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The CT rate in Brazil is made up of 3 elements , 15%, 10% and 9% (social contribution) currently (2021) totalling 34%
The proposal is that this will reduce by 2.5% 2022 and by another 2.5% 2023. So by the time HZM are a profitable producer their combined tax rate of 29%
https://www.ey.com/en_gl/tax-alerts/brazilian-government-proposes-changes-to-corporate-income-tax-system-as-second-phase-of-comprehensive-tax-reform
If I was a groundworks/building/engineering contractor, I wouldnt sign a contract that is along the lines of "you will be required to start as soon as it stops raining".
Its not reasonable to hang around, or start other work that you will then drop, on this basis.
So I think that they will have signed contracts with hzm that have a definitive start date.
So Im going for after B.hol Mon (Tue May 3rd)
Sorry somehow managed to post that without finishing. Typing on this site using my mobile is often really clunky. Not sure how others find it?
Anyhow I was just goung to say that my initial modelling was for a raise in 24 months time. Im not advocating that as your timeframe PP is more sensible - wait for A2 then raise from a position of greater financial strength/ higher SP. Just means waiting an additional 18mths.
Therefore the break even point for a JV would mean retaining 75+% of the project. Its all a win whichever way we go to honest. Its just the scale of that win!?
Grateful for your post PP,
The over raise for A1 did indeed include excess working capital and perhaps sets the wrong precedent, however Im pretty sure that the 2019 PFS figure of 652m will have inflated but perhaps not to $1bn point that my calcs were based on. Perhaps closer to $850m would be better.
You mention a couple of hundred million from A1 and also A2, but my timescale was raising in 2 years time (Apr 24) which would be a year or so pre A2 income.
A1 income has started at this point, but Im assuming is being used to fund the A2 expansion without the need to tap shareholders.
That same A1 money cant be double spent on A2 and Vermehlo, so still think they would need either a JV or debt/equity raise but at the lower $510m debt/ $340m equity level.
Recalculating on that basis puts the breakeven point at around retaining 70% of Vermehlo whilst the JV partner finances the equity piece for 30% of the project npv.
On the Araguaia calculator thread earlier today, I responded to the question of what would the hzm SP be based on the npvs of 100% of A1, 100% of A2, and 100% of Vermehlo.
In my response I stated that I currently model hzm keeping 35% and giving away 65% to a JV partner in return for them financing the build with no dilution for hzm holders.
However this 35/65 split being an uniformed guess, I thought I would spend a few minutes exploring where the breakeven point for shareholders might be on JV % giveaway.
Of course we await the actual DFS so all the following is based on the 2019 PFS.
In that PFS it is stated that $652m would be needed to finance Vermehlo build.
Based in our experience with the Araguaia raise, I'm going to inflate this value by more than 50% to $1bn required.
My next assumption is that hzm would attempt to raise this in 2 years time when DFS was out and well digested.
In 2 years from now A1 is producing, A2 line is being built. The SP based on all the assumptions stated in the Arag calc thread could be 37.7 based on 100% of A1 npv, 30% of A2 and 5% of Vermehlo.
A share price over 35p would give hzm a strong position on which to raise.
So lets say they try to do the same traditional debt/equity split that theyve done for Araguaia. It would mean 60% debt ($600m) and $400m (£304m) through share dilution.
So if they raise this at a 20% discount to the 37.7 SP then this would result in 1013m new shares at 30p
I currently work on 4.7bn shares (after CLN conversion and director options taken) so the enlarged share capital would be 5.713bn but of course hzm would have 100% of Vermehlo npv.
At $30k nickel 100% of all A1,A2 and Verm would be a mcap of £4961m and sharing this with 5713m shares would give 86.8 as a SP.
To get the same SP without the dilution, hzm would need to retain 67% of Vermehlo amd give away the 33% in return for financing and no dilution to shareholders.
(At 30k nickel, 100% of A1 and A2 plys 67% of Verm would be a mcap of £4069m but be shared by 4700m shares, giving SP of 86.6)
So my original 35% guess seems very generous to a potential JV partner in light of the 67% breakeven point calculated.
The difficult thing of course PR77 is the 100% of Vermehlo. Clearly 100% implies hzm have funded it themselves and therefore found up to $1bn capex.
