Member Info for observer842

@Dallas:

"Interim Results" (13 February 2019)
https://polaris.brighterir.com/public/bacanora_lithium/news/rns/story/w6l18kw
===[
In July 2018, the Company drew down the first US$25 million of the RK debt facility.
]===

@Dallas. My 6,524,242 was from Yahoo.:

https://uk.finance.yahoo.com/quote/BCN.L/history?p=BCN.L

It's now showing as 6,709,303.

I trust you more than Yahoo so I'll go with your 8.3m trades! Although I see HL is currently showing 8,444,303 for today... ;-)

I believe we held 6,574,000 shares in BCN around the end of February. I make today's traded volume of shares at 6,524,242. Coincidence? Probably - but if we wanted out, today was a good day to shift a fair amount! ;-)

@Tesla101, I didn't find it too strange that BCN was singled out. The analysts will be quite familiar with BCN, having covered them when they covered KDNC a few years back. Also, they explain why BCN is compared against on page 5

"European Metals Holdings: Significant lithium resource at the heart of industrial Europe" (11 March 2019)
https://www.europeanmet.com/wp-content/uploads/2019/03/FN-EMH-110319.pdf
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Table 2: European Metals Holdings Peers in Europe (plus Bacanora Minerals - as a major London-listed lithium company)
]===

Indeed @Tesla101. I hope it wasn't in response to the WHI report which was released today. I doubt it, but any excuse for the shorts to latch onto...:

"European Metals Holdings" (11 March 2019)
https://www.europeanmet.com/wp-content/uploads/2019/03/FN-EMH-110319.pdf
===[
The capital markets have recently been a difficult place for junior explorers and developers in the Natural Resources Sector. Bacanora (AIM:BCN) is a case in point when, even with a compelling feasibility study for production and several strong partners lined up, it has still run into difficulties with financing its project in Mexico. We believe that with European Metals Holdings’ project location in Europe and the many car manufacturers pinning their future on EVs, and the potential growth of a significant battery industry, will create an environment where industry participation and/ or EU guarantees in the funding of the project may be a distinct possibility.
...
Location in an area full of infrastructure is also seen as a positive. The new spodumene producers in Western Australia are remote, the Chilean and Argentinian brine deposits often lack sufficient process water and the new clay deposits in Mexico are also remote and in areas which will be new to mining with all the lack of support services that implies. Cinovec by comparison benefits from significant infrastructure, access to experienced contractors and a trained workforce and is in fact a Brownfields development of a previous mine.
]===

Can anyone confirm whether the WHI figures are after tax. They include tax in their Discounted Cash flow analysis on page 12, so I presume so. 30% IRR including tax is significant uplift from 21% post tax in the PFS ;-)

@earache, I missed the bit about possible project equity funding @35p/s. Good spot! In terms of your "More small interim raises?" From the WHI report today:

"European Metals Holdings" (11 March 2019)
https://www.europeanmet.com/wp-content/uploads/2019/03/FN-EMH-110319.pdf
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European Metals is well-funded for the short-term with £2.6m in cash (WHIe).
]===

As for: your "have we commenced pilot plant operations?" From the Shard report:

"Security of supply for the European battery market" (14th December 2018)
https://www.europeanmet.com/wp-content/uploads/2018/12/Shard-Capital-EMH-Dec-2018.pdf
===[
Pilot plant test work - commencing May/June 2019. The pilot plant will produce representative product samples for marketing purposes.
]===

"European Metals Holdings" (11 March 2019)
https://www.europeanmet.com/wp-content/uploads/2019/03/FN-EMH-110319.pdf
===[
Our simple DCF model (suitably risked for stage) provides for a fair value of 78p/sh meaning that the company looks undervalued in our view against its European peers.
...
In our model we assume current spot prices ($12,000/T LiOH) throughout the mine life and have inflated our capital cost requirement from the pre-feasibility study to $550m (from $393m). Using these inputs we calculate a fair value at 78p/sh using a DCF methodology risked at 20% and based on a 10% discount rate. There is strong potential for value appreciation as European Metals goes through its development cycle.
...
Full value capture - with European Metals Holdings proposing to produce a final product direct to the battery manufacturers it is not losing value in the conversion from an intermediate concentrate (e.g. the spodumene producers).
...
The changes [Producing hydroxide rather than carbonate] for Cinovec are not a fundamental shift in processing, rather a few changes to the chemistry in the back end of the plant which will require a slightly higher capital expenditure. However, lithium hydroxide currently achieves a premium to lithium carbonate (15-20%), and this differential has been higher in the past. We believe this higher price differential will be maintained and that Cinovec will produce lithium hydroxide; the economics are compelling.
...
European Metals Holdings currently trades at a discount to its peers
...
European Metals is well-funded for the short-term with £2.6m in cash (WHIe).
...
Our fair value for European Metals Holdings is 78p against the current share price of 18p
...
The result is that we use a long-term price of $12,000/t for lithium hydroxide in our analysis versus a $10,000/t for lithium carbonate price. We have added in a small $50m component of capital expenditure increase for this production, as well as $100m increase in capex over and above the PFS estimates – this raises our capex forecast from $393m to $550m.
...
Location in an area full of infrastructure is also seen as a positive. The new spodumene producers in Western Australia are remote, the Chilean and Argentinian brine deposits often lack sufficient process water and the new clay deposits in Mexico are also remote and in areas which will be new to mining with all the lack of support services that implies. Cinovec by comparison benefits from significant infrastructure, access to experienced contractors and a trained workforce and is in fact a Brownfields development of a previous mine.
...
IRR 30%
...
NPV8 = $970m
...
Breakeven LiOH Price (10% discount) $7286/t
]===

