Member Info for pickedpeck

Anglo Pacific is worth a look if you want to buy into the Piaui Project. Brazilian Nickel is not publicly listed, but APF have a large option.

Is the news today part of the new plan or something that would have just happened anyway?

On Saturday I wrote...
'... Start the mine build, and shift the pressure back onto the potential investors by bringing some more to the party from the US and Canada. Get on the bus, or miss the bus as all the seats will be taken... To follow through on this game plan the company will continue to put pressure on investors by releasing lots of progress and news. We may see a different beast over the next six months than the previous six.'

I stand by the post, I think we may see a much more prolific news flow, but obviously one RNS doesn't prove the case.

Interesting though

I've got three portfolios that I have investments in and / or watch, miners and minerals, main market, and wags (wild assed guesses). Today the miners and minerals list is almost all red, main market is almost all blue, and the wags are all over the place as usual.
I think we are seeing a wider shift of money from what are seen as riskier plays to the main market recovery stocks. For example Cineworld is up 9% ffs, hasn't earned a bean in 12 months, and is 3x up from its covid bottom.
The point I am making is that this is not all about the news here last week, however I suspect a good number of people are pi55ed off at the price of the raise and also the change in direction from a single announcement.
The trading patterns seem to have shown solid buying but there must be a stock overhang, presumably from the raise, pushing the price down.
It will recover, we will all get over it and apply 20-20 hindsight when it turns out to have been a stroke of genius.

From the ESG report https://horizonteminerals.com/uk/en/sustainability_report/
page 26:

The south region of Pará state, where
the Araguaia and Vermelho Projects are
located, is an agricultural region. The
land is predominately used for rearing
cattle and growing pineapples. Original
indigenous vegetation was cleared over
50 years ago.
The total area occupied by the Araguaia
Project is around 1,100 hectares of which
only 3% is considered a Permanent Protect
Area. The project does not extend in to
any National Park, Conservation Area, or
indigenous or traditional communities.
As a result of the agricultural industry
the vegetation surrounding the Araguaia
Project is not diverse, it is predominately
grassland. Nonetheless, as part of the
comprehensive Environmental Control
Programme the Company has established
a Conservation and Management of
Vegetation initiative. The Company will
rehabilitate areas affected by the project
with native species.

I'm sure this will likely be the catalyst for off takes, which will be the trigger for the rest of the finance deal.

My understanding of the deal before this week was that debt with five banks, ECAs for equipment loans, local banks adding to the debt, off takes with potneital for up front payment, and the cornerstone investor to pick up the balance in placed equity.
Either my understanding was wrong or the plan just went through a major change.

I thought Jeremy looked uncomfortable in the BRRmedia interview and I have been trying to think why.

I think it's likely that they have not managed to qualify for ECA credit for the equipment, the debt raise is harder than expected, and the cornerstone investor didn't want to cover all the equity and has forced them to raise. Meanwhile they still haven't signed any off takes, possibly because the mine build hasn't started. Negotiating simultaneously may have been just too hard.

Jeremy was uncomfortable because he had been backed into this corner. Mum and Dad (Teck and Glen ore) haven't helped out either.

So I think this is a gambit to break out of the corner. Start the mine build, and shift the pressure back onto the potential investors by bringing some more to the party from the US and Canada. Get on the bus, or miss the bus as all the seats will be taken.

For us PIs this means essentially the game is now afoot and running. To follow through on this game plan the company will continue to put pressure on investors by releasing lots of progress and news. We may see a different beast over the next six months than the previous six.

What I don't see is a calm steady cruise towards finance against the original plan, JM and the board after being put into check have thrown the pieces in the air and said let's play a different game!

Few of points:
1. We always knew there would be equity dilution to help build the mine. The low price is the only issue I have with the raise. It actually makes sense to do it in stages.
2. Doing it at the end of the day UK time gives everyone time to digest it overnight rather than an hour in the morning.
3. No one below has said 'sod this I am selling', most are having the opposite reaction and hoping it generates a buying opportunity. The price drop may be very short lived.
4. Full finance is likely far enough off to need to do this to get going. As I said earlier, the off takes have not been signed, the debt not agreed. It could be needed for the ECAs to be signed.
5. We need a PI focused update from the company to calm the horses.
6. New investors, new publicity, starting build and news flow are all massive positives. How exciting will it be to see build updates rather than waiting for a finance penny to drop.
7. If you want to get sold this is a better way to do it.

