stephan I'm hoping it's possible to get to the AGM this year, that is just the sort of question to ask the board. Agree totally re V. No news on Vermelho has moved the SP since the asset was acquired, as far as I can see.
People have been building mines and infrastructure in Brazil for decades, I expect they know how to deal with the climate/weather. As a comparison, JM said Anglo's Barro Alto RKEF plant was a "turn-key" project built on time and budget (youtube presentation circa 2011/12). No reason Araguaia South won't be the same. On another positive note, I've been very impressed with some of the recent posts on this BB re possible future valuations. the 30p plus sounds plausible to me in a few years time plus what ever Vermelho adds to the mix. There are different ways to value a company but a PE ratio for a miner of five to ten is a good benchmark. And as things stand future earnings are looking pretty good.
Caterham7 I think you are right there. Takeover bids I see in the news (I have not researched this) seem to offer 30% type premiums on the share price, which not remotely acceptable at the company's current stage of development. I cannot see orion or la mancha going for that after putting so much effort into due diligence etc, not to mention the lack of value yet ascribed to Vermelho pre FS and partner. As to the current share price that is surely set by the market based on among other things, the length of time to production meaning an unknown nickel price and nickel demand in three years time, meeting construction deadlines, opportunity cost of holding shares without a dividend and so on. My view is that as HZM closes in on first nickel production the above will be more predictable and the SP will adjust accordingly. I average 4p a share and my very rough "back of an envelope" view is a working RKEF line should be worth twice what I paid and with a second line up to 16p would be a good result in my book. Given the volatility of the nickel price HZM's SP is also likely to move around as well. All pure speculation of course, but I hold to the view that the market prices the company as an average AIM mining explorer/developer where as having a more hands on knowledge makes me think HZM are much better than that and therefore is mis-priced on the downside at the moment.
Agree TDT. The major delays I can think of were purchases of the Glencore and Vale assets, that required rewriting of the FS and time to "digest" the Vermelho site. Very poor market conditions which caused the company to hold back announcements which would have "gone stale" in a period when capital markets were effectively closed to junior exploration/development miners. And covid restrictions. Non of the above is necessarily relevant to the construction phase. Yes of course there could be delays but there is no reason at the moment to expect any based on the past record of delays. So, construction of RKEF plants is a known process, rainy seasons are predictable? and HZM are using contractors who have done this before, so why not on time? My only question would be about the Brazilian utilities, do they deliver in a timely fashion? All questions for the AGM I think.
Thanks pickedpeck. https://www.hatch.com/Projects/Metals-And-Minerals/Onca-Puma-Furnace-1-Rebuild
I'm pretty sure Hatch were also involved in successful work on the furnace at Barro Alto as well. As I keep saying HZM have built a core of contractors, consultants and an in house team who have a first hand track record of building and repairing RKEF plants in Brazil. i.e. Anglo American's "turn-key" Barro Alto plant and repairing Vale's in-house built Onca Puma operation. The above applies to everything else, from permitting to the technical reports by the people at Snowden who have prior experience of the Glencore and Vale assets acquired by the company. To my mind there is no doubt that HZM have the ability to successfully push through this project. And if it were taken over, the same team would be retained to finish the work. HZM is shaping up to be a premier division mid-size miner. I wouldn't be surprised if the company are seen as "punching above their weight" at the BMO conference. I think it's entirely possible that there is substantial "in-bound interest" as JM states.
Well spotted Rover and I appreciate the humour fulmar, hopefully they can do better than Brent Council! It's worth noting, in no particular order, a mine blockaded by locals because of road traffic accidents, polluting rivers leading to suspended permit to mine for a year, legacy dams failing with large death tolls, insensitivity to cultural artifacts causing massive reputational damage and resignations at the top of the mining organisation, "colonial" type mind-set failing to settle an ongoing insurgency against a mining project, pollution leading to global bad news stories, etc etc. And the frustrating thing is it doesn't cost a great deal to have avoided the above, i.e. de-risked it. It also requires people with the right skill set, which includes local partnerships with the company and people in the organisation who know how to do these things. It would be good if HZM learn from others mistakes and get it right first time. It's important to keep as much of the local community onside as possible and HZM have a great track record so far.
Not that I know more than anyone else, some thoughts. HZM don't post news unless there is something relevant to say. It's only been six to eight weeks since before Christmas, equipment delivery has to travel from Europe/China and it's the middle of the rainy season. The construction window is stated as 31 months not two years. The nickel price that will put a value on the company is at least two years out from now and in all honesty no one knows what that will be. The company have built up the expertise, Orion and especially La Mancha will be learning more from HZM than the other way round about the nickel business on the technical side. I'm comfortable with, as others have said, Orion and La Mancha expecting to gain multiples of their initial investment in the medium term (five years?) and lths will get pulled along with them. When I get a chance to attend the AGM (I hope) I'll be asking the BoD this and similar questions. Also I noticed in the latest presentation Araguaia North states that Glencore's PFS adds a potential extra 32 k/tonne pa contained Ni for LOM 26 years. Worth noting that these RKEF plants have been successfully scaled up in Indonesia. But with better ESG/GG figures. No criticism from me about people wanting things to move along more quickly, but personally I'm more relaxed about the timetable.
