Member Info for observer842

Can anyone help with this?

"Cadence Minerals PLC - Approval of Judicial Restructuring Plan - Amapa" (Fri, 30th Aug 2019 07:00)
https://www.lse.co.uk/rns/KDNC/cadence-minerals-plc-approval-of-judicial-restructuring-plan-amapa-omqcte36gtcervm.html
===[
The beneficiation plant consists of a crushing circuit followed by screening, flotation, thickener and filtering to produce a 65% Fe Pellet Feed and a 62% Fe Spiral Concentrate.
...
The current mine plan would mean that the Amapá Project would produce at steady-state production an estimated 4.4 Mt of 65% Fe and 0.9 Mt of 62% Fe per annum. Currently steady-state production is expected to be reached in 2024.
...
It is estimated that at steady-state production of 5.3 Mt of iron ore and utilising a 62% Fe price of US$61 / tonne (27/08/2019 price Fe 62% - US$90 / tonne) Amapá will have an average :
o US$266 million per annum of net revenue after shipping,
o US$90 million per annum in mine, processing and transport costs
o US$48 million per annum in environmental, sales and G&A expenses
o EBITDA of US$136 million per annum.
]===

It's not clear to me which iron ore price they have used, and how that relates to today's spot for the various iron ore products.

For example is that EBITDA of $136m based on selling all of the 5.3Mt per annum as if it were 62% Fe @ $61/t, even though the majority (83%) is actually 65% Fe pellet? Or have they implicitly calculated the 65% Fe pellet price and its premium from a historical relationship? Some recent prices:

"China Iron Ore Spot Price Index (CSI)"
http://www.custeel.com/en/csi.jsp
===[
Date Seaborne index 62% Fe fines Seaborne index 65% Fe fines Seaborne index 65% Fe pellets premium
2019-09-03 89.73 97.75 25.55
2019-09-02 90.73 98.15 25.55
2019-08-30 84.73 92.15 24.55
2019-08-29 81.73 90.15 25.55
2019-08-28 84.03 91.65 26.55
2019-08-27 83.53 90.65 26.55
]===

I say prices, but those are indexes, I presume it's dollars...

So what's the weighted current (2019-09-03) spot of what we are planning on actually shipping? Is it:

(89.73 * 0.9 + (97.75 + 25.55) * 4.4) / 5.3 = $117.6 / tonne.

That's nearly double that used to get the $136m, and is off the back of recent significant falls. It'll be very interesting to see what WH Ireland have to say in their sensitivity analysis. Could be a wake up call to the market.

Ob.

We will be shipping "65% Fe Pellet Feed and 62% Fe Spiral Concentrate." not lump. Admittedly it's all a little confusing!

For a bit of fun whilst we wait the results of the latest testing, and perhaps even certification news, 200, the single trade today @0.025p @13:02:05 is fabled to be:

http://www.pennystockdream.com/Market-Maker-Signals
===[
2. 200 - I need Shares badly but do not take the stock down.
]===

You're not having mine! ;-)

It's very odd. I wonder what the hold up is? Politics perhaps?

Your toes's hang off it. :-)

By the way, did you see that the authorities still haven't made a decision re our tenement in their September update? Curiouser and curiouser

Care of @news - I don't remember seeing it posted on here

"Hill Dickinson advises AIM-listed Cadence Minerals Plc on investment into Amapa project, its £1.6m Placing and the restructuring of existing convertible loan notes" (19 July 2019)
https://www.hilldickinson.com/insights/news/hill-dickinson-advises-aim-listed-cadence-minerals-plc-investment-amapa-project-its-
===[
Hill Dickinson has recently advised AIM-listed client Cadence Minerals PLC (KDNC) on its joint venture with Indo Sino Pte Ltd for KDNC to invest in and acquire up to a 27% interest in the former Anglo American Plc and Cliffs Natural Resources Amapá iron ore mine, beneficiation plant, railway and private port (Amapá Project) owned by DEV Mineração S.A.
...
Also commenting on the Investment and Placing, Kiran Morzaria, chief executive officer of KDNC said: ‘We are delighted, through the Placing, to have secured the remaining funding requirement for the Investment into the Amapá Project. The Amapá Project gives Cadence the potential for an exceptional ROI in the run up to full production and an opportunity to become a significant shareholder in a mid-tier iron ore producer. We have worked with Hill Dickinson throughout on this project and Cadence has been greatly assisted by Mark and Francois [of Hill Dickinson] to deliver responsive and practical advice to help identify and resolve any complexities arising from the structuring of the investment into the Amapá Project. The Amapá Project is a potentially transformative asset for Cadence and we are very happy to have progressed to this stage with the opportunity.’
]===

I'm as perplexed as you are @news as to why the market doesn't seem to have reacted to the RNS at the end of last week. It's almost as if it's in shock. Nurse! Lol.