The perceived risk here is that we will not get financed. Objectively that is still a risk. Its not in the bag until it is actually in the bag. Jeremy is a good CEO, but does not control the financiers.
We are company that has never run or built a mine before asking for $450m to build a mine secured on assets purchased for less than 5% of that cost.
Set against that are independent investible studies on the assets, rising nickel demand and price driven by EV and other factors, a different point in the Ni commodity cycle, experience of the management team elsewhere, the backing of two major miners as large shareholders, the due diligence of Orion, and the spread of risk across multiple investors.

We as holders all believe the last paragraph outweighs the previous one, but institutions would rather take the risk off the table even if it means not making as much money. I don't believe the private investor herd will be the ones that move this share price, it is fund buyers that matter.

saj190 - There have been lots of posts on this topic here but they are likely buried deep on the board now. In summary Araguaia Phase 1 needs i.r.o. $450m to be built and commissioned, of which is it proposed that $325m will come from a debt mandate from 5 international banks.
The rest will be made up of a mix of:
Prepaid off take agreements - unspecified value so far.
Export credit agency agreements to fund equipment, likely more than one ECA, again unspecified value so far but likely $25m plus.
Funding from local Brazilian banks, $32m identified so far but may be included in the $325m above.
Brazilian development fund, again value unspecified so far but may be low.
The balance of Orion Mine Finance money, approximately $17m remaining.
Cornerstone equity or potential additional equity investors - the balance.

Consensus argued through here previously is that there will likely be around 2Bn shares in circulation after finance is complete, although the number could be either higher or lower depending on the other finance elements. If the off takes are large enough, there could be very little equity dilution, if they are not (seems unlikely) then there will. I think it is a reasonable bet they will have to issue 500m new shares at somewhere around 10p a share, raising $65m in the process.

If that dilution occurs then you will find most of the holders here celebrating as it will mean the finance is done and we are on the way to production and realisation of the first tranche of NPV. The NPV of Araguaia Phase 1 only at today's Nickel price is over $1Bn. That project funds Phase 2, expanding the NPV to $1.67Bn . At production it would not be unreasonable to be trading at a market cap close to the NPV or even higher as the Nickel price is likely to continue to rise. $1Bn mkt cap for 2Bn shares is 50c a share, 83c a share if you include ph 2.

Then additionally there is the much larger and higher value asset of Vermelho which should get its FS done this year making it investable.

The reason our price is where it is is because the finance is not yet done, simple as that. We are all hopeful that it will be concluded soon, but the Araguaia operational update from December said:

'The project funding package for Araguaia involves multiple components that are being negotiated simultaneously. We continue to engage with a number of prospective investors, have recently negotiated a non-binding, term sheet with a major cornerstone equity investor, have reached an advanced stage with offtake agreements, received initial approval for a financing facility of up to R$200 million (c.$32 million) from Banco da Amazônia and are advancing workstreams with a syndicate of five international banks for the principal project finance package, as previously announced.'

We are generally all believers here, but as hard nosed fund manager looking at this will see it slightly differently.

'continue to engage with a number of prospective investors' - so the investor list is not complete yet and is still being negotiated. The company is still looking to find new investors.
'recently negotiated a non-binding, term sheet' - The cornerstone investor is not yet contracted, the term sheet is not binding presumably on either party. When it becomes binding it has value, up until then its just an outline of what may happen.
'reached an advanced stage with offtake agreements' - what agreements, how many, who with, and what does advanced stage mean? How long until the off takes can be announced as they may be the trigger to underpin the rest of the finance.
'received initial approval for a financing facility' - initial approval does not mean final approval and the money is in the bank. Its like applying for a mortgage that is agreed in principle pending background checks.
'advancing workstreams with a syndicate of five international banks for the principal project finance package' - what workstreams, what are the dependencies to get completed? Do the loans need securing against offtakes? The mandate was to raise finance, it didn't mean finance was done.

There are a lot of loosely moving parts here, the sp is still reflecting that. As soon as one or more of these moving parts become static, contracted, and done then the whole game changes. Until then we will not see a massive leap in share price driven by institutional money.