Ob

https://www.europeanmet.com/wp-content/uploads/2019/03/FN-EMH-110319.pdf

https://www.cadenceminerals.com/
===[
Cadence is a global investor and cornerstone partner in the discovery and development of lithium deposits that will fuel our greener tomorrow.
]===

Institutional investor isn't a term I'd use to describe KDNC, but by some definitions we probably are:

https://en.wikipedia.org/wiki/Institutional_investor

WH Ireland:

https://*********************/companies/uk/industrial-metals-iron-steel/european-metals/research

@news
===[
6)Mr Green in his podcast of 4 Mar 2019 said Kiran, CEO of KDNC expects a "supply squeeze". This is known in the industry itself. However, Mr Green pointed out about "quality" projects. By quality, it was not explained so what exactly would quality mean? As far as I am aware, Australian lithium especially without mica etc ie at Bald Hill, near KDNC*s Picasso may be considered quality per their CEO?
]===

Quality could mean many different things. e.g. attractive NPV, IRR, payback times, jurisdiction, infrastructure, etc. In the lithium world it can also refer to the quality of the product - the chemical composition. For lithium products it isn't so much the percentage concentrations that the suppliers are interested in (though this is important!) rather the contained percentage impurities, especially impurities that can cause adverse chemical reactions in the end products (batteries).

Take a look at:

https://www.targray.com/li-ion-battery/battery-grade-lithium/lithium-carbonate
===[
Li2CO3 of 99.5% purity – Standard battery grade Lithium Carbonate
Li2CO3 of 99.9% purity – Enhanced grade Lithium Carbonate for xEV use
Li2CO3 of 99.99%, 99.995% and 99.999% purity – Superior grade Lithium Carbonate for xEV and special applications
]===

Other definitions are available. 99.5% seems to be a common threshold for "battery grade", but as I mentioned above not all 99.5% grades are equal, and is one of the oft stated reasons why Lithium is hard to commoditise, that and its relatively short shelf life in comparison to other metals, due to its reactivity.

Put another way, a 99.5% product from one mine that is sourced by a cathode supplier can't be interchanged with a 99.5% product from a different mine without substantial testing beforehand, unless the supplier is confident the composition is practically identical - which is certainly not going to be the case between the different Lithium sources: brines, hard-rocks, clays, and to a large degree within the same source too if geographically separated and/or processed differently.

Ob.

@news
===[
4)For those who attend the London KDNC AGM*s etc, I wonder if his Lordship [history now so can ask] at BCN would have been better off for his co to be London listed and therefore able to obtain funding for the project? After all, funding could not be done in Canada at the time even for drilling and this is the reason why our Founder was at hand to provide funding once he had looked at Sonora? I am talking about about the REM [London listed] takeover offer of 88.5p.

5)I looked at the BCN presentation and saw that his Lordship*s family has sold down their share of BCN to become minority holders?

I am puzzled about this. If his Lordship had asked our Founder if he had the backers informally and he said yes, then any official takeover offer at 88.5p would require an issue of documentation under the Takeover rules?
]===

On 4. One of the stated reasons to re-domicile to London was for funding purposed. Unfortunately certain analysts spooked the market Q1 2018...

Timeline wise COE stood down as chairman on 25 July 2016 and passed away on 3 August 2016. On 09 August 2016
announced a CLN for $15m which we were subsequently told was to help in the "unsolicited non-binding indicative proposal" @100p which was publicly rebutted by BCN on 30 September 2016.

"Rebuttal of Proposed Merger" (30 September 2016)
https://polaris.brighterir.com/public/bacanora_lithium/news/rns/story/xpyndjx
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The midpoint of the Proposed Offer range represents a premium of only 13.1% to the Bacanora closing share price of 88.50 pence per share on 29 September 2016 (being the last trading date prior to this announcement);
]===

88.5 * 113.1 = 100.09p

COE's estate have sold down their holding (without notifying the market when crossing certain % thresholds). At BCN's current share price this seems like it was a good move to preserve their families inheritance.

Ob.

Thanks @news:

"Cascabel: Time for the M&A Spotlight" (September 11, 2018)
https://static1.squarespace.com/static/570c792159827e97f06d8e59/t/5c472f3070a6adb6112186a8/1548169042684/ParadigmCapitalInc_SOLGCascabel-TimefortheMASpotlight_Sep_11_2018.pdf
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Obviously, at the current stage of the project any potential acquirer would not be expected to pay the full NAV but a discount to that. We would expect something in the range of 70–75% would be in line with early-stage acquisitions in the mining space.
===]

!!! ;-)

followed up by criminal proceedings if known to be false and perpetrated for financial gain.

Indeed. A fall on what looks like unsubstantiated fake news should be cause for a trading halt IMHO.

Could bounce strongly once won - or before if they fail...

Someone's trying to win a short bet - see the BCN board. ;-)

@news
===[
3)Alan Green cites that KDNC owns some 19% of EMH and by extension = 19% of NPV at $540m. He also said it could increase. In terms of M & A metrics which is a reasonable benchmark to ascertain fair value, one broker cites 70-75% NPV [copper and gold case]. I am aware that lithium may have another metric.
]===

In relation to the M&A aspects, do you have a link for the 70-75% discount to NPV for fair value?

Here are two interesting links and information I found while hunting:

"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.
]===

"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.