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Totally agree Chris regarding our current profit margin and it's why I added again on Friday.
The point of this thread is to also point out the massive transition to self generation in SA that is evident in the FT article. (From just 86MW to 1650MW in 1 year now that the SA government have finally got out of the way.)
Our own mini grid with vrfb will be operational shortly and as well as reducing power costs at Vametco, should be of great interest to other organisations in the current SA environment.
The shambles of Eskom is no doubt causing ongoing difficulties and extra cost for Vanchem operations.
We await to see the impact on Q4 shortly and guidance for the year ahead.
However this power crisis creates opportunity too.
I read this from the FT with interest (link below)
"Renewable projects capable of generating 1,650MW were registered last year, after the government ended the requirement for companies to secure a licence to produce their own power, according to ***lor Montmasson-Clair, senior economist at the Trade and Industrial Policy Strategies think-tank. This compared to just 86MW in 2021.
“Before, it was quite difficult to put forward any private project. It really shows the impact policy changes can have,” Montmasson-Clair said. “We’re likely to see in 2023 an even greater number of projects.”
Such a swift and massive change towards private generation, largely based on renewable solar, creates the perfect backdrop in which to market complete minigrids such as BMN are about to complete at Vametco.
https://www.ft.com/content/77f1e4fa-5c1d-4c4c-8ade-c1168250a60b
For the 2 years that I have been building a stake in HZM I've been encouraged that production is timed with the beginning of the forecast nickel supply deficit period (2024 onwards). Similarly the Vermehlo DFS.
In the build up to 2024, it's been repeatedly forecast each year that there will be a 12 month surplus and that again has been forecast for 2023 with associated downbeat pricing.
However it is surprising, and therefore even more encouraging, that throughout this 2 year period nickel prices have risen fairly consistently and currently stand at around $29k on LME and $31k SHFE, so far defying predictions.
So what price when there really is a deficit in the years to come?
Or is there a deficit already that Wood Mac et al are behind the curve in identifying?
Largo continues forging ahead (another +5% today).
A confident realistic statement addressing current costs/margin, 2023 guidance, BE carve out status, further plans to mitigate load shedding and the Orion debt from FM as part of Q4 results shortly and this could play catch up very quickly.
I agree with you Chris, however you could also argue that the debt aspect is now less of a concern than it was 6 weeks ago when operational margins were much tighter in a lower V price environment. Sustained higher cash generation should translate into more rapid debt repayment and/or better renegotiated terms with Orion if necessary.
I posted a similar point re LGO a couple of months back Macanman.
In my analysis then BMN and LGO sp falls were virtually like for like to within 2% of each other over a 3 month, 6 month, 1 year and since the Nov 2018 highs.
I note that there has been a short term divergence since however with LGO rising almost 30% in the last month whilst BMN has stood still.
To me that has signalled a further buying opportunity with BMN SP not as yet reacting to the rally in the Vanadium markets.
I love a bargain! And BMN mcap is so detached from both its book NAV and its prospects as an ever greater producer that it's an easy medium/longer term hold whatever scare tactics some posters on here employ.
Chart Tweet
https://twitter.com/VauxViva/status/1611662655881633793?t=IP-oEVi8gkls8xJMNFUL9A&s=19
Looks as though these cumulative V price rises are benefitting Largo; up 10% today and 17% for the shortened week.
PP - I've never understood A2 NPV being lower (and by a significant amount) than A1. Makes no sense for the reasons you outline.
Can someone please ask the the company at the next opportunity to explain perhaps.?
TD2 - wonder what the class 2 discount to SHFE nickel price is?
SHFE nickel stands at an additional $3650 over LME currently.! ($33750)
Afternoon Rover - hopefully you like me have now recovered.?!
With regard to your reading of my post, yes the current mcap is only one fifth of A1 npv but I do not believe we will therefore get 5x on A1 production alone. This is because of the following (and I welcome correction or input from any other poster):
The NPV calculations are a few years old now and therefore elements have evolved and/or supplementary elements are now known;
Such as;
# There is a 2.5% royalty on A1 nickel.
#There is a 1.1% takeoff fee to be applied
#Coal has gone up sharply affecting the opex.
#Electricity deal (-30% to NPv) struck
#Nickel price is class1 and a discount to this for class 2 is required.
Therefore, for the above reasons, I would discount the current $30,100 nickel price to $25,500 to get a realistic value to put into the HZM Npv calculator.
This gives an A1 npv of £1482m, meaning I'm looking for an eventual 3.8x uplift (rather than 5x) in mcap for A1 alone (if LME nickel remains at 30k)
From 31/12/21 to 31/12/22 HZM;
SP went from 129.5 to 147 (+13.5%)
Mcap went from £246m to £392m (+59%)
Nickel price went from $20,800/t to $30,100/t (+45%)
$ to £ went from 0.74 to 0.83 (+12.2%)
Arag1 NPV8 went from £901m to £1981m (+120%)
Arag2 NPV8 went from £593m to £1209m (+104%)
Verm NPV8 went from £1833m to £3481m (+90%)
Total NPV8 was £3328m to now £6671m (+100%)
Arag1 build 0% to greater than 28% complete now.
If we assume that there is 0% in the current SP for A2 and Vermehlo, and any other asset that HZM hold, then the Mcap is all against Arag1.
Giving Mcap as a percentage of A1 NPV8 to be;
Was 246/901 = 27.3% 12 months ago
Now 392/1981 = 19.8% !!
Here's to a great 2023 on the horizon
Asian metals now has US Pittsburgh price back to where it was 12mths ago in % terms.
Anyone remember, or know, what price that was and therefore now is?
It opened at over $32,500 on SHFE last night.
https://twitter.com/Sino_Market/status/1607905786818342912?t=xa5KDlDSYDtZpDAoEtmRrw&s=19
Just refreshed Asian Metal to see Vanadium price rises across most markets including the US. Great news from BMNs premium market. Wonder if the US starting to rise further again is coincidental with the passing of this bill..?
It's the end of the year approaching fast and time for a celebration of the progress that has been made ..
But hang on;
At the end of 2021 the company had an mcap of £240m. At the time $to£ was 0.74 and nickel was $20,800/t on LME. That gave Arag1 an NPV8 of £900m.
We were therefore valued at 240/900 =27% of npv for Arag1 alone with nothing included for A2 and V.
Fast forward 12months and we are on schedule with the build which is now close to 30% complete. We've also started the $25m commitment to V DFS. Opex costs are looking good after a superb long term power agreement etc..
Mcap has risen to £375m. But doing the same calc as 2021, Arag1 NPV is now based on nickel $28700 (today) and $to£ of 0.83. Giving a current NPV for A1 of £1800m.
As a percentage of this, the mcap has gone backwards!
£375/£1800 = 21% (Still assuming no value for A2 and Vermehlo)
So 27% back to 21% even after the recent rally.. !
Progress on the ground in Brazil but not on the mcap.
Is there a surge in SP ahead if nickel is anywhere near current levels as 2023 progresses.? Surely by end of 2023 with first nickel just literally a few weeks away, mcap would be > than 50% of A1 npv!?? And A2 FS will have given some value to that project, and Vermehlo DFS will be all but signed off..
I'm therefore going for £850m mcap (£3.15 sp) at the of 2023 if nickel is 28k.
GLA and an early happy new year
The article says that Nornickel want to cut production as demand in Europe for their Russian metal is down.
Understandable!
But maybe this is also the explanation for LME nickel stocks rising currently at that same time as the Nickel price is rising strongly? That wouldn't normally be the case but LME have of course recently decided not to boycott Russian sources.