Member Info for pickedpeck

The A$2.4Bn was about £1Bn in 2007, which lines up reasonably well with Araguaia Phase 1 NPV.

I guess that makes sense as the company in question was producing marginally less nickel than Phase 1 is planned to do, in a higher nickel price environment, but very likely with higher production costs / reduced margin.

Obviously then there is phase 2, Vermelho, and SDT to value.

Nice bit of archaeology TDT.

A$2.4Bn for 12,000 t p.a. is also a fairly eye catching line.

Luke. Don't go because of one twonk.

We all appreciate your research and posts, you're part of the been here a while good folks club and you would definitely be missed. Your contributions are valued highly, and I am not sure just by me.

I suspect we all have back stories that brought us here, I'd very much like one day to share them and raise a toast (no burnt bread jokes).

Hello John.

My advice is seek help, there is obviously something wrong. If you can't see it get someone you trust to read your posting history. Your cup isn't half empty, it's flying across the room at someone.

Mayfair,

Without the persistent seller over the last 2-3 months we would very likely be well into double figures now. Its a moot point whether selling volume now holds VWAP down much if we really are close to the equity transaction.

Gringo,

One thought on the sells is a stakeholder from the last offer, maybe CIBC, is using their existing stock to keep a brake on the share price. One reason could be to suppress VWAP for the equity portion of the finance deal, it's hard to imagine other reasons at this stage of the game even for distressed sellers.

By contrast the company twitter feed has been fairly obviously trying to push VWAP up lately.

If so it begs the question how close the ties are between the investor and the company if they are working at cross purposes like this.

Most of the potential scenarios are good for PIs, once the deal is in place and the brakes come off there should be a sharp rise in the price.

oilhead... I recognise most of that post! Not sure about 14p in days, its not impossible but I think the initial jump may be lower. Depends what the nature of the release is.

Clever -
On 14,000t p.a production from phase 1 I would expect something like £120m EBITDA. On 3bn shares that's about 40p a share.
I'd go with another 10p valuation speculatively for phase 2 for 50p a share from Araguaia.
Vermelho is a wildcard. I'd expect a DFS to make it bankable, but the company has said all along it needs a partner to build it. I expect that to be Teck and the real reason they are here. If a partnership has been formed and the build is underway by then - which is more likely than just possible -, you could potentily add another 30-50p in for that. If not and we just have the DFS, then another 10-15p.
Nickel price is another wildcard. Fairly Conservative organisations are now predicting 2rk a ton, which makes me think it may spike to above $30k and beyond. $30k doubles all the above numbers as it doubles the profits vs $20k.

So, in summary, anywhere between 50p and 150p by 2024, which is exactly why we won't get there and will be taken out beforehand, likely for around 25-35p a share

Strummer,

I'm expecting speculation on valuations to increase post finance, and for that to allow much wider variations in daily 'valuations' depending on which way the wind is blowing. Trading needs those variations, so will I think similarly increase. We have already seen charts and the herd mentioned today, I'm sure the associated whiff of BS will only increase.

Speaking of smells, if we start to get acquisition sniffs then that's when the sheet will really hit the fan.. . I'm still more than a bit surprised HZM has got this far, maybe Teck, Glen and Canaccord just give a swift no deal reply for now.

Lawrence. Keep it real, no need to exaggerate the potential.

Try working out what you think the EBITDA of the company will be with Phase 1 in production. Multiply it by 10 for a PE ratio, then divide that by the number of shares you think will be in circulation. The actual number is anyone's guess, from 1.7Bn as of today, up to maybe as high as 3Bn depending on off take vs equity.

Then add the current share price as a fair valuation for Phase 2 whilst in development, or you could take 60% or so of the NPV increment.
Then add the current share price again as a valuation for post DFS Vermelho.

Then on top of that add the percentage increase in net profitability due to the likely increase in nickel price. For Araguaia AISC is about $10k a ton despite the oft quoted $6.8k production cost. Its a nicer round number for the maths anyway.

That's where the share price should be as we enter 2024 if we haven't been bought by then.

On the other hand.... BUY BUY BUY... Last chance before rerate, incoming news imminent.

Hairy - FPX are onky at PEA stage. I think they are making a lot of claims that are not yet bankable. They are at least 4-5 years, and more like 6 or 7 years behind HZM in the cycle. They also need 3x the capex for their initial mine plan, which may well increase again at the DFS stage.

Does everyone understand that this finance package agreement is the transition point for HZM from being an explorer to a miner?

All of the stages to date have been about discovery, describing the concept, creating a business case and executable plan. From this finance package on it will all be about building the mine and plant, extracting and selling the nickel. Sure there is the other mine(s) to go through the same development cycle, but this really is THE watershed point all the junior companies dream of.

Artisanal nickel mining. I like it.

