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BTW Strummer - Well done on the GGP profit though, like I said earlier, these things really are a blind spot for me and some people are clearly making good money that way!

Burleigh - as far as I am aware there are no other equivalent investments to HZM on AIM at the moment given the stage of development, size of resource, nature of the commodity, and disparity in valuation creating the buying opportunity.

There are several earlier stage companies I've got much smaller holdings in, I'm not going to cross ramp them and they are high risk investments. MKA, KAV, JAY, SML

Hi Strummer,

Yes those numbers are kind of my point, it's not a value calculation any more than saying HZM has 4m tons of nickel and at $25k/t that's $100bn, or taking AISC at $10k they have a value of $15k x 4m, or $60Bn.

Using PAF as a gold market comparitor they have around decent size proven and wholly owned reserves with ongoing expansion, production 200,000oz P. A., AISC now well below $1000 which is fairly low, make a profit, and pay a dividend. Mkt cap £300m. Seriously, do a back to back comparison.

I guess it shows valuations are indeed just emotive rather than quantitative. People are prepared to use fag packet calculations so long as they show what they want them to show. One of the things I like about HZM is they haven't gone for the self ramping approach, preferring instead to show an actual project NPV. The CoC has just dropped from the 8% too in case no one noticed, the NPV calculation should be adjusted to more like 4% to reflect the reality of the mix of finance just raised, LIBOR still hovering around 0.1%.

Burleigh,
Thanks for the reply. PFS is early stage, and really draws up the outline economic plan. Vermelho has a PFS, having previously under Vale ownership had a DFS that proposed a 46kt annual operation. Araguaia has moved past feasibility and onto funding, and is obviously a lot further on than Vermelho, which in turn is further on than GGPs assets.
I can see that GGP will likely turn into a mine at some point, it's more the valuation I struggle with given the development stage. Would you swap 5 x the whole of Horizonte for one early stage GGP?
I think people do the base calculation of gold in the ground to future value, skipping the NPV calculation as its a bit tricky and produces a lower number anyway. PAF is a good case in point in that regard, an example of what it's like to be a miner with actual mines, costs, loans, workforce, and shareholders expecting a dividend.

Burleigh - I have to admit I don't really understand GGP, I admit it's a blind spot for me. £726m mkt cap as I write vs HZM at £133m. Other than gold being an emotive commodity (not many people have ever heard of a nickel rush) what drives the relative valuation?

Compared to an existing gold miner, say PAF at a mkt cap of £300m producing more than 200,000 oz pa, in profit, paying a dividend etc, the valuation seems full already. Is the expectation that they will produce more than 500,000 oz pa at a higher profit margin? Seems like a lot of hope given the stage it is at.

I know on the Lassonde curve the speculation phase is often more highly valued than early production, but even the most optimistic speculator has to have an idea of where their profit will come from.

For example from a resource in the ground perspective HZM have around $100bn of proven nickel in place. For GGP to have the equivalent amount of gold it would in the region of 60m ounces at today's prices. HZMs resource is drilled, proven, and about to be in development. GGP's resources are still somewhat speculative based on future expected drill results.

Why do you think HZM and GGP are similar investments? Genuinely curious as I am definitely missing a trick given today's GGP rise.

Mininginvest... Part of the problem is that we all wish the market to be rational and deterministic, in reality its not at all because almost everyone involved has some greater or lesser degree of emotional involvement which clouds their judgement one way or another.
I find it useful to make an investment thesis on what will change the value of the investment you're making. You should include expected timescales, some sort of SWOT and Risk analysis, and entry and planned exit points. Keeping the thesis under periodic review also helps, checking progress or lack of it.

For example with HZM a summarized thesis may be something like...

Reason for investment :
Electrification and decarbonisation of global economy will drive a commodities supercycle, wity Copper, Nickel, Lithium, Cobalt, Rare Earths in highest demand.
HZM have proven Nickel and Cobalt reserves with no exploration risk, drilled and thoroughly evaluated by third parties for development. Two potential mines, one at DFS the other at PFS with low risk development plans and high ESG credentials.
HZM share price not properly valued by the market due to institutional investor exits (CF, JPM, LO) creating a contrarian opportunity for private investors.
Major risk (when I first invested) inability for such a small company to raise debt finance secured against undeveloped assets, mitigated by sum of the parts asset sale and no significant debts. That risk has evolved to now being execution risk in opening Araguaia operations.

Entry (for me) sub 10p at scale.