I prefer to model a JV where our partner picks up the capex cost in return for us giving them 65% of the asset. We end up with 35% but no dilution.
On this basis and all the other previous assumptions posted re costs etc., then mcap for
100% A1 and A2 plus 35% of old V PFS is a mcap of £3.2bn and a SP of 68.2
This again is at 30k nickel.
Every $1k nickel above that adds 3.9 so 40k nickel for example gives 107.6
Its no wonder posters dont feel hzm will make it that far..
But how much will it take for Orion et al to forego these future returns..
Ivor/Tdt2
Here's my adjusted npv SP calculation for 31/3/24. (2 years from now)
Assumptions:
1) A1 is successfully producing at the 14500t/yr rate allowing me to allocate 100% of the adjusted npv to the sp.
2) A2 expansion line using the kit already bought is being built and on schedule for production 1 year later. I allocate just 30 % of the NPV for A2 at this stage.
3) The cost of the work is partly funded by not repaying the CLN and instead converting to shares.
4) Vermehlo DFS is out. This is the big unknown. At this point Im just allocating 5% of the old Npv calculator but there is clearly a much bigger upside here in the pipeline and JV interest would massively change this assumption.
5) Production costs are $12000/t due to coal/power cost increases.
6) Directors take up the 8% options maximum as previously stated. Taking this and the CLN conversion from point 3) in to account, the number of shares in issue rises to 4.7bn
7) The $to £ exchange rate is 0.76
The result of all of the above is a mcap of ...
£1772m and SP of 37.7 in 2 years time.
Personally i adjust the nickel input price in to the formula to allow for the 2.5% Orion royalty and also a guestinate of the increased production costs per ton in the current inflationary environment. Due to the increase in power and in particular coal, I currently downplay the nickel price by $4k to get what I feel will be a more realistic npv.
To extend the calculator beyond its $28k/t limit then use the following for Araguaia stage 1 NPV;
1) Take the nickel price to project (lets say $32000/t).
2) Then subject the calculator's base $12000/t case. (In this example 32000-12000 =20000)
3) multilply your result by 0.1205 (in this example 20000 x 0.1205 =2410)
4) finally add the base case npv at 12000/t of 157m (in this example 2410 + 157 = $2567m npv)
So if you think nickel will be 40k in 2 years then A1 npv would be;
(40000-12000)*0.1205 + 157 = $3531m
Hope this helps
After a week in which we have started coming back to life, a nice 25%ish gain, and renewed optimism/excitement about the future prospects of this investment, then why am I reading such a babyish, namecalling, pathetic thread as this!?
Can someone please start a more constructive discussion point under a new adult title.
2 Tesla factories have just been completed and are ramping up production. Berlin and Texas.
The long wait for the insane Cybertruck from the Texas plant is nearly over and not only does it need monster batteries but it also has a 3mm stainless steel exoskeleton body.
Orders are huge. Elon needs nickel for sure.
Then there's the Semi truck to come.!
Seem to remember a good while back that $45 to $50 was being quoted as the 'sweet spot' for feV price on this board, to balance VRFB prospects and mining profitability.
Seeing as the average EU FeV price so far in 2022 is $46.70, then all's good right? Or do we now feel that VRFB adoption/competitiveness is just fine in the $50 to $60 range where the spot price is now?
I have 3 time based forecast models.
The 1st and nearest one is in min 15 months away, which is earliest point according to JM where commissioning could begin.
At that point I believe hzm should be at 70% npv of A1, 20% of A2 (as I believe it will be built immediately as A1 finishes) and 5% of Vermehlo (DFS bringing attention) all at the prevailing nickel price. (Im basing this prediction currently on what now seems like a conservative $26k/t.
Ive also adjusted the npv values to allow for extra power/coal costs etc. by allowing a further $4k/t to the approx $8k/t in the original Arag DFS.
Oh and I even allowed for the CLN to be converted to shares and management exercising all their max 8% of share cap options, bringing total shares to 4.7bn.
But even on this quite pessimistic forecast basis the SP is still 20.7p on commissioning.
Breaking ground cant be far away. The weather has turned over there - hot sunny week ahead.
With nickel settling down, after the LME fiasco, to a value that is well above the Araguaia calculator fantasy top end, then this share is all set to go.