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I wouldn't be at all surprised to see a counter offer come in if PGM's keep the positive momentum.

Have you re-invested then Loot? I seem to remember you claiming to have sold up despite never posting here before that... now you're almost a regular!

Jonah, from the info we had at Inyoni, they were only recovering about 35-40% of the PGM's due to oxidisation, plus if we are in a 50/50 JV to process the material so you might be overestimating a bit there.

Hi Dru, I guess it's also possible that they just weren't happy with the rate at which things are progressing with Munkoyo so decided to bring in an external mining company... we shall see soon enough I suppose. It would be nice to see some positive drill results before the circular.

One thing I'm curious about is the drilling from Munkoyo, it was clear Leon was very excited by the results. Maybe they have extended the resource horizontally or maybe drilling has revealed a deeper sulphide orebody? It seems odd to be looking to bring in an experienced mining company to just extend the open pit they have already established, maybe they want to go deeper?

Whilst we wait for more information I thought it might be worthwhile to think about the reasons to sell or not to sell.

For me a reason to sell:

If you look at the longer term history of the chrome price : https://www.mining-bulletin.com/Uploads/2024_06/20240604213347.png

you can see that apart from a brief spike up to US$400, the upper range has been US$300-330 and the lower range around US$100. We have been sitting close to that upper range for the last year but recently prices have started to fall from that high. Prices are highly volatile and we are operating on small margins with big cash outlays to fund RoM purchases. Any sudden drop could put a squeeze on already tight margins as we saw at the start of the year. Luckily prices quickly recovered and we are set to benefit from that in the current period, but that isn't guaranteed.

Significantly lower chrome prices might force them to shut down the Thutse operations and go back to tolling operations, just focusing on PGM's instead.

Reasons not to sell:

Obviously PGM prices are just showing signs of a possible recovery, it would be madness to sell at the current offer without knowing where PGM's are going. A significant rally could help support the build out of operations in Zambia.

We still don't know for sure that Zambia will generate a significantly better return than South Africa. We await the numbers to prove that definitively.

Any other thoughts one way or the other?

This is the estimated PGM basket updated as of this morning: https://tinyurl.com/3ejtv49w

It certainly looks like we are breaking out into a new trend. I'm sure they would have already switched focus from chrome to PGM content when processing the RoM so we might expect lower chrome and higher PGM production in the last quarter.

Morning Dorfan,

At least it seems we have some time before a decision needs to be made, I guess they are gathering information on Roan production before releasing the circular. That gives us some time to see if this PGM rally is sustained or not. If it is then at the very least we could argue that the offer undervalues the company. There has been a slow and steady rise in the basket price in recent weeks, I do wonder if the potential buyer recognised this and decided to come in with an offer because of it.

In the meantime it's worth noting that this half year should be the best for SA operations in a few years... it would seem an odd time to be selling as far as I can see.

Platinum now over US$1200… if this rally continues it could ba hard sell!

Yes, if I’m planning on selling a large number of shares I generally find the best approach is to announce it on a public message board ahead of time to sow a little panic.

That's not true HD, the module had a theoretical capacity of 5,000 tonne / year of oxides based on 50,000 tonnes / month throughput and 1.5% grade. They are estimating upto 4,300 tonnes / year of total copper based on 40,000 tonnes / month and 1.5% grades, with the majority of that being oxides according to what Leon said (about 85%). As I already said, if the material you are processing is mainly oxides then the sulphide capacity is largely redundant.

They have processed enough material through it now, both from Roan feedstock and Large Waste Project to be able to give us firm numbers. They are showing them to potential investors so the least they can do is also show them to us... that's if they want people's votes.

Why does it not surprise me that Edzi now claims to be an expert on writing circulars as well as an expert on the processing of transitional copper! Truly a man for all seasons.

Https://podcasts.apple.com/gb/podcast/the-sunday-roast/id1593750832?i=1000711985630

The more I think about the offer, the more I think it's actually not an unreasonable one. Have a look at the longer term prices for chrome and PGM's:

https://tinyurl.com/mrynhc59

The big spike in PGM prices was caused by a combination of factors; including a shutdown of Amplats smelter plant due to fire, panic buying due to the pandemic and later by the Russian invasion of Ukraine. Are we likely to see a return to that level? It's possible but unlikely in the near future.