Exit criteria: Takeover Bid which seems inevitable at some stage, but alternative exit points may be available as A1, A2, and V mines come into production in a spiking nickel market. Expected latest exit date 2026. Expected exit price > 50p per share.

Strengths
Locale and mining jurisdiction.
ESG credentials,
Global scale of assets
Management team
No new tech or complexity in mine build.
Glencore and Teck as major shareholders.
Teck board member.
Orion Mine Finance diligence and investment.
Stainless Steel market alone showing CAGR of 5% since 1950s, but seems to be accelerating to more like 8-10%.
NPV.

Weaknesses
Equity dilution unknown.
Lack of new institutional investors.
Partnership uncertainty for Vermelho development.
Lack of local Nickel demand (export market only), although Brazil could have a Giga factory of its own as the market scale deserves it.
Lack of market awareness of nickel criticality (changing fast in 2021).

Opportunities
Bid.
Further resource development on large land Bank including Serra Do TAPA.
Global name as partner on Vermelho for battery grade offtake.
Nickel spiking to early 2000s levels driving speculation.
Likely move to main market listing away from AIM.

Threats
Further delays to full finance.
Slowing global economy post covid
Araguaia execution delays - first time build for this company.
Destabilisation of Brazil post Bolsonaro.
New

It's more than that. With the exception of HSBA and JAY my whole portfolio went down a similar amount today. Its just a bad market day.

In the last few weeks we seem to have collected some naysayers, forecasting doom and gloom for whatever reason, schadenfreude or just a prolonged attempt at driving the price down. It's not just LSE that has seen this relatively new phenomenon, Advfn and elsewhere have also suddenly seen a slew of negative posts on HZM, just at the moment they seem to have actually pulled off a miraculous financing deal. The naysayers will claim foreknowledge, but of course only share it after the fact. Sigh.

Personally speaking I have stopped caring about the day to day price fluctuations. Has it moved because of the nickel price, because of wider market depression, the invention of yet another new battery technology, a private investor selling a few, or just because. During the mine build we may get news of delays, an equipment order hasn't arrived, a permit expired, unexpected rains arriving in rainy season and so on. They will definitely affect the share price when they happen. If those type of movements bother you, then invest in BHP or some other invincible behemoth, but you won't see the potential rewards only offered by early stage companies like HZM.

When HZM enter production all the forecasts indicate nickel will be in higher demand and consequently have a higher price. There isn't enough capacity coming online to avoid a price spike. Even without the coming surge, HZM have low cost, high ESG supply which will be extremely profitable in almost all potential scenarios.

Today's price is an anomaly. It won't last long.

The most recent note I can think of was Cantor's in January which set a 23p sum of the parts valuation. The one you may be thinking of was Peel Hunt from last year where they set 14p risked and 34p unrisked, the obvious inflection point being financing.
I'd expect new broker coverage post finance if that sort of thing is what you're after, some notes from 12 months or more ago are a little irrelevant now considering the nickel market upgrade and Horizonte landing the loans.

Wasa, no idea what you do in It but if it pays well enough to add another half to your position you're doing fairly well. I counted more than 50 HZM transactions on my account so far, you'd have to sell half your position to be at my lowly level.

Nickel price in China dropped 10%ish in the last few days, power outages presumably to blame. Wider market malaise going on too.

I've seen a number of companies I have been invested in see a short term pullback after significant news, as PIs we all think the inference is obvious but big boys often don't move before analytical reports, broker coverage, or free cash from elsewhere or a million other reasons. This will move as a derisked investment, but maybe not at the pace we all expect from being so close to it.

Well. Poor old Vale. Onca Puma halted, Goro sold ( https://www.mining.com/vale-sells-new-caledonia-nickel-assets-to-trafigura/ ), their previous star nickel asset (called something like Vermelho) all but given away for peanuts in the nickel slump to a British based mining minnow.

One wonders where they could find some nickel projects with sound ESG credentials, possibly right in their backyard. They never will though, imagine the depth of the about face to buy back Vermelho with some extra zeros involved.

I saw that just after my post! Oh well... I still think if you want any meaningful volume of shares then the public offering won't be the place to get them, of it happens at all.

JM looked quite cheery in the video, no wonder.

Having had a bit of time to reflect on a few things about today's announcement and some of the noise here I think there are a couple of things we haven't considered.

Q1. How was it the company was so confident of Q3 but held it to the wire?

