Member Info for observer842

Off the top of my head the worst thing about San Luis/Zulu @Frankie is that we go ahead all the way to 100% and 50% ownership respectively, but never manage to get either to production or sale - I'm sure @Bannor can think of something worse. LoL! ;-)

Oh I meant to address this point from @Bannor: "I very much would've preferred they'd sat on their hands, protected our Sonora exposure with only the required debt & dilution to achieve that until Sonora realised it's value .... at that point they'd have had funds to go off exploring & playing master investor with realised funds instead of massively poisonous & dilutive debt & share issues."

@Bannor - I couldn't agree more in hindsight! Clearly that would have been ideal. But at the time it's of my opinion that certain members of our BoD believed we had the necessary backing to see the merger to completion. Again, to my mind, that backing faltered and fell way and it didn't go ahead. But be in no doubt, I'm sure that in hindsight, our BoD, as I do, wish we'd only borrowed just enough for the shares and to take us to 20% in EMH! So no more told you so's eh? ;-)

Ob.

Indeed @Ivybush and @Bannor. I'm sure everyone has their own particular style of analysing the past, present and future of companies. I tend to try to put my shoes in the BoD's shoes: trying to think about it from multiple angles: a BoD out for purely personal gain, that of their friends, one out to maximise shareholder value, short term, medium, long term strategies and share price goals etc. When it comes to posting my thoughts on here, I tend to do so wearing the shoes of a @Kiran where I've taken all he's said on board at face value - attempting to understand the decisions they took given all available information to them at the time, which is always more than we know - often even in hindsight.

So the way I tend to report the recent past is as how I remember @Kiran relating it: Despite us funding drill work, BCN were unwilling to mine our JV's first, and more so were looking to erode their value further by re-domiciling to London without an operational agreement in place. We can't fully blame the BCN BoD for their actions as it maximises their shareholder value, albeit to the detriment of ours: not everyone believes, or cares in win-win... So we borrowed money to buy shares to block it. The balance left over after the BCN share purchase was also used to increase our shares in EMH (and elsewhere?) and would have been used to further sweeten the BCN takeover had that gone ahead.

On to the more recent past. Despite @Kiran's reassurances we don't really know the value of any operational JV agreement, which presumably has yet to be signed (!?). So from my perspective, thinking from @Kiran's, their are a few scenarios we need to cater for: valueless Sonora JV's, good operating value Sonora JV's, and a (part) sale of Sonora JV's.

Interestingly all three scenarios leads me to the same conclusion: we should be pursuing farm-in strategies similar to the San Luis and Zulu ones. The reason being in the valueless Sonora JV strategy we have some good new JV's to shore up to a point where we can diversify from them - rinse and repeat, slowly growing our SP. However, if Sonora JV has value, and/or is sold, we needn't necessarily diversify from San Luis/Zulu - we should be in a much stronger position to take them to production and on much faster timescales than if we had to look elsewhere for equity funding. Even if we are flush with cash, it would still be in our advantage to part fund via debt, using that cash to rinse and repeat other projects up the risk/reward/value curve.

And the best thing about San Luis and Zulu, is that we can abort at anytime. Given the above, I'm surprised some still worry about this plan. I'm personally quite excited by both - but holding fire until San Luis has been permitted and Zulu has been signed off. Timescales wise, I'm very disappointed in San Luis! As I'm sure our BoD and the BoD's of our neighbours are! :-(

Ob.

@degsie, do you want me to expand on any of the points in my post on 9 Jul '18 summarising (very briefly!) the way I see it?

Different province @spring, hundreds of miles away ;-) I believe our San Luis neighbours are still waiting for their exploration permits to be granted... Didn't our BoD anticipate these to materialise quickly back in mid June? If they haven't been granted by the end of July, then surely August!

===[
The Company has been advancing discussions with an interested party to take forward exploration for lithium across the Company’s extensive ~1,300 km2 portfolio in the Pilbara.

The Company has been advancing discussions with an experienced lithium partner to further explore the Company’s Reynold Springs Project in the Railroad Valley, Nevada.
]===

I wonder if either of these are us? If so, it could suggest a windfall is heading our way - either that or our BoD really want to wind up @Bannor! ;-)

Perhaps a forward purchase agreement will be the final piece of the funding package? It's certainly in the off-takers interest to see this project through to production, and for a suitable discount to prevailing (LME @Barksy!?) prices they could be champing at the bit for the opportunity: if a better offer isn't forthcoming that is. Take a look at table 22.1.2 of the feasibility study, bearing in mind those figures are for $11,000/t LCE when the going contract rate is currently more like $16,000/t LCE. $120m? No problem! ;-)

Oh no @Barksy - what have you done!? Couldn't you tell the mood @Bannor is in that tweet isn't going to sit well...

There's no doubt we could have played the cards we dealt ourselves differently. Both worse, and better. It's hard to say which particular play might have gone better, but for me, had we not had regulatory problems with our Mexican backers we could have been in a whole different place today. I hope our BoD learnt a good lesson from that!