Chrome is the more relevant one. If you look at the longer term trend, the average price is nearer to US$200 which, if I was looking to buy the business is probably what I would value it at. You can't assume it will remain near historic levels as we are right now. I guess that will be addressed in the circular but worth noting anyway.

Also worth noting is the inherent problem in expanding further when the price is so volatile... imagine we bought RoM when chrome was at US$300 / tonne and then it dropped to US$150 / tonne and didn't recover. We would have debt that we would struggle to repay.

Also note that chrome and PGM prices tend to work in opposite cycles so any rise in PGM's may actually be tempered by a fall in chrome prices.

All factors to take into account when considering how fair the offer actually is.

Bluebelly, the reason for the high level of debt is because of the large amount of cash needed to finance the purchase of RoM for chrome / PGM production. Revenue was lower than expected because of the rapid drop in chrome price. For H2 the opposite should be true, with lower purchase costs and higher revenues. Yes we still need to understand what happens with the debt as part of the deal but it should not be as bad as it appeared after H1.

The key thing for me is if they announce a deal for the financing of the modules for the Large Waste Project. They will have to give potential investors hard numbers rather than promises so if they announce that then, as far as I'm concerned, we can take that as a signal that all is good.

I think there was a lot of disappointment with the provisional numbers for Roan and the reason for that is entirely down to Leon not being entirely honest about how much of Roan's capacity can actually be utilised when processing this type of material, which (according to Leon) is largely oxides with a minor percentage of sulphides. Roan's 13,000 tpy theoretical capacity is comprised of 5,000 tonnes of oxides through the new front end module and 8,000 tonnes of mostly sulphides through the original circuit. If you are processing material with very little sulphides it essentially renders that 8,000 tonnes capacity largely redundant. The upside is that if you are producing mostly oxides which go to Sable to produce cathodes, the revenue / tonne is much higher. As long as the front end module is recovering oxides at somewhere near the expected 65% then that in turn bodes very well for future modules at the Large Waste Project and elsewhere. So far initial results suggest that is the case but we need to see that confirmed with hard numbers.

It's not quite as simple as you want to make it Bottomsup.

The South African operations are profitable and we are yet to see the full value of the operations with chrome / PGM output still increasing through the JV. PGM's have been bumping along the bottom for the last couple of years and with big deficits in production, the surplus is slowly disappearing. Prices are rising, we are yet to see where they end up, it might be the beginning of a significant rally or it might be just a temporary blip... it's very unfortunate timing to announce a sale just when the rally starts however, although clearly the offer was made before that started.

Do we want to jump ship from a proven and profitable business in South Africa into Zambia which as yet is unproven? Yes we all know that copper is the future but how profitable will the Zambian operations be? That's the key thing. If they can demonstrate that margins will be significantly higher in Zambia through actual production data and not just promises then I could get behind the deal, if they can't do that then I can't vote for it. Let's see what information they put out before rushing to decide anything.

Are KoBold, who now have the biggest copper deposit in Zambia in a century, a joke? Are FQM a joke? I think the only jokers here are you two! They have potentially economic grades of near surface silver at Mushima North after shallow drilling, most holes end in mineralisation. That’s enough for me to invest a few thousand quid. Each to their own though!

Leon said the details would be in the next few weeks in the interview. Maybe to give time to get the production numbers for copper? Also it gives time to see how PGM's develop, the higher they go, the less likely an offer will be agreed by shareholders I think.

It was pretty obvious they would need to raise more funds for drilling, they even said so in the full year results. I sold out after the Mukai results were announced because that was the last thing I could see that could have lifted the SP before a raise. I will certainly be buying back in once drilling starts again at Mushima North, the large surface anomaly could easily point to something significant at depth and well worth being invested for imo. Also the second KoBold drill well underway in the Southern corner of the license. I expect there will be more drilling by FQM at Mukai but waiting to see on that one.