Member Info for scottology

When trying to value an asset it's easier to use recent examples of prices achieved.

Simandou was that example and at nearly £12 per share that would value ZIOC at £3.3billion - yes a big amount, but given this is approaching a $1 trillion asset - does it seem like a fair price?

If you reduce that to a super low-ball £3 offer (based on % of proven reserves in the ground) that would value ZIOC at £850million which is peanuts for a project of this size, scale and future profitability.

Somewhere in the middle would be preferred - my own target £8 or £9

Sit back and relax.

Don't forget Arran will bring in another 7kboepd net to RRE which should add an extra £150m per year profit, which equates to over £11 per share profit just from Arran.

While we are currently trading at £19

I'd previously done a calculation based on the Simandou purchase that would value ZIOC at £11.95 per share (excluding capex costs) so should be significantly more.

We've also now got confirmed higher grade ore which sells at a higher premium.

Remember that the interested parties in this have been involved for many years. It just takes time to get a project of this scale and complexity (given the nature of the politics/debt of congo) over the line.

With the new enlarged group achieving a profit of £230m for the year, that would equate to a £17 dividend returned to shareholders.

With the new combined group making £230m profit you can see there is still significant upside.

@Zanaga_Iron_Ore are tweeting that iron ore hits five year high of $126 a tonne

$75million profit for the year and no recommendation to pay a dividend.

Serica wants the cash!

But will the cash be used to fund another imminent acquisition or will it be used to fast track our exploration assets?

Some nice hints in the investor presentation as to the true scale of the resource

Only 2.5bn of the 6.8bn required to support 30mtpa for >30 years so that means defined resource would last for 82 years.

You also have to bear in mind that only 25km of the 50km strike length has been drilled, and to only a total depth of 300m with ore body continuing further.

So in theory you could then double the expected life of mine to 160+ years, plus whatever the extra depth provides (a currently unknown quantity).

Alternative to long life, is to ramp up to a stage 3, targeting 60mtpa to extract the value over a shorter period.

I believe some have already stated that Andrew suggested such a move, which ties in nicely with my own opinion on the matter.

Nice to see NPV of $800m for stage 1 based on average $90/t average selling price.

As others pointed out, this is 65% FE compared with our premium 66% - 67% which should achieve more.

Jumps nicely to $2bn on stage 2, with significant upside on a possible Stage 3 which should surpass $3.4bn

If it had been successful the share price would have gone ballistic, i.e. not priced in, so no reason for any drop.

Yes it's a disappointment as there was considerable upside above and beyond the current assets, but as stated, we're still undervalued based on our current producing assets.

You cant buy 5% of IOG without sending the price soaring.

Absolute low-ball offer from RRE and was rightfully rejected by the board.

Of course they want our assets, but it will cost them significantly more than that if they are serious.

Surely too much value here for us not to be subject of a bidding war.

Hi Extrader, my point was more about whether the other big iron ore miners would be willing to JV with Glencore and allow them a place at their table. But at the same time, would they want to miss out on involvement with such a potentially profitable project? It could do either way, but I get the feeling that a Chinese JV might make more sense for all involved.

There is probably no place for ZIOC at the table long term as they add little value once this is ready for production, however that means we're missing out on considerable upside on future (and from what we know already - guaranteed) ore reserve increases as the project progresses.

It would need to be a suitable offer to compensate shareholders for lost value from these future increases in reserves.

Of course Glencore are a great partner to have on board. No other small scale miner has such a partner.

Zioc have been in driving seat for the majority of that time albeit some recent indications that things are changing with Glencore taking a more proactive role...

Given that Glencore don't have much of a presence in iron ore, you would assume that they would want another major on board as JV partner to leverage their skills and expertise in this space. Would the likes of Rio, Vale, BHP be willing to do this and allow Glencore to make headwinds into what they currently see as the major source of revenue for their own business? Or would they prefer to take both Glen and Zioc out of the equation?

Would a Chinese partner be more willing to work with both of us to maximise total value for shareholders over the long term? Particularly one that could achieve significant cost savings by being involved in the full end to end supply chain of the raw materials they require to make their product?

Chinalco have always been a possible partner given their need for a direct source of high grade iron ore, rather than being held hostage by the big miners as they currently are.

The collapse of the Simandou purchase can only make the case stronger for some sort of agreement with Zioc, particularly as there are very few greenfield mining opportunities around, and most of those that are, are already owned by the majors themselves.

Therefore ZIOC must now be top of the list as potential acquisition target.

I've done a calculation a while back indicating a like for like comparison with the agreed price of Simandou, that values Zioc at around £12 per share.

Looks like some big holdings taken out.

No obvious reason at this stage.

Interesting intel on the debt restructuring progress. These have been long drawn out negotiations, but it will be worth it in the end.

You've got to consider extraders view on financing i.e. other competing projects but given that the iron ore berths make up the biggest component of the new port, it should place us high up the list, especially considering the JV with Glencore.

Also I think it would be incorrect to consider the port as a separate entity to the SEZ, they are very much interlinked. There would be no point negotiating some deal to build the SEZ without the port, and then having to go back to start negotiations later, particularly given that the port is the key driver for diversifying the Congo's economy away from oil. If they aren't developing other industries why would they need a shiny new special economic zone.

I'd suggest Evergreen (being a Chinese company) will be funded by the Chinese, so we don't need to worry about that.

Hopefully they will also take a share of zioc giving us full free carry

This is for the planned production from the 770MT proven reserves and EXCLUDES future potential value of the full 6.9BT resource.

If we only achieve 1% of this value, that puts ZIOC at over £1 per share.

Copy and paste from previous calculations last year:

$161.50 / tonne for 65% pellets

Stage 1 opex $24/ton

Cold palletisation $10/ton

= $127.5/ton profit

12Mtpa = $1,530,000,000

9 years = $13,770,000,000

Stage 2 Opex costs reduced to $22/ton + $10/ton cold pellets

= $129.5/ton profit potential

30Mtpa = $3,885,000,000

21 years = $81,585,000,000

Total profit over 30 year life = $95,355,000,000 ($95 billion)

Less $4.2billion capex

= $91,155,000,000

ZIOC share = $41,019,750,000

0.78 exchange rate = £31,995,405,000 (£31.9 billion)

283,201,033 shares = £112.98 per share

Indeed extruder, the money is starting to flow to other similar countries.

China have a strong hand with debt negotiations and will no doubt be holding out to get the best deal out of the new SEZ.

Nobody wants to commit until everything is lined up but we keep getting closer and closer.