Member Info for observer842

To clarify: my understanding is that KDNC borrowed approximately $4.2m to pay off their old convertible loans. In return they issued a loan note for $4.87m which included approximately $670k in future interest payments (and likely fees)

Although having read the RNS a few times now I can see how it might be interpreted differently - if it wasn't for the phrase "and future interest payments" I too probably would have concluded KDNC received $4.87m, meaning they would be required to pay that back with interest, rather than receiving $4.2m or thereabouts and then paying back a total of $4.87m.

Maybe neither of these interpretations are correct?

"Restructuring of Loan Note" (24 September 2018)
http://irservices.netbuilder.com/ir/cadence/newsArticle.php?ST=REM&id=2571962
===[
Cadence is pleased to announce that it has refinanced the Convertible Notes by agreeing a US$4.87 million amortizing loan note with a consortium of institutional lenders. The loan will be primarily used to repay the outstanding balances due on the Convertible Notes (US$4.2 million) and future interest payments. The loan will attract an effective 9% per annum and has a principle repayment holiday until 1st January 2019. After which the loan will be paid via equal instalments over a 12-month period, with the principle being fully repaid by the 1st December 2019. The note is secured over the Company's assets.
]===

My take is that the monthly repayment is $4.87m / 12 = $406k = £300k or thereabouts

Two must watch videos:

"Benchmark Mineral Intelligence MD Simon Moores – outlook for energy & minerals markets" (11 Feb 2019)
https://www.youtube.com/watch?v=wv0PHIo1zzo
===[
"We are in the midst of a global battery arms race," said Benchmark Mineral Intelligence MD Simon Moores this week in the Dirksen Senate Office Building in Washington, DC. The purpose of the hearing was to examine the outlook for energy and minerals markets in the USA’s 116th Congress.
]===

"Simon Moores: Big Investors are Turning Down the Century's Top Trend" (13 Mar 2019)
https://www.youtube.com/watch?v=YipKMeXH5lA
===[
Interview conducted at PDAC on March 6, 2019.

In this exclusive interview, Benchmark Mineral Intelligence Managing Director Simon Moores shares his thoughts on battery metals.
]===

EMH must be looking quite attractive round about now to the car manufacturers in the region!

Some great links as ever

"Lithium Miners News For The Month Of March 2019" (Mar. 27, 2019)
https://seekingalpha.com/article/4251240-lithium-miners-news-month-march-2019
===[
Simon Moores - "Nowhere near enough lithium companies are getting funded....The lithium in the pipeline is well behind what is needed."
Simon Moores - "You're going to have supply problems in the next 2 years for these battery megafactories... The demand is not just there, it is intensifying... there isn't enough (raw material)."
]===

Could we finally be in the right place at the right time? Finally!

Have a rec on me ;-)

Good point @jimb2. As you suggest perhaps the BoD decided there was more value to be had in raising off a slightly inflated (~50%) share price off of the back of MMS news, rather than continuing to sell down BCN in the hope that imminent BCN news raises the share price substantially in the near term before our next sell a few months or so down the line. After all, BCN are intending to complete financing in H1 2019...

Nice! I'm currently valuing our Yangibana JV's conservatively at 4% of Hasting's market cap. This is because I believe we have approximately 7% of the resources and 6% of the reserves, but come later in the mining schedule. I'm interested to hear how others might be valuing Yangibana in their own valuations.

@Ironic - although @Bannor and I clearly don't see face to face: I believe him to be a sincere knowledgeable shareholder.

@Bannor: When I said this: "Not so good on those spiked though - I feel for you!" I didn't mean I felt for you you, just for those spiked in general, we've all been there. Having said that, I do now feel for you. Take care ;-)

Ob.

Just saying it how I see it @mrcautious - it's not always sunshine and rainbows from me. People get spiked. It's a fact of AIM. We shouldn't be afraid of discussing the mechanisms behind this - especially if it helps a single person from a future impalement... Not enough long term holders willing to sell IMHO. Likely because if they are anything like me, they still see the potential for massive returns from here!

Though I will apologise if I am winding people up! It's a tricky subject to discuss - especially in public.

And yes - I am a bit wierd. Weird too.