"And no amount of shorting activity is going to affect the development of the project and will at some point unwind." As I said yesterday. To me this Maven short is a bit of a punt on their part based on a belief the SP is likely to fall following what JM called a finance raise similar to an IPO. The majority of IPOs SPs fall in the short term, so it was a good call by them, if a bit lucky. But this was not a short like those against a bricks and mortar retailer losing market share to online competitors, or some sprawling conglomerate, where the sum of the parts is worth more than the whole. And it certainly isn't an activist shareholder trying to dislodge a useless BoD. The Maven short says nothing about the viability of the company. HZM is in rude health and no one is better placed than the current team to push this through to production. As both Orion and La Mancha (and many lths here) say this is an investment in the quality of the team, the asset alone is not enough. My feeling is that the short term direction of the SP is going to be steered by global factors as much as company news, as others have said, but in the long term the value will reflect the asset, which when in production will be well north of 7p. Usual caveats on Ni price etc allowing.
Minecheck, I think you are spot on. The deal was done just in time give the current situation. All I would add is, in two years time when the mine is built and FeNi30 product is being sold into the market, HZM will have a value related to it's sales, plus the anticipated second RKEF line. Plus whatever value is ascribed to V, either nothing, as now, or an addition to the M cap. I would think that will be way north of 7p. And no amount of shorting activity is going to affect the development of the project and will at some point unwind.
Hi Tardis, re the post deal drop, imagine for a moment the SP had gone up instead of down, there would probably be as many critics saying the raise had been done at "mates rates". Can't win really. Time will resolve a lot of these issues, but lets face it some are not convinced this is a good deal. I'd like to see a benchmark to compare HZM against which would be helpful. My time frame is to a working mine but there are as many time frames as investors and traders so at some level we have to accept different perspectives. Personally I'm comfortable with mine and not overly concerned about others. Hope things work out for you.
PP absolutely if HPAL can be made to work, I hope it can. Some of the saprolite grades at Vermelho are amazing. I'm just making the point that there is a plan B for V which is world class. Ore grades are optimised by blending saprolite, transition and limonite ores. I'm sure I've heard at an AGM that the saprolite ore body HZM have is unusually high grade and rarely found globally, hence being in the lowest cost quartile and highest grade. And surplus limonite at A will be set aside for potential use in a HPAL plant.
Quoting JM from the proactiveinvestors interview on 30th September. " Line one will come online in late '23 early '24 and the second line will be eighteen to twenty four months after that, so we see that as our time frame to having that production profile". This suggests to me that A2 will be financed before the FCF is available from A1 as initially planned, bringing A2 into production at an earlier stage. So might already have some sort of understanding that the money to finance the second line will be made available when line one goes into production. Re V in the earlier video that was taken down JM talked about the FS taking twenty four months which he said was "quite aggressive" in terms of time scale. HPAL seems technically to be difficult to pull off so the company need a partner with a track record and perhaps a customer as well so maybe a three way arrangement? The good news is V could go the RKEF route at short notice ala Indonesia with scalable plants copying the A phase. If nickel price holds up it's difficult to see there won't be a substantial uplift in value in a couple of years time.
RosyLee, much appreciate your contribution here. Re cost over-run, JM has made the point on several occasions that RKEF plants are a mature technology, lots of sites (circa 40 globally), i.e. a known entity. And HZM have built a team of in-house expertise, contractors, consultants etc who have first hand experience of building, repairing and running RKEF plants in Brazil and delivering similar projects on an even larger scale in the copper space, "on time and budget". I think this is what provides the confidence to the banks that there is the quality of people to build the Araguaia plant on time and budget. Notice the emphasis by JM on the substantial DD on technical and ESG the banks have done "over the last year". Finance director Simon Retter has told a poster on this board that the company MUST NOT go back for more money so that is a red line for the company re finance. I've continued to increase my investment in the company because I'm impressed with the quality of the BoD not just the asset. My view is the market in the past and currently values HZM as an average AIM miner/explorer which in my view mis-price's the company on the low side as it has the ambition and the expertise/competence to out perform the average. I'm satisfied my view is being vindicated so far. I believe the BoD when they say their aim is to build a 50kt a year nickel business. If they achieve even half that it will be worth the wait.