Member Info for observer842

Correction on this one:

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?

@Degsie - I've skimmed back through my posts since August 29th (!) and here are some outstanding questions that I wouldn't mind knowing the answer to in decreasing order of importance:

Q: Can we see the Amapa agreement, redacted if necessary, before a further raise of funds?

Q: Can you clarify the $49m debt mentioned in the corporate presentation?

"INVESTOR PRESENTATION" (June 2019)
https://www.cadenceminerals.com/wp-content/uploads/2019/07/Corporate-Presentation-KDNC-June-PPT-PUBLIC.pdf
===[
Cadence invests US$6 million in Pedra Branca Alliance then IndoSino assigns US$49 million debt to NewCo (Pedra Branca Alliance) and (Ownership IndoSino 73% / Cadence 27%).
]===

Q: How much of the NPV10 $106m corresponds to the agreed historical debt of R$900m ($222m)?
"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
===[
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.
]===

Q: Can you comment on speculation by Eduardo de Abreu Sodré that the mine could be expanded to 11Mt/yr from 5.3Mt/yr?

"Amapá iron mine to resume operations in 2021" (3 Sep 2019)
https://www.pressreader.com/brazil/valor-economico/20190903/281827170443994
===[
[translated by Google]
The mine has a reserve of 251 million tons of iron ore and in the first year of operation is expected to produce 5.3 million tons. In a second moment, according to Sodré, could be expanded to 11 million tons.
]===

Q: The forecasts for full production uses $61/t of 62% Fe. Is this forecast based on all 5.3Mt being (hypothetically) sold at $61/t i.e. very conservative, or does it include appropriate premiums for what will actually be shipped? For reference at the end of last week Seaborne 62% was around $98/t, and 65% Fe pellets (not pellet feed) was around $126/t.

Q: If we were able to sell the iron ore stockpiles at $100/t, rather than the $80/t that results in approximately $60m net, how much extra would be netted? What is the tax situation?

Q: Do we have to escrow the $3.5m before all prerequisites are met? If not, it will likely be beneficial to existing shareholders if this is raised afterwards. Do the BoD plan on participating? What about extending the opportunity to existing ordinary shareholders?

Q: Can the WH Ireland note be made public?

Q: Will the port rehabilitation benefit our neighbours? How much rent might we expect to receive?

Q: What is the current situation with the remaining Greenland licence?

Q: What is the current situation with the Argentinian and Australian lithium licences?

@Degsie - feel free to reword! And thanks in advance if you get the answer to only a single question! ;-)

Ob.

"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
===[
An independent survey of these stockpiles indicates some 1.39 Mt (+/- 10%) of iron ore in three stockpiles with an average Fe grade of 62.12% (+/ 10%), which based a US$80 per tonne of 62% Fe would net Amapá a forecast US$60 million net of costs.
]===

Is this a fair way to estimate gross?

(1.39Mt * $80/t) * (62.12% / 62%) = $111.4m

And if so, does that mean an estimate of the costs is:

$111.4m - $60m = $54.4m

Which means if the price rose say 25% from the baseline of $80/t to $100/t (which it approximately has since the end of August) then the forecast might be expected to increase to:

((1.39Mt * $100/t) * (62.12% / 62%)) - $54.4m = $84.9m net of costs.

Meaning a 25% increase in sale price gives rise to a:

($84.9m - $60m) / $60m = 41.5% increase in that netted by the project.

I wonder what the tax situation is and whether we'll sign an off-take agreement for the stockpiles. And if so, for what price? Would we want to agree the price in advance (presumably aligned with the futures market over the 18-24 months period) or allow a bit of flex either with some spot weighting in the price or shorter agreement periods (3-6 months?) than the full 18-24 months, to take advantage (gamble!) on rising prices?

Amapa is certainly going to be interesting over the next few months if all goes to plan. I find it interesting that the market appears to be waiting until the project has all t's crossed and i's dotted before believing that this is really happening. Part of me says fair enough, we've been burnt before, but the other part says - Ob, take the gamble (advantage!). LoL

Ob.

Long may it last!

"Column: China steel, iron ore sectors bet on stimulus hopes over economic reality" (SEPTEMBER 17, 2019)
https://uk.reuters.com/article/uk-column-russell-ironore-china/column-china-steel-iron-ore-sectors-bet-on-stimulus-hopes-over-economic-reality-idUKKBN1W20YD
===[
Spot 62% iron ore, as assessed by commodity price reporting agency Argus, ended at $97.55 a tonne on Monday, just below the prior close of $99.20, which was the highest in five weeks.