Ob

I know it wasn't technically a premium @Bannor... Just having a bit of a laugh as clowns do. Your second paragraph contains the thrust of my argument though, we might consider ourselves fortunate to see it close @0.15p as I believe it's a "premium" to what the market appeared to support last week + new MMS value.

You don't suppose me and you discussing this could make this a self-fulling prophecy do you... Point being it seems to me the BoD managed to get @0.15p away on the back of newcomers who massively overvalued the MMS news, and it's those that are in essence paying for this "premium"... Well done the BoD - Not so good on those spiked though - I feel for you! But it's the way it goes in a free market when there are not enough sellers for the number of buyers...

As it happens I see this placing as a win from my perspective, and I suspect those buying in @0.15p also see it as a win for them! Win - win. Just how I like it ;-)

Clown

LoL @Bannor! Of course they can't claim it was at a premium, but we all know it was really - just don't tell those that took part... ;-)

Certainly feels like a lower risk proposition than this time last week @d21! Also, given that the fund raise will be partially used for "project review across several potential investments" indicates to me that we could be on the cusp of (finally!) realising a decent asset sale to progress future and recent investments, where we can increase to 100% ownership, up the value curve as we shore up to production/sale. I personally doubt we'd be looking at more assets if we weren't confident of funding them through sales elsewhere. Which will be the first to go though? EMH? Sonora? MMS? Yangibana? Place your bets... ;-)

Ob.

I said this yesterday:
===[
If the share price is above what they consider good value, then if the market supports it I would be happy with a placing to raise even more funds for them to invest in projects to return additional growth to the share price in the long term.
]===

Before the MMS news our share price was about 0.1p and the same 20% placing discount to this would have been around 0.08p - which, following the placing, the share price would likely have fallen to or slightly below. With 7,851,440,339 shares in issue at the time, this would have valued the company at around £6.3m

I believe at last count our share holding in MMS was 30,000,000 shares, which means the added value from MMS's rise from around C$0.05 to C$0.15 (yesterday's close) should have added around

30,000,000 * C$0.1 = £1.7m

to the £6.3m valuation, resulting in a new fair market cap the BoD might have reasonably expected to raise at of around £7.5-8m all else being equal. This is around 0.1p. Since they actually managed to raise 50% higher @0.15p I'd say today's placing was good, which I'm sure many who managed to buy in below this will agree with!

Though I do wonder if we'll continue to see a retrace as the market reverts back to its previous approach to valuing the company, i.e. we lose the premium for an imminent decent sale - which might be on the cards for any one of our assets! Or perhaps the new blood here and recent publicity might see that premium return and stick for longer than a day or two... Roll on the day our directly held assets - the JV's and up to 100% ventures are (justifiably) valued by the market at significantly greater than cost!

@Bannor - did I just intimate that we placed at a premium? I think I might have! ;-)

Ob.

Perhaps JG will throw us another bone? ;-)

2 minute video discussing M&A in the Lithium sector.

"Lithium producers as takeover targets" (12 Sep 2018)
https://www.youtube.com/watch?v=B6Mhl_YgIXo
===[
Mergers and acquisitions activity has picked up in the last 12 months, as sentiment has finally allowed more deals. Luke Cummings, Chief Investment Officer at Harvest Lane Asset Management, explains that M&A tends to increase later in the cycle as confidence is essential for successful deals. Despite the recent flurry of activity, the lithium producers have been conspicuously absent.

Cummings believes that these companies could be attractive targets now, with prices having fallen significantly in recent months. In this short video, he explains what’s driving M&A activity currently.
]===

From:

http://www.bacanoralithium.com/projects/sonora-lithium/

KDNC has 919kt LCE in the measured and indicated category, and 559kt in the inferred category directly attributable from the JV's. If that were acquired by an interested party (e.g. a major) at say 1-2% of sale price of say $10,000/t LCE that's:

(919,000 + 559,000) * 1-2% * $10,000 = $150-300m

Here are my thoughts from 11th March that lend support to that valuation, starting with a link to recent M&A analysis from the copper sector, in fact I forgot I'd determined 3% might be a realistic in ground discount value, so perhaps the range above could optimistically be extended to $450m? Call it $100-$500m for LCE prices in the range $6,500-11,000/t ;-)

=====[
"Copper M&A: The Cupboard is Nearly Bare" (November 2018)
https://www.kincoracopper.com/media/downloads/media/RFC_Ambrian_Copper_MandA_November_2018_web.pdf
===[
The overall deal values reflect the average price paid for the acquisition of company shares, and the acquisition of assets. These values have varied over time and for copper equivalent resources the price paid has varied between US$119-254/t (US¢5-11/lb) for the past seven years. The overall average for the period 2008-2018 was US$196/t (US¢9/lb).

