Member Info for observer842

It was our due diligence that uncovered the Leogang farce, which we subsequently were "rewarded" for with shares. As for not being able to get the full funds from our Mexican backers due to regulatory issues... sure, that was incompetence on someone's behalf, probably our lack of due diligence - but perhaps not. Maybe one for the AGM if anyone really wants to know what happened then. But ultimately we got the funds from elsewhere, on the same terms as we were going to offer to the Mexican backers. And not as detrimental as first thought as the £1.6m charge was for the warrants, which look like they won't get issued after all - so most of that £1.6m was for the books not to third parties.

But you are right overall - more upfront due diligence for both wouldn't have gone amiss. Surely 60 days for Zulu is sufficient... Sigh.

I guess we both have different aspirations for this company @Bannor. I too agree (hope!) that it will be early 20's when our Sonora JV is mined - with the market starting to recognise their worth in the next few years, perhaps as early as this one even. In the meantime, knowing that @Kiran appears to be on board with the EV/battery disruption story, I believe we can use our built up expertise and connections to position ourselves for the explosion in lithium demand which should result. Granted, San Luis looks promising *on paper*, with lots of locations to drill - but surely Zulu is a much less risky proposition? Of course the political situation could play against it. Politics eh? First Cinovec, then San Luis, and now Zulu. At least Sonora seems to be relatively smooth rolling - at the moment! But what of the royalty case...? Sigh.

Both the new ventures are Spodumene, and I think I heard @Kiran say we had others on the table too - much cheaper and faster timelines to production than carbonate. Personally I think we've been particularly unlucky with BCN not getting funding, San Luis delays and EMH politics. We still have a good hand though - and I'm backing @Kiran's judgement to play it the best he can!

Ob.

Nice analysis @Bannor. For balance I'm of the opinion it is crucial that the market can see cash flows to this share on the near horizon - not the over a decade (likely in practice) currently on the table with our direct assets (the JV's). I was quite impressed with @Kiran's update on San Luis, and what he had to say about Zulu despite not going to say anything ;-). I'd rather we didn't have to sell BCN and or EMH if the BoD's hands are handcuffed by those voting against 4 and 5. i.e. consulting and then offering to shareholders all adds to the additional expense of a fund raise, meaning the balance could be swayed towards the assets sale rather than the equity raise - even if it's not a particular good time to be selling EMH and or BCN... (which I don't believe it is!) We know what the funds will be used for, so I really see no point in voting against 4. As for 5. I'm for it, but I understand more why you and others might not be.

Ob.

Lol @Bannor: "poor chaps considering it might be appropriate to take an average of less than" £500k a year each. See what I did there? ;-)

They are suggesting around £75k each on average if we don't see the anticipated turnaround, not less than £100k, or less than £150k, or any other random number above £75k. ;-) No doubt some will get more than others though - depending on their worth and how much they contribute to the company.

£537k last year down to £300k for all four isn't to be sniffed at in my book of prudence. ;-)

Are you still hoping we decide against Zulu (and knock San Luis on the head too?) and go into lock down mode fingers crossing the Sonora JV values out some time next decade?

If we decide to go for Zulu I presume PREM will rise that day (or will it!?), but what about us I wonder? There really is no telling with this share. ;-)

Ob.

Indeed @degsie. It's a shame @Kiran keeps mentioning salary in the webinar, when taking in context he's almost certainly talking about total remuneration. If we don't see a recovery towards the end of 2018, looks like they are talking about reducing the total remuneration of all directors further still in 2019 to around £300k. Here is the quote around the 25 minutes mark:

http://webcasting.brrmedia.co.uk/broadcast/5b5b215d06c7f84227ae9891
===[
So we conscious of that and we continue to reduce it and we will be reducing salaries if this trend continues, and continue to reduce those salaries to get to the cost rate which we think is suitable for an investment company overall. I think that's well below a million pounds overall, and salaries of directors in total of around the three hundred thousand pound mark, in total for all four directors.
]===

Not another one who needs to wash their ears out! ;-)

@maddog. I have no idea what you are talking about. I understand battery tech. If it is lithium based, the future tech will very likely need the same or more LCE per kWh. If you are saying it's not lithium based, then I say it's unlikely to come to market any time soon: the momentum behind lithium is just too great.

@Frankie. Transactions themselves cost money. Say it costs a few 100k per equity raise in admin costs, fees etc. Say you need £2m. Do you do it in 1 raise or 2? Depends on how you think the share price will change by the time you need the second £1m or how easy it will be to raise. If on balance you think the share price and market conditions will be the same, and the market will support an initial £2m raise at the same price as a £1m raise, then it's likely better to raise in one transaction to save the (few 100k?) in overheads. However, if you think the share price will have risen sufficiently to negate the additional admin costs at a later time, then perhaps it's best to wait.

@maddog - I believer you are mistaken: my understanding is that pretty much all future lithium based battery technologies are forecast to be using either similar amounts of lithium or *more* per kWh not less. If you ever find that link, I'd be happy to review it. The important metric is "LCE per kWh". ;-)

@earache: "It would be interesting to know what %age of lithium p.a. is sold at spot and how much at contract." I recently heard 5-10% is spot, but for the life of me can't find the link: I suspect I heard it rather than saw it written. However, I found this from a year ago which supports that %:

"Lithium consumers to welcome exchange price contract: analyst" (01 Nov 2017)
https://www.spglobal.com/platts/en/market-insights/latest-news/metals/110117-lithium-consumers-to-welcome-exchange-price-contract-analyst
===[
Prices of lithium carbonate sold on 1-5 year contracts, representing some 40% of the market, are now around $10-12/kg. Prices for contracts of 1 year or less, accounting for 30% of the market, are at $12-15/kg and spot prices, accounting for 10% of the market, are put at $15-30/kg, according to Roskill research.
]===

@maddog38 "batteries are being tested to use very little lithium to cut down wieght and a longer life.they are ahead of the conventional format". Link please.