I don't know how many times this has been said on here @Frankie ;-), but I'll say it again: our hand was forced, our creditors (the convertible loan holders) wanted part (some no-doubt wanted all; those that didn't were happy to renegotiate the balance) of their money back, so either we had to raise money via a placing (probably at a terrible share price) or sell something. Since the BCN share price had appreciated sufficiently and it looks like we want to stay above 20% for EMH, we sold a portion of our BCN shares, the portion we bought at an average price lower than what we sold for. That means the remaining shares have a purchase price approaching an average of a pound (has anyone got the number?). Since then we have sold a few percent of BCN shares at an undisclosed share price. It's likely, but not certain, at least some of that percentage will be above a pound a share, and it's likely the overall average sale price of this recent few percent is higher than the remaining average buy price (which includes the pound a pop shares we purchased to block the initial re-domicile attempt which, we are led to believe, could have significantly devalued our JV's).

And thank you for your detailed response @Frankie!

Any stage 3 rumours? ;-)

First things first @Frankie. If you feel like a snail chasing a bird, then you might want to consider stopping to reflect on the situation. Perhaps the snail will sprout wings and turn into an eagle? I've never seen such a thing, but in an analogy anything is possible, no matter how unlikely in reality. Perhaps you should get yourself a session with a good financial adviser who will almost certainly warn against putting all eggs in the same basket and chasing losses, especially if the primary reason is to average down. I really hope you can afford to lose everything here and still live an OK life. KDNC is a gamble, albeit a seemingly good one, for me! But don't listen to me, I've been saying Strong Buy and been following through all the way down to 0.2p and other than a few good bounces, have been proved pretty much "wrong" to date. :-(

I believe we first officially notified BCN as part of their re-domicile: it's on their AIM26 page where they say:

http://www.bacanoralithium.com/investor-relations/restricted-aim-rule-26/
===[
(3) Cadence has confirmed to Bacanora that it now owns approximately 8% of the company’s shares. As an Investment Company, Cadence is only required to file a TR-1 when it crosses the 10% and 5% threshold.

This section was updated on 29 May 2018.
]===

Our Sonora page has incorrectly said 7% since NextView were on the scene as that is what our 9.3% would have been approximately diluted to. It was never readjusted back up after they left the scene. As confirmed in today's RNS it should say 8% here:

http://www.cadenceminerals.com/projects/sonora-lithium-project/
===[
Ownership : 7% Equity Interest – 30% Joint Venture
]===

In terms of selling assets. You realise we have convertible loans, one of which has to be paid off each month, and I don't think anyone really has an appetite for a placing at such a low share price so means must.

For examples of "Value curve" do a google image search for "Lassonde Curve" or "life cycle of a mining project". @Kiran had one in an earlier presentation. The point is that KDNC invests - proves up, and moves on. We aim to invest towards the minimum of each stage of the curve, and sell towards the peak. We are moving on from BCN, but hopefully not the JV's without getting good value from them in return! ;-)

I'm with you that it would be a shame to have to sell anymore of BCN at these low prices, but if we have to, or we think we can grow the money faster elsewhere (e.g. EMH, San Luis or Zulu) then we should certainly go for it, even if it means crystallising a technical loss with BCN! All IMHO...

Ob.

Don't you think it will be a little bit... embarrassing for them if the placing is below our 70p sell off? ;-)

@Frankie. I think we realised a couple of million when the BCN share price was significantly higher than today's (which in hindsight is good!) We are still claiming around an 8% holding, and this is down from the 9.3% after the 70p sell off from 16% in September last year to pay back our creditors. i.e. we've sold around 0.8-1.8% of BCN since then - almost certainly some, if not all, around the turn of the year above a pound to realise a profit on what we paid! ;-)

In terms of old vs new assets. It's all about the value add curve. I'm 100% behind @Kiran on this.

"Bacanora Lithium (BCN) Announces Strategic Investments of US$90m And A Proposed Placing to Raise US$100m." (16 July 2018)
http://irservices.netbuilder.com/ir/cadence/newsArticle.php?ST=REM&id=2508950
===[
Cadence Minerals CEO Kiran Morzaria commented: "Following on from last week's senior debt funding package announcement, today sees Bacanora take two additional and hugely significant steps towards the start of the construction phase of the Sonora Lithium project in Q3 2018."

"Securing additional backing from existing strategic partner Hanwa and new funding from a blue chip investor of the calibre of SGRF further underscores the quality and longevity of the Sonora Lithium project. Along with the $100m placing, Bacanora looks set to complete its funding package by early 2019. On behalf of myself and Cadence Minerals, we congratulate Peter Secker and his team for achieving this milestone today"
]===

One step closer to JV realisation. And if @theiceberg's rumour is true... (Bad Ob!) ;-)

Ob.

Indeed @Simon_Said. Could all be over in a day or 2 as it's an accelerated Bookbuild. KDNC sold a large tranche at 70p a while back (they've been selling higher than that in recent times!). I'll be quite surprised if the placing price goes below that.

You realise that rumour has to be discounted to zero without evidence, but hey, what a rumour to share! Would be great news for the JV partners ;-)

17.5ktpa from Hanwa and 10-13ktpa from SGRF. Any more, for any more? We could be talking Stage 3 territory soon me thinks! ;-)

Reasonably endeavours on behalf of the seller was my initial thought too, but on closer inspection of the wording it seems to imply the buyer. But if it is the seller then it could be as you say, to protect the seller if for some reason the production rate falls behind. Alternatively, it could be another hint of a Stage 3. i.e. they've earmarked 35-10= 25ktpa from Stage 1+2 to Hanwa (which is around 70%...), and therefore the additional 3ktpa is contingent on a Stage 3.

Takeover bid is certainly interesting! Whoever might be in the wings waiting to make one is cutting it a bit fine! We'll be taking it to production and reaping the rewards ourselves if they aren't careful ;-)

Ob.