A. They are not borrowing from one lender, but 5. BNP Paribas Securities Corp, ING Capital LLC, Natixis, Société Générale, and Swedish Export Credit Corporation ("SEK"). It is highly likely that they had confirmation from multiple lenders prior to today's date with likely one outstanding until today as a quarterly procedural formality. They waited to have approval from all rather than announce each piece of approval piecemeal, but they could give investors real confidence that it was done without actually saying it.

Q2. What happened to announcing a Big Bang finance deal?

A. It almost certainly went away with the equity raise in February, since then there has been no mention of it. The company could have made it clearer, but I suspect once they had raised come cash via equity they were then just doing too complex a deal to announce at once.

Q3. Why are SEK in Tranche 2 rather than the ECAs?

A. Terms. It is extremely likely that the two ECAs in Tranche A could give terms preferable to those in Tranche B. SEK don't need to give quite such good terms as everyone wants Volvo mine trucks!

Q4. What's changed in the mix?

A. Mizuho Bank, Ltd seem to have dropped out of the original syndicate and have been replaced by SEK. That's really indicative of the work that has been going on in the background here. Banco do Amazonia were also announced to have given initial approval for $32m last December but this has also disappeared from the deal, at least for now.

Q5. What's going to happen next?

A. Very likely between now and the end of the year there will be a stream of news. I'm expecting debt finalisation, equipment orders, equity / strategic investor raise details, news of offtakes (in my view likely plural), announcement around Vermelho DFS, Q3 results shortly possibly with operational progress, build contract announcements and maybe more. I am hoping this is the end of a quiet period for the company and we will now see their marketing function earn its crust.

Q6. Should I buy now or wait for the equity raise?

A. A little like the Big Bang announcement all has gone quiet on any form of retail offering accessible to PIs. Whilst JM knows we are here I am sure, the big boy finance companies in this now don't give two hoots for us and would sooner have the deal go entirely to strategic investor(s). Its possible again that this will turn out to be split, but you and I are unlikely to be a factor in that. If you want shares you will have to buy them off the market.

Q7. Anything else I should think about?

A. Broker coverage will now change. Peel Hunt should be pushing this like crazy now, coverage on price will increase and start to attract institutional investors. Share liquidity here

Oh and by the way, I find your naivety around long term investing puzzling given your name. It's particularly so because this whole company has been built on a contrarian investment thesis.

Perhaps you're trying to start a new movement, contrarian traders, sell against a long term rising share price to try and prove a bb point?

Oh and by the way, I find your naivety around long term investing puzzling given your name. It's particularly so because this whole company has been built on a contrarian investment thesis.

Perhaps you're trying to start a new movement, contrarian traders, sell against a long term rising share price to try and prove a bb point?

Contrarian, lucky guessing day to day movements is not my style, I am am investor not a trader.
Personally, I'd rather guess the price two years from now than two hours. Any offers on the price when (not if now) HZM enters production? Or perhaps you'd like to guess the take out price if it happens before then? Are there any significant milestones between then and now that will occur at a lower share price.
I'd take 33p as a now derisked takeout price, but I think it would now be a lowball offer. Entering production I'm going to go for a Conservative 40p a share.

Contrarian - let me understand this, you are trying to imply that investing for jam tomorrow is a bad thing? When you are definitely getting the jam, the jam is already valuable and going up in price, there is no risk of not getting the jam, and you have to pay less for it today than you would tomorrow?

You're starting to sound very foolish.

A few of us posted on this thread back in January.

Peel Hunt issued a note on the derisked valuation set at 33p a share at a time when the HZM profit on production would have been much lower due to the nickel price.

33p derisked, ie with finance in the bag and Vermelho still to come, and the long term nickel price (Chinese power troubles aside) set to continue rising.

Up until today this investment had significant risk that they may not get finance, that as a small company trying to raise a big slice of debt they simply couldn't get the credit over the line.

That risk has now effectively gone.

The risk of very significant dilution has also effectively gone. If they hadn't been able to raise sufficient debt then there was the possibility of a large dilution event to raise the balance. With the extra debt, and the cash from the previous equity raise already on hand, there is now almost no risk of a larger than expected equity raise.

How many miners, AIM or otherwise, offer a derisked investment in a scarce essential commodity with rising demand?

This just became a no brainer investment for PIs or Institutions.

"Appian Capital in talks to sell Atlantic Nickel for $1bn - MINING.COM" https://www.mining.com/appian-capital-in-talks-to-sell-of-atlantic-nickel-for-1bn/