Member Info for ProphitOfDoom

From the Oxford nanopore website:
-In March 2018 Oxford Nanopore raised £100M ($140M) from global investors
-In 2020 Oxford Nanopore announced that it had raised £29M + £49.4M +£84.4M in new capital in three tranches

From the most recent SUPP annual report (31/12/19):
- 4% of nanopore owned (rounding means that the % could be 3.5-4.5%)
- Fair Value of £74,847,000; Cost of £57,749,000

At 30th Sept 2020, FV was £68,707,000. It is not clear whether this diminution in value is due to a sale (cannot find any announcements to this effect, though it would have been an easier sale than much of the portfolio), or a lowered valuation (possible, though seems unlikely given Nanopore’s apparent overall good progress), or perhaps a combination of partial sale and some uplift to the residue.

I note that IP Group, the largest shareholder, sold a partial stake in 2020 (see IP Group Annual results RNS of 10th March). It is not unlikely that existing holders are generally reducing their holdings, e.g. to raise cash and rebalance their portfolios.

I note also the following from IP Group’s RNS “we have concluded on a fair value of £340.3m for the Group's 15.0% undiluted shareholding, an increase of 29% during the year”. This implies an overall value of £2.2bn, i.e. 1% of Nanopore is worth £22.7m currently. So, if SUPP has (somehow) still got 4%, that means an end-Dec 2020 value of c. £90m, with an overall NAV of 37p and discount of 13%.

I’m inclined to treat gosh-look-at-this, puff-piece articles about IPOs in the daily press with a high degree of caution. However, let’s assume (for the sake of the argument) that the IPO price is x2 the current valuation, so that the stake will be worth c. £180m. By my calcs, that would take the SUPP NAV to 47p; so, the current sp is at a discount of 32%. Obviously, if SUPP’s stake has been reduced over the year, and/or they’ve already applied a valuation uplift, then the impact on NAV will be lower.
Personally, given the degree of uncertainty about what exactly the board has been doing, and their slightly haphazard approach to announcements, I am inclined to stay away until the audited annual results emerge.

Thanks for this. In the interests of disambiguation, please decipher:
- 'waste case'? Presumably you meant 'worst case'?
- '4PE'/'6PE'? Presumably you meant a 4x PE ratio? Or perhaps 4 years to exhaustion of the resource?
- EV: Enterprise Value, obviously

Thanks.

I couldn't find the number of shares in Nanopore held (I doubt whether this data point is publicly disclosed). However, though I have not done it, it may be possible to infer the number of shares held by comparing Oxford Nanopore accounts and other disclosures filed at Companies House with the holding valuation information disclosed by SUPP.

Presume you're looking to get a better fix on the value of the Nanopore holding?

The RNS says NAV of 35p. Maybe add another 2p on for Nanopore, the booked value of which is too low, given the likely IPO.

At a sp of 32.3p, this gives a discount to NAV of c. 13%. This is rather narrow for a VC portfolio, so expect the sp to slide further. Obviously, the higher value one ascribes to Nanopore, then the more reasonable the discount becomes.

I would suggest that the board's news-flow management has been at best mediocre. There have been a few positive-seeming RNSs recently, e.g. Rosetta, Immunocore, Kymab, as well as the forecast Oxford Nanopore IPO. And then...this sucker punch gets released at 3.32pm. (I realise that this is a function of the financial statement timetable to some extent, but still...)

I'd need to have a good hard look at the annual results & report before increasing my exposure here.

At least the booked value of Industrial Heat is incrementally being written down to a more realistic level, I suppose...

I suspect that any questions about potential dividends will, at best, get a non-committal response. I can't see the major shareholders looking for dividends anytime soon.

This company very much in investment/growth mode, and so any cash generated by operations is best invested in capital equipment, obtaining JORC-compliant assessments of the potential resources (especially at Gakara), etc. Confirmation of a significant resource via JORC survey(s) is the thing most likely to get institutional investors excited, which would perk-up the sp.

The point is that share issuance at progressively higher prices is not particularly problematic, for reasons which I hope are obvious. Issuance at low(er) prices is the killer. Let me know if you need to be walked through this...

With regard to GB's loan to the company, I got the following from the relevant RNS:

"The loan carries no interest, however includes warrants over 2,000,000 new Ordinary Shares of no par value ("Ordinary Share"), at a strike price of 4.55 pence per Ordinary Share, and a life to expiry of 4 years. [...] It is intended that the loan be repaid out of the proceeds of any future fundraise; however Pipestone may elect to convert a portion of the loan into equity on the same terms as those offered to investors at that time."

