Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
I'm expecting the offer(s) to takeover HZM in H2 2024 and with Bank of America predicating it's recent near term valuation on $30k nickel, I'm wondering just what percentage of NPV8 for A1, A2 and V posters to this forum expect at that time to be regarded as a "fair" offer?
In particular the PFS for Vermehlo will have been superceded by the DFS, but on the old PFS figures, $30k/t nickel throws out an NPV8 of over £3.5bn for Vermehlo alone.!
I want as a minimum in July 2024;
85% of Arag1 (built and producing)
30% of Arag2, waiting in the wings to be built quickly and doubles capacity/profits (minimum Capex and some old kit already spent).
10% Vermehlo.
In total at $30k nickel, this comes to an offer of £2bn to take us out.
When reading more about La Mancha's aims, when it gets involved with a junior (below), I doesnt say to me that they'll give up this position in HZM easily to the likes of Glencore, without extracting full value in their stated 3 to 5 year investment timeframe.
"Promote operational efficiency improvements through streamlining the cost base, enhancing management capabilities when required, optimising life of mine plans, increasing plant efficiency, and reinforcing ESG action plans.
Assist in unlocking organic growth and value creation opportunities by defining long term exploration plans, developing assets and building new mines, and increasing plants’ throughput.
Foster and support accretive external growth opportunities through bolt-on acquisitions, regional consolidation, and exploring mergers with larger players."
From the BoA note:
£1.90 Valuation is based on 0.5x calculated NPV to allow for remaining execution of build risks.
Looks like we'll be easily over Wasa's £3 then when producing in 2024.
Other takeaways;
They note that class 2 nickel will also be in deficit from 2025 with nickel over 30k/t.
Editda for Arag1 is given in the range of $200m to $250m and they note that the current valuation is only marginally over this.
Capex for Arag2 is less than half Arag1 and doubles production and can be found from FCF.
China's COVID lockdown policy has undoubtedly and significantly held back the economy over there, and by extension affected Vanadium demand, at least on the steel (rebar) side.
However looks like things may be coming to a head..
https://www.bbc.co.uk/news/live/world-asia-63776816
So by not addressing your previous unfounded scaremongering in the OP from 9 months ago, and instead deflecting in your reply, I take that you accept it was total tosh, designed to spread fear and doubt.
Its worked in your favour though - so got to hand it to you but I wonder how large the position you've built is now..?
If you haven't .. the clock is ticking... every day is a day nearer and with nickel going back through 25k .. who knows when this will inevitably break significantly.
Tick tock.
https://twitter.com/jenstilmanydots/status/1588999818718097409?t=5u6nfydKu1iaH9JyznuGcQ&s=19
We know that Glencore will want to take us out when all build risk has gone and cashflow from production has started. ((Say 18mths+ away).
Question now has to be what would La Mancha and Orion let this go for at that stage when Vermehlo and Arag 2 lie ahead and all the hard work has really been done getting Araguaia built and producing.
I 'm guessing that after their money has been tied up for a number of years and having taken significant risks, then they will want to more than just double their original 7p financing funding to be persuaded to give up all that FCF that begins in 2024, especially if nickel follows the predicted demand levels forecast for 2024 onwards.
Why would they give that up for just a marginal gain?
I was shocked at the total disregard for PIs shown by the board this week. We've truly had our pants pulled down. However I can only believe that La Mancha and Orion have their interests aligned with ours. If they do then they will be looking for north of £3, not south.
Nickel doesn't get much dirtier than Indonesian nickel. Pricing needs to reflect ESG/carbon impact so that consumers are clear about what they are buying in to when purchasing an EV.
"Indonesia’s high-carbon nickel key challenge in global EV uptake | Financial Times" https://www.ft.com/content/2ca51587-4b51-4019-9040-4ddedac252d9
"Fed that is leading all other banks in rates will have pivoted well before"
And what do we think will happen to dollar priced commodities then ...?
Especially those such as nickel with increasingly tight supply, low stock levels...?
With regard to the OP of this thread, I disappointedly note that the UK has now raised the price cap on domestic electricity to £0.52 kwh making the incentive to move to an EV purely an environmental decision rather than benefitting financially from the switch.
My partner has a plug in hybrid as a company car and it will now cost them more per mile if she plugs it in than if she just uses petrol.
So much for our climate targets..
Thanks for chart link TDT.
In that zoomed out view it appears to me that LME nickel stock has essentially been falling for 6 years (it has resumed the same downward trend line post the temporary Covid rise in stock).
At the same time, for the same 6 year period, price per tonne is on an upward trend (curve) that remains unbroken despite the retrace from the crazy spike we saw this year.
So maybe not really any divergence. Stock going down and price going up over the longer term.
£4.50+ by July 24 in my view to take this out at fair value for both parties (calcs dependent on nickel price being roughly where it is now and Vermehlo DFS producing similar findings to the current PFS.)
Still £1.025 now to £4.50 in around 22 months needs compounded growth of 7% per month. Not a bad rate of return. Of course the longer this goes without moving then the better the return rate will eventually be.
Net Asset Value £181m as per these accounts and trading at £198m mkt cap
Therefore £17m is the market premium being paid for the 30yr mining profit potential, and additional asset development (Arag2 and V).
Accounts confirm Arag is on schedule, a schedule that leads to production ramp up in approx 18 mths.