Member Info for observer842

I thought I'd attempt to tease out an IRR of sorts. First we need to estimate the payment schedule from what we know:

===[
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.
]===

Assuming equal payments, then I make it that 13 payments of $22m in years 5 to 17 have an NPV10 of $106.74m. Out of interest that is an NPV8 of $127.81m, an NPV5 of $170.02m and an NPV0 of $286m

We also have:

===[
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.
]===

so the schedule used in my previous calculation of the NPV10 can be fine tuned as follows:

"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 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 13 114 (13 years of full production in 2024 to 2036 of EBITDA $136m - $22m debt)
NPV = $562.37
]===

Varying the discount rate:

===[
NPV12 = $472.16
NPP10 = $562.37 (for reference)
NPV8 = $674.40
NPV5 = $898.08
NPV0 = $1,509.70 (for reference)
NPV95 = $0 (The IRR based on this method)
]===

IRR=95! That shipped ore in the first few years really helps with the financials.

As ever, DYOR, possible typos, mistakes, bad logic, etc...

Ob.

If you insist @Frankie. Yes - I believe Amapa could be worth £100m to KDNC. With a first right of refusal to take us to 49.9% and strong iron ore prices we could be talking several times that, and by the time we get to DFS in a year or two no doubt we'll be wanting out for a decent fraction of that NPV, we are after all an investment company, not a mining company. However, please remember, I've said this many times about other projects over the years and these predictions have yet to bear fruit against a background of a falling share price... Please don't trade on what I say - I put it out there in the hope someone more knowledgeable will point out flaws in my reasoning. Let's see what WH Ireland has to say. Obviously I'M trading on my own research. lol.

Indeed @ivybush. Sounds like they've put a lot of effort into this deal over the past year and especially so the past week. Investing significant amounts of cash on the back of their progress and belief in the project in the last fund raising. It wouldn't surprise me if they've bought a few more on market on Friday - it'd do wonders for ordinary shareholder confidence if so! But on balance I suspect not.

It does indeed feel that there are many games at play on AIM shares @maddog, however I suspect that if a share gets enough (good!) attention, or sentiment changes amongst existing shareholders: for example as the penny drops this time it's for real, there really is no holding back the price - especially if high net worth individuals get wind upsetting the games in play. Point being, if a few outsiders with deep pockets wanted in, I just can't see the price being held back down here. You'll see a few new faces posting of late, perhaps they are the start of the turning tide?

@Degsie. For quick rough and ready NPV estimates I often use an online tool. Here, put these figures in:

"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 -106
1 1 30
2 1 30
3 1 -168.30
4 14 136
NPV = $572.34
]===

Converting to pounds and taking 27% = £128m, less taxes etc might give around £100m of NPV value to KDNC

A bit of sensitivity analysis never hurt anyone, especially since "On a global comparison, the rehabilitated mine is expected to be competitive and cash generative with conservative assumptions.".

===[
Interest rate 10%
Compounding 1
Cash Flows at End
Number of lines 4
0 0 -106
1 1 60
2 1 60
3 1 -168.30
4 14 272
NPV = $1,377.12
]===

As mentioned this is VERY crude. In practice there will be overlap between capital expenditure, ramp up to full production, debt interest, decommissioning at end of life (however we might explore more to extend beyond 14 years), and likely other factors I've not included off of the top of my head - and our shares in issues will likely be greater unless we decide to sell an asset to fund the rest/pay off loans (£10-100m for the Sonora JV would be nice!). Additionally we may own both more or less than 27% of the project in time. Less, due to equity funding of the CapEx, more, if we exercise our right to increase to 49.9%

This is to everyone, definitely do your own research, there could be all sorts of flaws, typos, etc with the above thoughts (appreciate it if you point them out!) but feels like a strong buy from here for me, on this project alone, never mind our legacy investments. It'll be interesting to see what WH Ireland has to say, but even then, DYOR - they make mistakes too, we all do...

