Member Info for okenia

Good deals tend to be good for all parties, usually because they bring different skills/assets.

Asset - Omega
Skills - LH
Listing and capital markets - RGM

Roll forward 18 months once all the figures are out there, properly PLC audited etc. I'd say that would be an interesting point to consider bringing in the remaining 53% of MET, and make RGM a coal producer. You could clean out any 'non core' legacy assets at that point, to make it focused on the coal. You'd obv bring in additional Board representation at that point (maybe Andrew would go non-exec for a while before standing down fully, on a high note), reflecting LH's role.

A pure coal play with readily visible cashflow that you could then value on whatever metric you want (e.g. Multiples of free cashflow, implied yield, PE or whatever). The current $34m pa revenue for Omega would give a lot of headroom for the SP in those circumstances. Even ABS might buy in ...

Using MET's revenue figures for Omega in 2017, together with their nine-year production plan and RGM's pro rata ownership, that works out (all things being equal and unchanging) at $150m revenue for RGM's stake over the next nine years. How much cashflow would that revenue need to be converted into, in order to dwarf RGM's current mcap on a prudent valuation basis?

Another point to note is that Omega don't dig up all the coal they sell. Their issue is that the coal is 'too good' (its met-grade) so to sell it to the power station they have to buy-in low grade stuff (at say $20/t) then blend it with their super-grade stuff until it meets the offtaker's spec. The advantage of that is that there is no mining / capex costs for that bought-in coal, instead it's the purchase price.

As I understand it, Omega did this to weather out the slump in met coal prices a while back - thermal coal is a less cyclical market because it feeds into stable power generation not steel making. One potential route I imagine to increasing profit going forward is to start selling more unblended coal directly to met coal offtaker and thus capturing the grade premium.

Here's the comments on this, again from the MET website.

"Omega produces a high quality metallurgical coal product mined from multiple seams across the area. Supplementing this mined coal is additional coal tonnage purchased from regional suppliers and then blended at Omega's coal blending yard to the correct specifications for customer offtake. Over the next 9 years Omega plans to sell over 7m tonns of coal from current operations, with much of the offtake blended downward and sold to a modern coal power facility. With plans to expand production beyond these levels Omega looks to become a major regional producer."

At the moment most goes to the power station, but that can change.

From the MET website:

"For the year ended 31 December 2017, Omega sold 749,000 tons of coal, generating revenues of $34m. Omega employs approximately 70 employees with strong mining experience, competencies and customer insights. "

You're a bit out of date it seems.

https://www.miningequitytrust.com/omega-coal/

"MET operates the Omega metallurgical coal operation located in Southwest Virginia, in the United States. Begun in 2011, Omega produces high a high quality metallurgical grade product in demand from multiple offtake partners and which is a primary ingredient in steel making of which there is currently no substitute. For the year ended 31 December 2017, Omega sold 749,000 tons of coal, generating revenues of $34m. Omega employs approximately 70 employees with strong mining experience, competencies and customer insights."

There's the $34m figure, in black and white, in public.

booboo ("that is simply that it isn't true"), are you saying that this public statement on the MET website is a lie?

MrMagic - if you speak to Andrew directly he'll confirm it's him. It's not the first time he's posted (he normally doesn't wade in until litigation seems likely and some individuals need a gentle reminder of the consequences of their OTT statements).

Now let's move on.

I know ppl have been a bit "are we there yet daddy?" frustrated with the lack of news recently, but tbh when you're a small company doing (for it) a MASSIVE deal like this - $34m revenue and profitable - there are a helluva lot of moving parts and it takes time. And now it's been delivered. Andrew's style has been to go for the occasional big fish. Some jump off the hook but enough are landed (I think in particular of the spectacular money cow that is Tshipi). Omega looks - at first sight - to be another in the same stable. Well done.

Not wishing to break up this Pearce/zumore bromance (or be deafened by MrTragic breaking his fingernails on his £4.99 pocket calculator where he's still trying to work out how a 10% dividend to RRR is not a dividend) we do of course have well established track records of how such large and profitable coal assets are paid for. It's called a defcon, and basically if you're good at operationally running the asset you make a fortune, and if you're sheet [other similar-sounding words are available] at it the vendor takes it back.

That's how a mouse eats an elephant, and is why the technical and execution skills of legacy hill are so critical here.

No need to respond, I know you'll be out sobbing into a warm half of bitter at the local Wetherspoons :)

The SPA was completed on time, and as of 1st April PERE have had economic interest in Minto (ie they own the production - all the concentrate that's been made since then is theirs) - although PERE didn't shout about this critical fact, it's in the Capstone paperwork.