Did you spot our tenement? ;-)

"Climate change: Greenland's ice faces melting 'death sentence'" (3 September 2019)
https://www.bbc.co.uk/news/science-environment-49483580

It's in the middle right of the 1993 to 2018 satellite reveal image towards the beginning of the article.

And the answer is? ;-)

For reference:

"Cadence Minerals PLC - Update - Yangibana - First Ore Reserves" (30th Jan 2019)
https://www.lse.co.uk/rns/KDNC/cadence-minerals-plc-update-yangibana-first-ore-reserves-hwhtsok8f1795hy.html
===[
Cadence Minerals (AIM/NEX: KDNC; OTC: KDNCY) is pleased to announce that a maiden Ore Reserves has been declared on Cadence's 30% joint venture ground at the Yangibana Rare Earth Project in the Gascoyne region of Western Australia ("Yangibana Project"). The total Probable Ore Reserves on our joint venture are 2.07 million tonnes ("Mt") at 1.66% Total Rare Earths ("TREO") including 0.43% neodymium oxide ("NdO") and praseodymium oxide ("PrO.")

Highlights from Hastings News Release
· Probable Ore Reserves on entire Yangibana Project increase 34% to 10.35 million tonnes at 1.22%TREO including 0.43%NdO+PrO
· Updated Ore Reserve extends mine life by 3 years, supporting a +10-year operational life for the Project
· Updated Ore Reserve increases Yangibana Project NPV to AUD516M confirming outstanding project economics
· Includes the first Ore Reserves from joint venture ground
]===

Indeed @mrcautious. I've got a faint hope that the share consolidation is part of a plan to get us off AIM. Fingers crossed!

Shares in issue according the end of year accounts:

2015: 6,802,811,028
2016: 7,418,126,097
2017: 7,811,370,698
2018: 7,851,440,338
Today: 10,546,196,754

Although we have authorised the BoD to issue 3B shares each year, and they did earmark a large proportion of this capability for the CLN's one year, in practice since these were never converted hardly any dilution took place. What's different this year is that we have a project which to my eyes at least looks like it is going somewhere, and we need to fund our side of the bargain. Point being that other than the falling share price (!), I'd say this year really is different to the past few years where we were waiting for licences to be granted. Hopefully the long awaited turning point is nigh! In fact Friday's RNS might have even signalled it, it's too early to call.

In terms of resolution 6 (the special resolution that requires 75% of the votes cast to pass it), I'd love to be able to vote against that, but I know in my heart of hearts it just won't work for this share. Though I'm happy to be persuaded my doubt is misplaced. Anyone got evidence of recent AIM placings were it's gone OK, good even, when ordinary shareholders have taken up a significant portion that was on offer? I suspect the offer would have to be underwritten in the least for it to work for us, and then what's the point? you'll likely be able to buy cheaper on market in the run up or shortly afterwards, and you've gone to the same trouble of lining up the underwriter. And think of the cost, why won't somebody think of the cost? Lol! AIM HO!

One thing I have wondered about though is whether it would be better for our share price if the BoD were unable to participate in placings, instead having to buy on market shortly afterwards?

And finally... I don't remember if it has been pointed out that the increase in authority to issue 3B shares to 5B shares appears to be in keeping with the increase of number of shares in issue - i.e. approximately half. As an investment company this works for me. Though it would work better if we had a recent history of a rising share price!

Ob.

@maddog, perhaps this figure in the OpEx will alleviate your concerns... I'd be very surprised if we hadn't got all bases covered to at least the right order of magnitude! A factor of 2 worst case.

"Cadence Minerals PLC - Approval of Judicial Restructuring Plan - Amapa" (Fri, 30th Aug 2019 07:00)
https://www.lse.co.uk/rns/KDNC/cadence-minerals-plc-approval-of-judicial-restructuring-plan-amapa-omqcte36gtcervm.html
===[
US$48 million per annum in environmental, sales and G&A expenses
]===

I'm not sure of the split, but if it keeps you happy lets say the majority is environmental? ;-)

@maddog - Take a look at the RNS. There is a breakdown for the CapEx, including what I presume you are looking for "Environment"?

