo? The latest RNS says: "years 5 to year 17 of operations", the heads of terms say "years 7 to year 17 of operations". I've been taking the latest RNS as correct.

@Frankie - on differences: I take in information. If later information doesn't correspond to my memory of earlier information I recheck both sources.

And whilst I'm presenting evidence... We didn't get the mine for free - we (essentially) got it in return for R$900m (~$220m) of debt:

"Zamin Mineração to resume mine operation in 2021" (Sep 03 2019)
http://www.valor.com.br/international/news/6418273/zamin-mineracao-resume-mine-operation-2021
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Eduardo de Abreu Sodré, a partner at law firm Donelli, Abreu Sodré e Martins Advogados, which helped draft Zamin's recovery plan, explains that the company's original debt was R$1.5 billion, but creditors reached an agreement to cut approximately 30% of that amount to R$900 million.
]===

which we are lead to believe equates to the NPV10 of $106m of debt:

"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
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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.
]===

Does anyone have views on the implications of the last sentence? It wasn't there in the original heads of terms:

" Heads of Terms to Acquire Interest in former Anglo American Iron Ore Mine, Amapá, NE Brazil" (21 May 2019)
===[
The JRP schedule contemplates the majority of the historic liabilities will be paid from free cash flow in years 7 to year 17 of operations which represents a discounted NPV10 debt value of approximately US$106 million.
]===

Note, it's "The JRP also caps the trade creditor liabilities.", not "The JRP also caps the trade creditor's liabilities".

I'm reading it as: in return for accelerated payments (from year 5, instead of year 7) we negotiated a cap on our liabilities to the trade creditors. I'm not sure I read it that way back in August though!

There is a lot of money riding on this project being successful, for us and our partner, the historic creditors, the state of Amapa itself in terms of taxation and the local economy - we are talking 100's, perhaps 1,000's of jobs.

If Iron ore prices don't tank I can't see this project stalling. The investment required is an order of magnitude smaller than projects of comparable size - let me know if you would like to see evidence. ;-) Although I strongly encourage you Doing Your Own Research - you being the general you - yes you reading this, not that you over there.

Ob.

In the light of @Bannor's comments I though it worth sharing evidence we have no liability with regard to the Amapa Port accident rather than taking @Kiran's reported word for it.

"ANGLO AMERICAN COMPLETES THE SALE OF AMAPÁ TO ZAMIN" (04 November, 2013)
https://www.angloamerican.com/media/press-releases/2013/04-11-2013
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As part of the transaction, Anglo American will assume responsibility for, and the risks and rewards of, the insurance claim in relation to the Santana port incident by acquiring the claim at full claim value.
]===

That's reassuring @Ivybush!

@maddog. I repeat: do your own research on Amapa and you might come to the same conclusion as me, a few others on here, and WHI that if all goes to plan it's a company maker - a serious multibagger, and then some.

@frankie - selfishly if you are still adding here (as I am), and you believe that the next placing will come *after* significant news, be that from BCN, EMH, HAS, or news that we now own 20% of Amapa and the iron ore stock piles start to ship, then the logical conclusion is that you should want the share price to go down before you next add. It pains me to see it go down as KDNC is a large part of my portfolio, but again, it's my logical conclusion. Look to what was reportedly said at the AGM, the interims and the latest shareholder presentation for an indication of timelines. Why don't I sell now then? Far too risky - news is imminent from all directions! :-)

@balman - thanks for sharing that link, just goes to show how willing the state is for us to get that port back into working order and from what the operation brings to the local economy in general.

You ask some good questions. I'll reply inline:

===[
We know the mine had a structural problem resulting in the unfortunate deaths of 6 people, do we know if this claim has been resolved or still outstanding?
===]

Assuming you meant "port" and not "mine" then my understanding is that it's in the past. The videos I showed explained that the insurers wouldn't pay as they believed the collapse was due to iron ore being stored in an exclusion zone "close" to the water's edge. Subsequent expert evidence presented suggests that even if this were the case it was unlikely to be the cause of the collapse. 70% of the port has been rebuilt since the accident.

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There are also accusations that the mine has polluted the Amazon - again how will this be addressed?
]===

Again, in the past, there were fines applied. I'd be very surprised, and extremely disappointed if in taking this project on we are not protected against any past claims.

===[
We know that a significant investment will be required to bring the mine upto full production - looking at SSX I can see this potentially going the same way
]===

The "significant investment" is peanuts compared to that required by other mines. We are talking an order of magnitude less.

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There were costly labour disputes with the previous companies which will require KDNC to take on board and work with the local community to resolve
]===

There have been addressed as part of the JRP. Our $2.5m for 20% of Amapa goes towards "Payment of historic employee and small trade creditors"

===[
So we have many, many obstacles to overcome before we can even tap into those stockpiles of iron ore.
]===

Once the preconditions for us owning 20% of Amapa have been met, my understanding is that we can tap into those stockpiles.

As for "no-one gives away a company/mine/product for nothing" - they haven't...

Ob.

I hope so too! At least it's much clearer (to me at least) why we've earmarked $61m for port reconstruction. I wonder what the plan is to minimise the risk of a similar incident occurring in the future?

This is the one to watch...

"Anglo American - Porto Santana - English Subtitles" (22 Nov 2017)
https://www.youtube.com/watch?v=yBTZoypjtso

https://www.youtube.com/watch?v=1jCOD4iMcBA

@balman. Presumably you realise that was a non-story? A senator not appreciating the order of events.

https://www.youtube.com/watch?v=mw4FcFClYmE

:-)