The main 'missed deadline' was that throw-away comment from Thomas Horton in the interview (you can almost see DL glaring at him!) and we all said at the time that there were way too many moving parts when buying a big producing copper mine for that to be possible. I said by end of July and I think I'm going to be pretty much spot on (given a bit of wiggle).

What may have stretched the timeline is the knock-on effect of Trump tweeting about China - have a look at the spot copper price and think how ******** you'd be if you were doing a roadshow for a copper mine in July 2018!

(I suspect copper will bounce back quite hard especially given the Escondida issue that is flaring up to remove 15% or world supply, again)

https://www.providentmetals.com/spot-price/chart/copper/

At the end of the day this isn't a spivvy AIM shell making a $500k investment in something, it's a tiny shell buying a whopping great revenue-generating copper mine. To be honest, a mouse eating an elephant like this is pretty much unheard of and if there's a slip of a week or two versus my own expectation then I'm really not fussed.

I do recall at the time it was announced that some people were disappointed at the potential scale of any placing and the consequential dilution for us existing shareholders. A $50m fundraise at 1.6p would have been a right kick in the Kalgoorlies.

What has become clear since then is that Minto is throwing off a lot of cash itself (if you look at the last Capstone accounts). You do therefore wonder whether you could fund at least some of the acquisition cost from internally-generated cash or debt secured on that. I note NTOG's RNS today where they are quite explicit that they are able to expand their asset base by organic growth - with internally generated, non-dilutive funds (reserve backed lending facility).

My own preferred option would for the bulk of the funding to come from non-equity, non-dilutive funding (eg the pre-pay from the trading house, debt, maybe a deferred consideration payment to Capstone that can be repaid from production etc etc) so that we minimise the dilution we'll suffer, and thus maximise the upside going forward.

In a perfect world I'd want as little as possible raised by equity, and for that equity component to be done at a nice premium to the suspension price. As I say, I'm not going to be best pleased with a $50m at 1.6p raise!

We'll see what happens, finger's and toes all crossed here at the moment for as small a placing as possible at as high a price as possible.

The trouble with "update" RNSes that contain no actual news (yes we're still writing the prospectus and dealing with UKLA, yes we're still doing a funding roadshow and investigating imaginative funding options etc etc etc) is that companies tend to only issue those updates when there's a problem and delay, in order to mollify investors. If there isn't a problem you should just crack on and announce when it's all done and dusted.

The trouble with "update" RNSes that contain no actual news (yes we're still writing the prospectus and dealing with UKLA, yes we're still doing a funding roadshow and investigating imaginative funding options etc etc etc) is that companies tend to only issue those updates when there's a problem and delay, in order to mollify investors. If there isn't a problem you should just crack on and announce when it's all done and dusted.

Unlikely as the date stamp is 20mins different. B&I moves are done at the same time by a MM as a matched trade. Also the £12k buy for 2.1m has no obvious matched sell Also the price ticked up on those trades (whereas a B&I is balanced and typically has no effect). So while we'll never know for sure, the evidence suggests they are buys.

Must be close to the Legacy Hill 'reveal'. Those are large trades though for someone blindly taking a punt, though.

Being EBITDA is a key milestone for any company. And a very positive one. But equally important is the scale of the operation - if this works, it won't be a tiny asset providing just a few grand of cash to RRR. It was deliberately targeted as the replacement in the PF for JMS, the company has said so in public. And we know the millions of £££ that RRR continues to receive from that asset.

Being EBITDA positive is a key milestone for Steelmin. (Good use of Google to find what it meant, btw). If you look at the raw input numbers, Steelmin has the potential to be a real cash cow for RRR (in the same way JMS/Tschipi continue to throw off cash, which RRR receives). There are a whole pile of variables that will feed into just how much cash RRR will receive, but this is very much the major asset in the p/f. It was a complex and risky bit of dealmaking to acquire this stake in Steelmin (it basically leveraged the JMS shares) but all the signs are that it's paid off handsomely.

Thanks - I got an online corporate action via Interactive Investor and can vote via their online portal. I agree the stuff about dealing with paper certs is confusing - Pere are trying to get people to use an electronic system as well (makes a lot of sense).

"Any acquisition or sale of shares/interests would be RNS'able unde" Wrong. There's a minimum size threshold. Otherwise an investing co would have to RNS every tiny sale or purchase. Ie there's a materiality clause. It's in the AIM rules. And it's there for rather obvious reasons, if you think about it for one second.

You mention "RRRs MTRs shares". When did rrr invest in MTR or am I misreading your comment ?

Not wishing to be pedantic, but if you read the AIM rules (or speak to a NOMAD) you'll find out when, and when not, an investing co has to disclose share purchases or sales. Or google 'class test' as another approach to self-directed learning. We can't sit on here 24/7 giving you AIM investing and compliance 101 lectures.