"Cadence Minerals PLC - Approval of Judicial Restructuring Plan - Amapa" (Fri, 30th Aug 2019 07:00)
https://www.lse.co.uk/rns/KDNC/cadence-minerals-plc-approval-of-judicial-restructuring-plan-amapa-omqcte36gtcervm.html
===[
Capital Item US$ Millions
Processing Plant 47.0
Fleet Contract 13.0
Power (Transmission Line) 5.0
Overland Conveyor 15.0
Tailings Dam 7.0
Railway 4.5
Port Re-Construction 61.0
Environment 2.3
Contingency 13.5
Total 168.3
]===

I think you know more than I do on this topic @Frankie, given how much you've researched it! The BoD appear to have made good progress this year in a direction which should hopefully allow us to snowball our investments in later years. Finally... So I'll continue to vote in favour of all resolutions. But it'll probably be the last if they royally screw this up! Fingers crossed! ;-)

On the topic of raising funds to progress Amapa - I'd be surprised if we raise before WH Ireland (our Nomad and one of our two brokers) has published their updated valuation note and the market has had a chance to adjust, hopefully upwards from here! Oh, and likely after the AGM, assuming over half of the votes cast approve the consolidation. Of course, we might sell an asset rather than raise - that'll keep us on our feet! LoL

@maddog "by any chance do you no what the true cost of environment reinstatement is or any caveats that could be imposed at a latter date in the small print". I'm not sure what you mean? I don't know any more than what is in the RNS, other than a few snippets that @Kiran said in the most recent interviews related to possibly being able to drill for additional reserves. Here are some quotes from the RNS that might answer your question?

"Cadence Minerals PLC - Approval of Judicial Restructuring Plan - Amapa" (Fri, 30th Aug 2019 07:00)
https://www.lse.co.uk/rns/KDNC/cadence-minerals-plc-approval-of-judicial-restructuring-plan-amapa-omqcte36gtcervm.html
===[
... was approved by over 90% of the credit value at the JRP meeting held in São Paulo and Macapá, Brazil and was homologated by the courts on the 29 August 2019.
... [10% didn't agree]
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.
... [we have additional, lower IMHO, hurdles to clear]
Further capital investment of approximately US$168 million, of which it is estimated US$61 million will be spent on port rehabilitation and US$47 million to be spent on plant recommissioning.
... [does this answer your question?]
Cadence and IndoSino will continue their work to secure all the operating and environment licenses required to operate the Amapá Project. Initially this will focus on the reinstatement of the railway concessions and finalising negotiations with the secured bank creditors.
... [this could be announced within weeks, and presumably anticipated by year end]
"As part of our desire to attract institutions to our Company and after positive discussions with our current institutional shareholder base, we announced, earlier this week, a proposed consolidation of our share capital"
... [This indicates to me we intend to raise funds - ideally from sticky institutional investors above the 3% level.]
It should be noted that this review provides a basis for a preliminary assessment of the project and its potential but further, more detailed reviews and analysis would be required to provide a Feasibility Study level report.
... [These reviews could throw up previously unseen problems. Unlikely, but possible]
The second stage of investment is for a further 7% of JV Co for a consideration of US$3.5 million. If Cadence is unable to complete the second stage of the investment or not exercise its right of first refusal under the terms of the Agreement, Indo Sino will have a twelve-month option to buy the shares in JV Co held by Cadence for 1.5 (1 ½) times the price paid by Cadence for such shares.
... [Good news: If we can't/don't raise the $3.5m then we should get 1.5 times what we paid back. Bad news: if we can't raise the $3.5m then game over?]
]===

Just in case anyone is verifying - the recent settings from the NPV calculator should read "Number of lines 5", although I hope you would have figured that out! ;-)

A more conservative take on the IRR calculation might be:

"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 4
0 0 0
1 1 0
2 1 -108.30 (CapEx of $168.30m minus $60m shipped ore for this year and last)
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 13 114 (13 years of full production in 2024 to 2036 of EBITDA $136m - $22m debt)
NPV = $559.89
]===

The IRR is then 73.8% (the discount rate which gives an NPV of 0). Still considerably high and based on reasonably conservative iron ore sale prices.

A (before tax, and other caveats) Internal Rate of Return of 95% is very decent - and it's so high because the project is generating cash before the majority of the capital expenditure is required, which is quite unusual and works significantly to our benefit, as I'm sure you can imagine - and especially so if we get "lucky" with the iron ore price in the run up to when we ship, estimated to be towards the end of this year. I can see why our BoD are getting excited! :-)

===[
"Cadence management, headed by Kiran have secured an opportunity to return this former Anglo American iron ore mine to production at a level enthusiastically supported by our board and institutional investors. There is a tangible sense of excitement and anticipation around our company and boardroom as we look forward to seeing the Amapá iron ore mine come back to life."
]===