Member Info for observer842

Hello @news. I thought you might be interested to know how much of the JV contributes to the 4.5Mt LCE of Mineral Reserves. It can be determined as follows:

https://www.cadenceminerals.com/projects/sonora-lithium-project/
===[
MINERAL RESERVES (Cut-off grade if 1,500 ppm Li)

Category Tonnes Ore (000t) Li (ppm) K (%) LCE (000t) LCE attributable to Cadence (000t)
Proven 80,146 3,905 1.64 1,666 116
Probable 163,662 3,271 1.36 2,849 723
Total 243,808 3,480 1.45 4,515 839
]===

The last two figures are the relevant ones. If 839kt LCE is attributable to KDNC this means of the 4.5Mt of reserves 2.8Mt are in the JV area (839 / 30%), which means 1.715Mt are in the LV area.

Put another way 38% is the LV (50% BCN, 50% Ganfeng) and 62% is the JV (30% KDNC, 35% BCN, 35% Ganfeng)

Ob.

@tomcat. Yes, and the stated $61/t at steady state production for the 62% Fe.

Cheers @EV_Bull. I tend to use lookup tables for very rough estimates of single value discounts. e.g.: https://www.cimaglobal.com/Documents/Student%20docs/2010%20syllabus%20docs/P1/P1-performance-operations-tables-2010-syllabus.pdf

if spread over multiple years I use: https://www.calculatorsoup.com/calculators/financial/net-present-value-calculator.php

As to what value of discount to use, I typically use 8 or 10% when thinking about greenfield projects, but it's possible the market might place a lower discount on this project given most of the infrastructure is in place and it was once operational, so it's certainly worth considering the lower 5% IMHO :-)

I don't know @Tradecraft, but if it is assumed to be the stockpiles then: 1.39Mt / (8,710 * 2) = $79.79/t (likely $80/t as stated in RNS)

@iamrich. I think there is a continued misperception here by a few here that shipping the ore doesn't benefit KDNC in any way. It does. It enables the project to be progressed making it more valuable. It may or may not change the likelihood that we'll take our 20%, but that is not the point, even if the probability is the same, the value this is applied to has increased BECAUSE of the shipping, meaning our OPTION to take 20% has increased in value.

Put another way, if you buy 1 of 10 raffle tickets which has a single prize of £100, The ticket is nominally worth £10 regardless of what you paid. If it were announced that (for whatever reason) the prize had doubled in value to £200, then your ticket is now worth £20, despite you not owning any of that prize until after the draw.

Same thing when thinking about risk and value in business.

Ob.

Indeed, we've always known that the $61/t Fe 62% is a conservative value used to demonstrate that even if prices were this low the project can still pay off its debt and be profitable. As it happens BRL:USD movements make this even more attractive. Personally I think it is quite reasonable to use a base long term production rate of around $90-100/t 62% Fe in sensitivity studies, especially since the recently updated mineral resource statement is using $130/t 65%:

"Updated Mineral Resource Estimate for the Amapa Iron Ore Project" (02 November 2020)
http://irservices.netbuilder.com/ir/cadence/newsArticle.php?ST=REM&id=311428202001057764
===[
The Mineral Resource Statement generated by BGS has been restricted to the Indicated and Inferred Friable Haematite, Friable Itabirite and Friable Altered Itabirite material falling within an optimised pit shell and using a metal price of 130 USD/tonne for a 65% Fe concentrate.
]===

LoL @tomcat. Never been on the receiving end of a bate and switch? The scenario that could be in play is that DEV intends to ship, but if for whatever reason things fall through this weekend, U will instead.

Yes $61/t and $80/t. Current spot is:

http://www.custeel.com/en/csi.jsp
===[
Date Seaborne index 62% Fe fines Seaborne index 65% Fe fines
2021-03-26 161.40 190.50
]===

You should be able to calculate them @tomcat. Steady state production is $55.2m & $351.44m. We are told the respective quantities are: 0.9Mt and 4.4Mt therefore... 55.2 / 0.9 = 61.333 (likely $61/t Fe 62% as stated!) and 351.44 / 4.4 = 79.87 (likely $80/t Fe 65%)

that if it turns out that the ship is here for another purpose and not for DEV's ore, that we aren't to blame, especially me! LoL.
The port is:

http://www.docasdesantana.com.br/index.php/operacional/programacao-de-navios
===[
Ships ETA ETS Source Destiny Owner Op. Port. Agency Charge Sit. Ton.
Ozios David 27 / mar 01 / apr Newark Zhangzhou DEV Norte Trading Serveporto Ore FORECAST 45,000,000
]===

Can you tell I'm getting nervous/excited? - hard to tell which! Give us a sign @Kiran - preferably in the form of a very favourable 7am Monday RNS! ;-)

Ob.

Great spot @tomcat!

This is sterling work @Tradecraft. I've now performed my own sensitivity analysis using the spreadsheets with minor alterations to enable it. Personally I don't think it is safe to alter the 3.6 exchange rate as we don't know what currency all elements are specified in. e.g. we know some of the debt is USD, but all?