Here is the equivalent of the Haynes manual:

https://www.onemine.org/document/abstract.cfm?docid=207818&title=Nickel-Laterite-Rotary-KilnElectric-Furnace-Plant-Of-The-Future

Need to shift a few wheelbarrows worth, need some scaffolding planks for the barrow track from the mine to the kiln, and somewhere to plug the kiln in. I wonder if a UK bought kiln would have the right plug attached for a Brazilian socket?

And... In case you'd missed it in all the excitement over the last 18 months...

"Tesla to buy cobalt from Glencore for new car plants" https://amp.ft.com/content/aa09dbcb-37ed-4010-a0ee-ab6cfab4d4b5

Glencore are going to need more Cobalt, preferably away from DRC and child labour. Wonder where they may look?

Vermelho is forecast to produce 1250 tons of Cobalt annually as well as 25-30kt of nickel, subject to final DFS.

Glencore's nickel page has a rather obvious omission...
"Nickel" https://www.glencore.com/what-we-do/metals-and-minerals/nickel

Interesting that they produced only 110kt globally in 2020, but generated $591m EBITDA from it at the significantly lower 2020 price point.

Soundbuy,

Vermelho was drilled to death by Vale, area wise it is tiny compared to the other licenses and has had a thousand plus drills.

The various other licenses under the general banner 'Araguaia' and Serra Do Tapa that are under explored. Have a look at the relative license sizes and the Vale historic drill records.

I see Glencore having the vast majority of the offtake agreements rather than the equity. I suspect Teck would rather take the whole thing. If they want to do that then why all the fancy dancing about debt and ECAs rather than just buy the company for a pittance now and fund it themselves. They would get the company for a 12-15p offer now, sad but likely true the instis would take that premium to their purchase prices and that would be enough to get it.

I'm not so sure. We don't yet know the volume, if the off takes are large - and they may be - then the equity raise may be smaller than we have been thinking.

I think it could be CIBC. I don't see it being Glencore or Teck as they have had lots of chances, notably the last fund raise, to increase their stakes and haven't. I suspect Orion, CIBC, or An Other we don't know about ahead of either Teck or Glen.

Could obviously be wrong though, hopefully not long to find out.

I know we had one on a Monday announcing the ECA, but most of the company's last news releases took place on Thursdays. Only two Thursdays left in September now. In fact fully 1/3 of the remaining trading days are Thursdays...

What I am expecting to be announced...

1. Tranche 2 credit secured with a mix of international providers and at least one Brazilian bank. I doubt we will get much detail of the terms beyond they have the money.

2. Structure and timeline of equity process should hopefully be announced at the same time. If it really is underpinned by a strategic investor and is only subject to closure / announcement of the debt then it should be published simultaneously. I can't see them getting the debt without having the structure and nature of the equity raise finalised. Lenders wouldn't lend for someone to buy the front legs of a horse with no knowledge of the funding of the back end.

3. Similarly off takes. They have been in negotiation a long time, and in order to secure the debt and strategic investor funding, and to know the balance necessary to raise, the off take agreements must also be known. I can't see them raising debt without having the off takes in the bag.

4. Either at the same time or immediately afterwards (days or few weeks) the start of the build will be announced, orders placed, ground broken etc. That may come in the Q3 results rather than RNS as it is operational news.

Basically I think it is likely we will get a bigger announcement than most here have been expecting.

What could happen...

The debt and off takes are almost certainly hand in hand, but the equity portion may be known in quantity, the book run by the strategic, but an offer is made for existing holders and new investors to participate in. I'm thinking this is less likely as it means a delay whilst that is executed, and JM said nothing about it in the last interview. I think they probably wanted to do that, but time has pushed on and they don't want to lose any more before cracking on so may just go with the strategic, even at a slightly lower strike price or terms.

To be fair CF, JPMorgan, and Lombard have allowed some PIs to build large positions here at a huge discount to fair value. It must have been a very frustrating time to be on the board of HZM, knowing what they have but only PIs buying into it, whilst other less robust miners saw their share price rocketing on the slightest hint of progress.

I want the full deal announced and clear, and then some new TR1s before I order the crate of Champagne at DJs pub.

I'm not sure the debt is fully priced in yet, there will still be those on the sidelines thinking it isn't over the line yet.
Also I think we have all agreed at some point that the needle will really start moving with institutional buyers rather than PIs, no matter how big the PI holding might be we just don't have the clout of investment banks wanting to build a position. Imagine Bailie Gifford decided to add HZM to its international fund for example. Those institutional buyers likely want more risk off the table and transparency if what they are buying into, otherwise more would be here now. I've been invested about 3 years here, I don't think we have had a significant new investor in that time, just Griffiths / CF debacle, JPM dispose of their small caps, and Lombard Odier sold their entire holding down. We have had CIBC come in but via a placing rather than open market purchasing.
I'd hope those instructions that left, CF aside, now regard their exit strategy as short sighted but I doubt it. I'd really like to see one or two new TR1s rather than hope this will be driven up by PIs.