Various points:
- the warrants issued in compensation for the loan do have value - the loan wasn't given for charitable purposes. One can only presume that the board felt the transaction was value-generating for the company.
- both the issued warrants and the (potential) repayment of the loan in shares imply share issuance at some future point, which implies dilution.

OK - managed to find the relevant presentation page eventually - thanks. I guess we'll see how closely Bacanora's revenues track lithium market prices in future.

With regard to the 29% shareholding, it does provide a great deal of leverage. This is why 30% is the level that triggers a mandatory bid. Ganfeng are looking to maximise influence for minimal outlay.

Hey - I'm not looking to paint myself into a corner on this: all will be revealed in time.

It was massively overbought before, and now it's correcting. Maybe it's at fair value now, maybe not...

Good luck

Given the lack of a response, and my own fruitless investigations, I can only presume that the 'presentations' in question don't exist. Happy at this stage to be presented with evidence to the contrary.

Thanks.

Thanks for your reply. Could you point me towards the relevant presentation? - I've looked at the company's website and cannot find anything that looks like what you've described.

Thanks again.

I write this with some trepidation, as it might be seen as an attack on Bacanora etc. This is not the case – I’m potentially a big fan, but I do have one or two questions, which I hope someone here might be able to clear up. Obviously, Bacanora is ‘partnered’ with Ganfeng Lithium to a great degree, eg.:
- Major shareholder (29.9%, i.e. just below the point at which a bid would become mandatory)
- 50% of SLL JV
- 50% offtake agreement for stage 1 production
- Significant involvement in process design etc.

Now, no doubt much of the above is entirely justifiable. However, is there anything in place to prevent Bacanora being a de facto subsidiary of Ganfeng (which might include say exercising excessive influence in the pricing of the lithium offtake), e.g.:
- Have Ganfeng undertaken to vote their shares for the benefit of the co as a whole?
- Has the board made any statements in this regard?

Thanks.

Re your 2nd question, this article implies strongly that the processing is done in China currently:
https://www.forbes.com/sites/willyshih/2021/02/24/it-might-take-a-long-time-for-the-us-to-become-self-sufficient-in-rare-earth-materials/?sh=830a8dc192df

A quick scan of a quick google search re Mountain Pass suggests that: there is thorium and radium to some degree; also, it used to be a Uranium mine, so that may well be present. From what I've read, if I had to guess, I'd say that Phalabwora is cleaner in this respect than Mountain Pass, but I haven't seen exact percentages.

Investors will each have to draw their own conclusions about the likely sources of RBW's future financing, and hopefully be able to distinguish between their dreams and realistic expectations in this regard.

My guess is that the investors would like to see the following:
- Phalaborwa: sample testing results that confirm an efficient/low-cost extraction process. (However, ANSTO have only just been appointed for this work, I doubt that we'll see much news-flow here short-term).
- Gakara: JORC-compliant survey results to confirm the size and quality of the potential resource. (My understanding, from the RNSs, is that the survey will happen after the current Burundi rainy season passes).
Gakara showing cash-flow positive on current production in H1 would be a nice-to-have, and this is probably the most to hope for in the very short term.

Happy to be corrected on any of the above, by someone with better information.

Half-year results due soon, which is a natural target date for the release of forward-looking statements too.

This is probably just a dumb forecast, based on the fact that the half-year report for 2019-20 was released on 16th March 2020. The latest one is due however.

Same set of obvious puns every few months, eh Fallingknife1?

Thanks all for your 'constructive' feedback. Hey, there's nothing like 'playing the man rather than the ball'... Anyway, it's not about me - it's about the company, and it's prospects as an investment. If I post something vaguely controversial, then maybe I get a response that tells me something I didn't know before, or somebody else gets an insight that they hadn't considered previously. Of course, what I really should have done is to post a few dozen messages into the echo chamber about how well the share price is doing - LOL.

Look: maybe I'm wrong, and the company can get cheap, no-strings debt financing on the basis of its current prospects. In that case, maybe I'd get a bit of told-you-so, but I'd still be quids-in when it comes to RBW.

@lovelyboy: the CPRs are positive from what I've seen, but I don't recall seeing anything about Probable Reserves or Proved Reserves (happy to be corrected), which is what lenders would want to see, which brings me back to my original point.

fulmar29: my "sad little objective" - thank you for the low-grade abuse - is to inject a little objectivity into the proceedings.

Campomar: "Blue jay mining announced a big loan effectively from the US government at a pittance rate" - this does not sound like a loan done on arms-length commercial terms, which is what I meant. RBW may be a beneficiary of some similar largesse (perhaps in exchange for say preferential access to output), but let's not fool ourselves if that happens.

Monarch: OK, fine it's a "pile of gypsum" with some REEs.

I'm sorry you all can't handle the cognitive dissonance of alternative perspectives.