The iron ore price has rallied 19.7% since hitting an eight-month low of $81.50 a tonne on Aug. 29, amid both some optimism that Beijing and Washington will resume trade talks and expectations for increased Chinese stimulus.
]===

sort of... ;-) Care of @antharry on BCN board:

"Ganfeng deal a credibility boost for Bacanora" (September 17, 2019)
https://www.bnamericas.com/en/interviews/ganfeng-deal-a-credibility-boost-for-bacanora
===[
BNamericas: What are the main strengths of the Sonora project?

O’Donnell: The pilot plant has shown they can produce a high quality, 99.5% lithium carbonate product, so they have the ability to produce battery-grade product and that’s within a resource that can be scaled up to meet the growing demand forecast, which is consistently now put at around 1Mt/y by 2025.

At the moment the 20-year mine life only uses 7% of the resource. The advantage for an offtaker is that they know they can get battery-grade material, and as the market grows, that project can be scaled up.

That battery grade material is then able to be produced on a larger and larger scale.

On some of the smaller projects, you get as much as 50,000t/y production, but without that scalability. As the market grows an offtaker is confined to the limits of that capacity, but in a project like Sonora it could get larger and larger.

No one has really talked yet about a 100,000t/y lithium carbonate project for the juniors. Once you get to 2025 and it’s a 1Mt/y market that’s going to be something that investors and offtakers are looking for.
]===

2.5 + 3.5 = 6

Paragraph corrected:

===[
My take being that if there are any complications at their end of the deal we could see our 27% (after investment of full $6m) potentially increase to 49.9%, as we'll have more "work" to do to pull the project back into operation.
]===

Only just spotted this - I thought I could finally stop checking here and REM... The discussion has moved on a little since your post. Unless I hear to the contrary I'm taking the $49m mentioned at:

"INVESTOR PRESENTATION" (June 2019)
https://www.cadenceminerals.com/wp-content/uploads/2019/07/Corporate-Presentation-KDNC-June-PPT-PUBLIC.pdf
===[
Cadence invests US$6 million in Pedra Branca Alliance then IndoSino assigns US$49 million debt to NewCo (Pedra Branca Alliance) and (Ownership IndoSino 73% / Cadence 27%).
]===

to be as how @Ivybush put it

"13 Sep 2019 10:42"@KDNC
===[
I am taking the phrase "IndoSino assigns US$49m to Newco" to mean that IndoSino are taking up that loan themselves but passing the liability of repayment to Newco. Thus assigning the debt. Hope this becomes clear by RNS or at AGM.
]===

My take being that if there are any complications at their end of the deal we could see our 27% (after investment of full $6.5m) potentially increase to 49.9%, as we'll have more "work" to do to pull the project back into operation.

"Cadence Minerals PLC - Approval of Judicial Restructuring Plan - Amapa" (30th Aug 2019)
https://www.lse.co.uk/rns/KDNC/cadence-minerals-plc-approval-of-judicial-restructuring-plan-amapa-omqcte36gtcervm.html
===[
The Agreement also contains security and default clauses which if triggered causes an upwards adjustment mechanism to allow Cadence to either receive cash from JV Co or receive additional shares in JV Co. In the latter case Cadence's shareholding in the JV Co will not go above 49.9%.
]===

The point being (as I understand it), as part of their contribution to kick-starting the project IndoSino have arranged for the JV company to have access to $49m of new debt.

Ob.

No news for months indeed! Here is a reminder of recent past and potential near term news to which could land any time...

13 Jun 2016: Align report: http://www.alignresearch.co.uk/wp-content/uploads/2016/06/Inspirit-Energy-Align-Research-13th-June-2016-Final.pdf
16 Aug 2016: Collaboration agreement with CIBSE
3 May 2017: Discussions with Argentarius to raise up to £2m through asset backed bonds
18 Jul 2017: Electrical efficiency improved from 3.0kW to 3.2kWe
21 Aug 2017: Argentarius arranged funding apparently falls through
14 Nov 2017: Accelerated redemption of all securities related to Argentarius by year end
28 Dec 2017: CIBSE ongoing collaboration confirmed
06 Feb 2018: Inspirit Energy Consultancy Incorporated
29 Mar 2018: Increased efficiency in the regenerator allows commodity grade stainless steel derivative to be used
12 Apr 2018: CIBSE ongoing collaboration confirmed
04 May 2018: Issue of £845k of Convertible Loan Notes raising £530k in cash, the balance converting existing debt
28 Dec 2018: In discussions with a European company that may carry out the certification process; CIBSE collaboration not confirmed; $2,600,000 of debt facility available
29 Mar 2019: Continued discussions with a European company that may carry out the certification process; CIBSE collaboration not mentioned [now assumed to have concluded]
26 Apr 2019: Facilities moved from Sheffield to Poland in collaboration with a European engineering group. Collaboration with a UK based University on new applications. New composite materials awaiting classification. Cost savings. Can start off grid. Peak electrical output doubled to @6.4kWe, same @15kWt [unknown steady state system efficiencies] during a running cycle of 2,000 hours. Height reduced to 80cm. Schematics for new applications: Inspirit Marine - currently in discussion with a large car/marine engine manufacturer to develop a unit for the shipping industry with current output of 11.68kw; Inspirit Solar; Inspirit Cooler; Inspirit Motor/ Generator
08 Jun 2019: Compulsory strike-off action discontinued for Inspirit Energy LTD as "Cause has been shown why the above company should not be struck off the register"
16 Jul 2019: Inspirit Energy Consultancy Dissolved