@Frankie. I don't know how much we'll raise at anyone time by (part) selling an asset or on market. Hopefully we'll have more than just Zulu to progress so it could be somewhere in the £1m to £3m region or so as a best guess (since it's uncertain I define a couple as lying in the range 1-3!). And don't forget there are overheads associated with just existing as a company, never mind funding all the preliminary work which has been/is going on.

As far as the market knows we own 8% of BCN. However this could be anywhere between 5 and 10% in practice as since we are an investment company we don't have to declare until we breach those limits. I believe the web page which says 7% is dated and comes from the time when we had declared 9 point something and the stated 7% was in anticipation of being diluted by NextView. But perhaps I'm wrong. Perhaps we sold down to 7% at one point, and then bought back in to 8% and haven't updated the page since? If it bothers you ask @kiran to clarify/update it?

In the KDNC webinar on Friday, @Kiran confirmed the OpEx cost advantage the brines have over clay/rock producers for carbonate production doesn't exist for Lithium Hydroxide production, as, unlike for the Brines, the hydroxide can be produced directly without first going through the carbonate route. And as PS acknowledged last week, Lithium Hydroxide has been produced at the Sonora pilot plant.

From memory Tesla wanted a 75ktpa LiOH.H2O plant to be specced at Sonora (~60-65ktpa LCE). I'm not saying it will be Sonora which supply them (as they weren't prepared to budge on the 2015 market prices in the conditional agreement), but that's a lot of material taken from the supply side of the equation which will need filling!

And with the move to the 8:1:1 NCM chemistry (to reduce the dependence on Cobalt, amongst performance reasons) we could be seeing an exponentially increasing demand for hydroxide in the coming years. ;-)

A good fraction of the KDNC webinar presentation talked about the battery chemical market in general, with a focus on lithium, so might be worth a listen. In summary: despite certain analyst's views, the market is very unlikely to find itself in an oversupply situation in the short to medium term.

Some history:

Ob@22 May '18 (KDNC board)
=====[
I never realised the "fact" on page 4 of the most recent lithium bull. If this is true then it's possible Clay could blow brine out of the water on hydroxide production operating costs. One helluva of a closely guarded secret if so! ;-)

"Imagine. Young Americans" (May 20, 2018)
http://www.libull.com/2018-05-20-Imagine-Young-Americans.pdf
===[
Spodume has a 15% structural cost advantage over brine to produce lithium hydroxide
]===

BCN has never officially played their hand on hydroxide production capability or costs... I wonder if our BoD know more than they are letting on?
]=====

Ob.

@TCGLOVER - we'll know in the next week or so whether KDNC will proceed with the Zulu project. In terms of paying for it, as stated in the webinar we'll either sell assets or raise funds from the market - which of these we will do depends on various factors, ultimately the one deemed most profitable long term for existing share holders (you'd hope!). There are other options which weren't stated, such as convertible debt. However, as it's a 5 staged investment, only a couple of million is required at any one time and only if the project is progressing to our satisfaction. If it is, and we are funding through equity placements rather than asset sales, then all else being equal with our other assets, the share price should support a higher valued equity raise at each stage. Should... ;-)

All my own interpretation from the webinar.

Indeed @denver21, and as battery chemistries move to 8:1:1 (nickle, cobalt, manganese), from 6:2:2 the traditional brine producers lose their competitive OpEx edge, as this chemistry is more suitable for lithium hydroxide, rather than lithium carbonate. Not only have we recently had confirmation that lithium hydroxide has been produced at Sonora (from PS), but that unlike for the Brines, it can be produced directly without having to go through the carbonate route first. Cinovec, Zulu, and San Luis too. Undervalued? Us? Very likely! But damn, how I've been wrong before! ;-)

In fact even if you aren't invested here or thinking of investing, a good fraction of the presentation talks about the battery chemical market in general, with a focus on lithium, so worth a listen! In summary: despite certain analyst's views, the market is very unlikely to find itself in an oversupply situation in the short to medium term.

It's a great listen. I highly recommend anyone thinking of investing here to hear him out to the end!

With so many "hold"er's looks like we need some new blood to well and truly shut that gate! I'd sincerely hoped San Luis would have been delivering the news to bring them in by now! Hopefully soon...

Housekeeping on the road to winding up the Bacanora Minerals company in favour of the Bacanora Lithium one?

No decision on ZULU yet - but the fact we haven't pulled out is a good sign! The finance situation is much clearer to us (me at least!) now. We'll likely rollover the CLN in some form or other. I think he said without an equity element, several months holiday period, but at a higher, but still competitive interest rate. Then we will either raise funds for our new ventures by either selling existing assets if they have improved significantly above our buy in, or the BoD believe they are not about to appreciate significantly in the short term. Otherwise we'll raise the (small) funds via the market in stages. The point being each time we raise, it will only be if the new projects (San Luis and Zulu) are showing potential, and therefore our share price should be at a higher price to support the few million I'd expect in each raise. If they aren't we can pull out.

Seems like a plan to me. Now lets get on with it! It would be marvellous to hear good news - for a change! ;-)

Ob.