I suspect the company is quiet because it needs to get one or more of these dominoes to fall before the others will follow. I think the off takes may be the key, and as the Nickel price continues to rise the terms of those may continue to shift to our advantage. Its a game of chicken, who will blink first.

Since the start of December HZM has released 1 RNS. By contrast Canada Nickel has released 13. The companies are simply at different stages, CNC is at the hype stage where HZM is in the vinegar strokes bit of the hardest, nastiest, most difficult stage for any junior explorer wanting to become a miner.

From the trading statement on the 8th to today PAF has fallen around 4p or 20%. That's after a statement saying earnings are going to be up between 80 and 90% YoY.
The gold price drop over the last month could obviously be to blame, but at what point does this fall start to represent really tempting value? How low will this drift assuming gold doesn't continue today's mini rally?
I think the post below saying the price may drift in the absence of news and in light of a gold price retreat may be spot on. I see PAF as a solid investment with assets that already outshine some of the AIM stars like GGP but at a fraction of the price. Producing companies are always less exciting than explorers though, and weighing political risk, falling gold price, poorer than expected debt pay down, and dividends being some way off I can see a drift to mid teens.

LSE often surprises me with the shares that get hundreds or even thousands of posts, and then those that get none like MIGO.

For me this is an interesting fund, since the lows of last April it has risen pretty consistently but is still trading at a discount to NAV. Given the consistency of the rise I would have expected it to start to command a premium rather than discount, but maybe those days are suspended if not gone entirely.

Its trust of trusts approach seemed to work pretty well from 2015 - 2017 with 25% ish returns, but has been hardly startling since. The current top 10 holdings seem to underplay US and China recoveries, despite the Global name maybe the management are picking conservatively in home markets.:

Baker Steel Resources Trust 7.4
River & Mercantile UK Micro Cap IC Ltd 5.4
Dunedin Enterprise Investment Trust 5.3
VinaCapital Vietnam Opportunity Fund 5.1
EPE Special Opportunities Ltd 5.0
Alpha Real Trust 4.9
Phoenix Spree Deutschland Ltd 4.3
Atlantis Japan Growth Fund 4.1
Artemis Alpha Trust 3.9
Third Point Investors Ltd 3.6

Good post, thank you!

I agree there is a major shift in the Chinese economy, so much consumer potential with a bias towards home grown companies. FCSS seems a good vehicle for investment in that potential

I think there is a goodish chance that dividend will be restored on the 23rd, at least partially. The price movement so far says otherwise though, its not a certainty by any means.

Would you buy this or standard chartered on that basis though, or split between the two? I agree on not favouring any banks too heavily exposed to the UK or Europe for that matter.

Up nearly 30% since the last post here, if this was a simple company stock there would be people proclaiming their genius for buying in the dip! Pretty sharp rise going on still, anyone any thoughts on the driver beyond China being the first to reviver from the pandemic?

Glaciation is slow, but this makes it look like a hasty landscaping process. Results are the only thing that will shift this with any pace, although we might see a run up to the date as the funds anticipate what may be declared in them.

I agree, really interesting document TDT! Shame Vermelho not mentioned too...

Wasa - There seem to be few scenarios where HZM will build Vermelho themselves. Waiting until cash from Araguaia pays for it, raising additional debt, even sloshing out loads more equity are all not serious options. The amounts needed are pretty huge even compared to Araguaia. So in short I agree I don't think there is any point doing a FS for a modest HZM scale mine.
What would a Vermelho partner announcement do to the share price? Imagine if that partner was Tesla with Glencore putting up a billion dollars for 20 years worth of nickel at $18k..., but I would take Teck . :)

In the run up to the deal Nickel had fallen over $2000 a ton just in November and looked like it was heading back to the levels were (round numbers) $7k cost per ton against a $10k and declining market price would have meant never being able to justify the high capex required to open up the mine. Vale were undoubtedly being short sighted, but with Once Puma already on their books and Nickel demand plummeting they probable judged Vermelho 'non strategic'.
I've been in a couple of big corporations and seen first hand how uninformed committees led by the incompetent can end up patting themselves on the back for offloading another non core asset.