Looking more closely at the stage of development of the underlying assets, the data shows that the price paid for operating assets has been US$307/t (US¢14/lb), preproduction US$211/t (US¢10/lb), feasibility US$193/t (US¢9/lb) and exploration US$74/t (US¢3/lb).
]===

The Lithium market IS NOT the copper market. However. If it were, in the period in question the sale price of copper has fluctuated between $4-10k/t with say an average of $6.5k/t. If we use the rough average of the feasibility and preproduction R&R prices of $200/t that's 3.08%, call it 3%.

Applying that to the Sonora reserve and resources of 8,817kt LCE off a long term LCE sale price of $12,000/t results in a potential M&A value of:

8,817,000 * 12,000 * 3% = $3.2B

My take is that for an offer of that magnitude to be made the demand for lithium must be such that prices of $12,000/t could be supported such that the R&R could be expected to be reasonably mined in a 20-40 year period. i.e at an increased production rate of 200-450ktpa. If a major enters the market, this is the sort of resource and production rates I expect they'll be looking to commandeer.

Ob.
]=====

I think it's good odds we'll see some M&A activity for some of the assets we own in 2019.

DYOR, especially for the above ball park figures which may include errors... up to $500m seems a lot - perhaps a 2% discount is more likely than 3% in practice for a project of this nature at this stage of development?! ;-)

Ob.

@Si90. "Which have also been stated as been worth between 0 and 15 million (bcn)". That's very likely just for the very small amount of the JV1 in the current mining plan. ~3.6% of the 19 years is directly attributable to us. If just that area were sold at the post tax NPV of £802m, then that 3.6% equates to £30m or so. Since the 3.6% is mined towards the end of the mine life, discounting would bring that sale value down perhaps to the quoted 15m. Point being, as most here know, the value to us from Sonora is the parts of the JV's which aren't yet in any mining plan. Some are JORC'd to reserve status meaning that if they are acquired by a significant other I'd expect the value to us to be in the triple digit millions. Do some research on in ground value sale prices (take a look at my posts from a few weeks back to see how I compared to the copper M&A sector) ;-)

On dividends - each to their own. I'd prefer our BoD to buy back shares if the share price is demonstrably undervalued (perhaps because it is being shorted, or just because it is unloved at that moment), rather than dividend out. If the share price is above what they consider good value, then if the market supports it I would be happy with a placing to raise even more funds for them to invest in projects to return additional growth to the share price in the long term.

We've not had a good run in recent years, let's hope that is all about to change. I suppose to some degree it already has! ;-)

Ob

@Si90 There are several options to return value to shareholders on the back of future success. If for instance MMS were acquired for £1B, and we received £100m for our shares on the back of this. If, for whatever reason our share price didn't appreciate to reflect this added value, then the BoD have authorisation to buy-back shares on the open market reducing the total number in circulation, which would (eventually) lead to the share price rising in this contrived example.

I am not expecting, nor would I want a dividend from this share. A dividend would send a wrong signal to me: It's like the BoD saying here have some money, you can invest it better than we can. I'm sure many think that already! ;-)

It's all about share price appreciation for me. Something which we are sorely lacking, but with multiple potential sales on the near to medium term horizon, the story could hopefully be about to turn - and we saw recently just how fast the SP can react to good news.

Ob.

Get yourself 3% of an unloved company for just £12,275

That's 42,624,205 shares @0.0288p, less than half the *minimum* share price (0.07p) the convertible loan can be converted into shares at.

If this share rockets on good news like it should, someone re-post this post will they? ;-)

Ob.