My (rough and ready!) approach to determining the NPV was to change the formula in the total revenue row to include a multiplication factor. e.g. 1.5, 2, 3. And then look to see how that impacted the 2035 closing balance. This can then be discounted to the present very approximately by dividing by 3 for an 8% discount or 2 for a 5% discount.

The figures are very encouraging, and this is before factoring in improved exchange rates, and other aspects which may have moved in our favour! I won't steal your thunder though. ;-)

Ob.

LoL scratch that. If it was you that concluded: "----So, Sonora*s lithium is MORE THAN 10 TIMES vs Bolivia*s ENTIRE country*s lithium----", then I am saying you've got that the wrong way round... :-)

LoL @news. I'm not saying that YOU are wrong, I am saying that some of the reports are misinformed. Trust me...

Thanks for all of the information and views @news. It is appreciated. I think that if it transpires from all of the recent press that BCN are forced to reveal where the lithium is intended for, and it turns out to be mostly Tesla (via Ganfeng or otherwise) then I think it would do wonders to both BCN's and KDNC's share price.

Hello @news. I thought I'd point out that some commentators appear not to be comparing apples with apples. The 243.9Mt is the weight of the ore reserves containing the lithium. The LCE contained in this ore is 4.5Mt. Take a look at: https://www.cadenceminerals.com/projects/sonora-lithium-project/

As to Bolivia? My go to source is the USGS

https://pubs.usgs.gov/periodicals/mcs2021/mcs2021-lithium.pdf
===[
Lithium resources are Bolivia, 21 million tons
]===

Since the USGS reports in Lithium weight not lithium carbonate equivalent that figures needs to be multiplied by 5.323:

21Mt * 5.323 = 112Mt LCE of resources - compared with Mexico:

https://pubs.usgs.gov/periodicals/mcs2021/mcs2021-lithium.pdf
===[
Mexico, 1.7 million tons
]===

1.7Mt * 5.323 = 9Mt

which is presumably the (rounded) 8.8Mt of Sonora resources.

I hope that helps with the comparisons!

Ob.

Hello @news. I've now taken a read of several Mexican articles (and may I recommend using the Google Chrome web browser as it auto translates) and I am fairly confident that each of them are drawing their conclusions from the area of the annual report I highlighted, coupled with the reasoning that Ganfeng supplies Tesla, and Ganfeng have an offtake with BCN and a large interest in the Sonora project and BCN. From what I can see there is no new information that shareholders are missing, in particular there are no official hopes or plans for BCN to supply Tesla, just potential opportunities. Even this sentence from the annual report might be referring about companies in general following the trend to localisation rather than the specifics of Tesla itself "This push for localisation provides an opportunity for Sonora Project and ZNWD to supply the key element, lithium, to their respective geographic markets.". But what can be said is that BCN are certainly playing the Tesla popularity card in an attempt to drum up support so it wouldn't surprise me if they intentionally left that sentence ambiguous - just take a look how many times Tesla are mentioned in the annual report. ;-)

I nearly didn't write the above, because I suspect you will not be happy to hear it, but I think it's important when reading the press to find the source material to help understanding what the true situation is rather than be swayed by an article's agenda. I hope you agree! Of course I'm happy for you not to agree on this or any of this post, in which case let's agree to disagree on this one? :-)

Now back to ship spotting for me. Have a good day!

Ob.

That's fantastic @Tradecraft. As I mentioned before, I recommend you set the exchange rate to 3.6 for various reasons, not least because it makes comprehension that much easier! :-)

Hello @news. I thought I'd try to find the source of the excitement by the Mexican press. My belief is that:

"UK firm hopes to sell Mexico mined lithium to Tesla" (March 25, 2021)
https://www.jornada.com.mx/2021/03/25/economia/020n2eco
===[
"Tesla plans to make its own batteries, which will further strengthen the supply chain, as well as the range and power of its electric vehicles. This drive, due to the location (proximity to the Bacanora deposit) provides an opportunity for the Sonora Lithium Project to supply the key element" , Peter Secker, Bacanora CEO, told investors in a report.
]===

is from this line in the annual report:

"Annual Report and Financial Statements 31 December 2020" (08 March 2021)
https://polaris.brighterir.com/public/bacanora_lithium/news/rns/story/xq68gqr
===[
Furthermore, Tesla plans to manufacture its own "tabless" (Tesla is removing the tab that connects the cell to the item it is powering) batteries in-house, which will further strengthen the company's supply chain as well as the vehicles' range and power55. This push for localisation provides an opportunity for Sonora Project and ZNWD to supply the key element, lithium, to their respective geographic markets.
]===

I remember reading that at the time and believing it was just that "an opportunity", which every local Lithium company has, but opportunities don't make for good headlines, so it becomes a "hope" then a "plan", then a "certainty". LoL. ;-)

It's certainly worth keeping an eye out for a concrete Sonora Tesla connection though, even if it is via Ganfeng! My understanding is that they received a fair amount of Sonora samples whilst the REM deal was still on, so they should have first hand knowledge of the suitability of what we've got! :-)))

Ob.

Hello @news, it might be worth clarifying which board you are referring to. Hopefully we are on the same page and you understand it to be the BCN board as I do.