So in terms of near news events:
- Announcement of the name of the European engineering group/company
- Announcement of the name of the Inspirit Marine manufacturer
- Confirmation of start/end of certification process and outcome - we've hopefully got many more hours under our belt since the 2,000 hours announced on 26 Apr 2019
- Conversion of CLN's: The maximum number of new shares if converted at the minimum conversion price of 0.07p is 1,207 million shares. These can be converted even when the share price is below the minimum share price
- Possible placing/issue of additional CLN's using the 650m shares authorised last summer
- Funding for commercialisation, assuming we don't use the debt facility
- AGM

Ob

Agreed @maddog. The agreement should be made public. Commercially sensitive aspects can be redacted. As to having doubts, this is healthy - why do you think I've spent the past two weeks doing as much research as I can around the limited facts we've been given to try to uncover gotchas and dig a bit deeper into the background? I've not seen anything glaringly bad, and in fact have uncovered a few bits and bobs which have given me confidence to increase my holding significantly during the period.

As I've said before, going by the share price I'd say there are more investors like you with doubts than like me who believe this project has the potential to be a company maker. Hopefully we'll see that change as the project progresses over the next few months. I just hope for all investors that I am write ,

Me? @maddog? LoL.

Ob.

I agree @mrcautious, any other factor than 100:1 and I would not have been happy. Why? Any factor that is not divisible by 10 is to obfuscate the share price - e.g. 5:1, 20:1, 50:1. A factor of 10:1 risks the share price falling by 10 immediately (only on AIM!). And finally a consolidation of 1000:1 for us would have indicated to me that we were no longer anticipating substantial growth from here - after all I'm here for the multi-bag (x10-20). 100:1 feels Goldilocks to me: not too small, not too large, just right!

Ob.

It's a fair question @Ivybush. We've engaged with qualified professionals for Amapa, namely Hill Dickinson LLP & Thomas Bastos Waisberg Kurzweil. I suspect the answer is that pretty much everything else is on hold with the focus on Amapa for the foreseeable future. That's the impression I get, and besides the Argentina assets (San Luis) are STILL waiting licence approvals as far as I know...

I've tried to be as objective as I can be given I'm invested, but I'm finding it hard to spot any hidden gotchas with this project, only (potentially!) hidden pros. Therefore I've (further!) convinced myself to vote for all resolutions, and if I continue to believe the share price is below value, even at this stage, then what more can I do but continue to buy on this belief?

I'd really appreciate some pointers to anything bad related to Amapa - I know it's hard if you are invested, but go on, you know you really should share your doubts: besides they might not be as bad as you think ;-)

Ob.

Ignore my YouTube link, I'd forgotten that the proceedings were held in São Paulo and Macapá not Amapá.

your b's-polar?

That's because your's b-polar

Examples of hidden "good news" the BoD might be hiding:

1. $49m from Indo Sino (which has to be paid back, presumably before shareholders in the JV are divvied out) - this is great news if true.
2. Potential to expand mine from 5.3Mt per annum to 11Mt per annum. Again this is great news and indicates to me that there must be significantly more Iron ore to be proved up to reserve status than just 14 years @ 5.3Mt. I remember @Kiran mentioning expansion in an interview, but I didn't think he meant anywhere near double!
3. Details of the agreement. We are led to believe they have all bases covered to reduce our risk exposure, but unless we can see the agreement how can we be investing on the same terms as they? I note that the proceedings were not streamed: https://www.youtube.com/user/TJAPNoticias/

Me? Scep...