Ob.

I agree @mac, unlike San Luis where we never got off the starting blocks the main hurdle in my eyes has been passed for Amapa - congratulations to @Kiran and co! However it looks to me that the market is not appreciating just how important this is. Perhaps understandably given our share price performance in recent years... But with lithium hard rock producers in trouble and iron ore prices rebounding it might just be that not getting those San Luis permits was quite fortunate in hindsight! Surely a run up in share price from here towards the end of the year, but not necessarily without a few pullbacks eh @maddog ;-)

It appears to be the same helicopter in the photo as seen in this video

"Greenland Minerals & Energy Ltd" (5 May 2011)
https://www.youtube.com/watch?v=GVJpw0cRX8U

if that is of any use? Lol

I don't remember seeing a video of a Greenland fly over. There is a picture of a helicopter at

http://www.cadenceminerals.com/projects/greenland-rare-earth/

which you might be remembering?

RE political - China, US, Denmark, Greenland plus Australian (GGG) and UK (KDNC) companies in the mix.

"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
===[
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.
]===

Can we deduce how much would be netted if the sale price were say 50% higher than the $80 used ($120)? Is it close to double? And close to 0 if the sale price were halved ($40)? Fingers crossed for the former! ;-)

We might find out on Monday if we've been granted another 5 years for the licence that abuts GGG's Kvanejfeld, primarily to the West, but also a bit to the North and South of it. It's all getting a bit, political, shall we say...

You are doing some great detective work @news!

I suppose we could have just said we've sold some shares without any commentary... That would have been significantly less controversial! I think I should take back my previous - attempting to explain the reasoning for the benefit of others on a controversial topic, on the internet, never was a good idea! Apologies if I've riled anyone up...

@Oggy. I know this is explanation is unpopular because as you say what was announced seemed somewhat conservative with the truth, but I'll reiterate what I've said before, we HAD to declare to the market that we'd made a profit on the sales when we sold the first batch of BCN shares as TECHNICALLY (according to the accounts and importantly the tax man!) that is exactly what we did. We sold the ones we bought cheaper many years earlier, not the ones we'd bought recently above the sale price. The profit shows in the 2017 accounts.

Of course, we didn't have to do it this way, but by doing what we did it looks to me that we were attempting to minimise our FUTURE tax bill. However, since we ended up selling BCN for a loss I don't think it mattered so much, in fact it might even have been slightly detrimental...(!)

But you are right, I wouldn't trust anything said by anyone, not least those with a vested interest! DYOR ;-)

Ob

"AIM minnow Cadence punches well above its weight in Brazil" (30th August 2019)
http://www.branduk.net/aim-minnow-cadence-punches-well-above-its-weight-in-brazil/
===[
“Opportunities such as this come along once or twice in a lifetime,” says Morzaria.

“To start a project on the scale of Amapá would require little short of $1bn capex. We (Cadence) will own 27% of a project, which when recommissioned should generate over $136m EBITDA per annum for at least 14 years, plus we will have the right and first refusal to acquire up to 49%.”
]===

@Oggy06 - the reason for consolidation has now been explained "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".

Without consolidation it is harder to raise funds - weird, but true. We need to raise funds at some point to progress Amapa, or go for more debt or sell an asset that is not quite ripe.

@Frankie - I find that "The Harder I Practice, the Luckier I Get". So yes, experience, research, contacts, and many other factors likely landed us this deal. But ultimately it feels to me that we got VERY lucky.

@Frankie - I'm very cognisant of the failure that was San Luis. That felt good, but alas was not to be. We've just passed the largest hurdle (IMHO) on Amapa.

I'd say we got very lucky!

In short @Frankie - Amapa really does look that good - the jewel in our crown - and if all goes well enables us to stand our ground with our other assets. It is already a significantly de-risked project. And we just heard from Kiran that the CapEx is a fraction of that if it were a new project and will be majority debt financed.

Great interview. Thanks for sharing! Very exciting.