Ob

Thanks @Ivybush, what you say sounds reasonable. According to this understanding, presumably if all goes well there will be $49m in cash ready to be injected in to the project when all prerequisites have been met (in exchange for $49m of debt on the JV books). i.e. The $49m is provided at the same time as our final $3.5m, which together is sufficient to unlock a further estimated $60m over 18 months to 24 months by shipping the iron ore US$80@62% Fe. The relevant price has been (re)approaching $100 recently, so optimistically that $60m might be closer to $100m with a good wind ;-). If $100m were realised from the sales, then this along with the $49m would pretty much cover the required CapEx, less stated contingency.

It still doesn't explain why no mention of the $49m debt provision in the RNS or interviews. This paragraph is the closest to suggesting that Indo Sino has obligations to be met: "The Agreement also contains security and default clauses which if triggered causes an upwards adjustment mechanism to allow Cadence to either receive cash from JV Co or receive additional shares in JV Co. In the latter case Cadence's shareholding in the JV Co will not go above 49.9%."

My sceptical self is wondering if the BoD know more (good) information than they are letting on in the hope they and their mates get to join in on the capital raise for $3.5m at a suppressed share price, assuming we don't raise the money by other means, such as selling an asset or two if they are deemed sufficiently ripe. Me? Sceptical? LoL! ;-)

Ob.

Credible, but google translated. I've only included new/interesting bits:

"Amapá iron mine to resume operations in 2021" (3 Sep 2019)
https://www.pressreader.com/brazil/valor-economico/20190903/281827170443994
===[
“Cadence will enter as an investing partner and there is a schedule for payment of installments that will be applied to the operation. In all, it will be $ 115 million to reactivate the operation. IS It is important to emphasize that the debt will be paid with the income from the operation ”, armed Sodré. The lawyer added that he will have two more installments that Cadence will pay for the project, one of R $ 27.5 million and another of US $ 85 million, resources that will be fully reversed to put the operation up.
...
With this, in 2014, Zamin filed for judicial recovery. “After five years, an investor enters the business and gives conditions for the return of the mine, the railroad and the port. There are at least 700 more direct jobs that must be created. ”, said Sodré. The lawyer said that, in addition to the funds already planned to be contributed by Cadence, the Zamin will also have the sale of the ore stock that is concentrated in both the mine as in the port. “Thus, it will be around US $ 60 million more than it could be with the marketing of this product. Everything will be reversed in the recovery works from the mine, the railroad and the port.

The biggest investment, I believe will be in the port terminal ” added Sodré. In the contract between Zamin and Cadence there is a clause stating that the funds will be applied after the renewal of all operating licenses for the entire complex. “From two to four months these authorizations must be granted, including the concession of the do Amapá Railway, a 194-kilometer extension from the mine to the port that returned to the after Zamin stopped operating. This project has already represented 31% of Amapá's GDP. ” The mine has a reserve of 251 million tons of iron ore and in the first year of operation is expected to produce 5.3 million tonnes. In a second moment, according to with Sodré, could be expanded to 11 million tonnes. “Since the recovery plan was approved, we have formed working groups to get licenses faster. As it is a renovation and it is a project that will give much return to the state, I do not believe that the releases will not be granted. ”Sought on August 29, the Amapá state government did not return to the report request.

The Zamin project operates a downstream dam and, according to the lawyer, has a report granted by the Institute for the Environment and Territorial Planning (IMAP) in July 2018. Despite this, Sodré added that the new company plans to invest $ 6.1 million in the structure to comply with the new security rules of dam of the National Mining Agency (ANM).
]===

A more credible source:

"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
===[
Zamin Mineração, which operates a mine in Pedra Branca do Amapari, in Amapá state, is expected to be back to business in the first half of 2021. The company, which halted iron ore production in 2014 following an accident at the Santana port terminal, had a judicial recovery plan approved in the last week of August. The creditors’ green light came after British company Cadence Minerals was presented as an investor of the project, which includes, besides the mine, a railway and the port. Cadence put up $2.5 million to pay labor debts and creditors with liabilities of up to R$150,000. 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.
]===

Unless evidence to the contrary appears, I'm taking that R$900m ($222m) of debt to be: "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."

Now about that mystery $49m mentioned here?

"INVESTOR PRESENTATION" (June 2019)
https://www.cadenceminerals.com/wp-content/uploads/2019/07/Corporate-Presentation-KDNC-June-PPT-PUBLIC.pdf
===[
Cadence invests US$6 million in Pedra Branca Alliance then IndoSino assigns US$49 million debt to NewCo (Pedra Branca Alliance) and (Ownership IndoSino 73% / Cadence 27%).
]===

Forget about the second paragraph in my last post @Frankie, it was a hypothetical. I was thinking aloud in response to @mac's post and wouldn't have posted it had I knew it was going to confuse.