Member Info for SloppyG

That's the interesting thing for me and perhaps why funding will take a little longer than anticipated. Those interested in taking overall project equity to fund P1 will likely only do so in the safe knowledge that P2 (incl in country processing) can be funded and it is viable - land, permits, expertise, logistics, UG gov support etc. The prospective value of the business would look completely different in the absence of an SPG plant hence determining how much equity needs to be give away for P1 $45m is highly dependent on this.

I don't think P1 and P2 can be seen as being mutually exclusive therefore (from a financiers perspective). If it was debt finance with say AFC for P1 then likely a simpler faster route to secure but we know it's an equity at the project level route

My instincts are we might have to give away a bit more of the business to cover the P2 risk factors then we think; however once received it would likely be a ringing endorsement that the entire project looks to be in relatively safe hands (DFC a sho0-in for P2 etc). The Team at Bres have also done a fantastic job in retaining 100% ownership to this point hence providing a few more chips to play with. It does all take a bit of time though as clearly many moving parts here.

I think the challenge at the moment is that all the moving parts make the DFS regularly outdated. Normally one would want to draw a line in the sand and move forward on that basis but there are some quite material changes to consider.

Mike has already said that China may need to be fully removed from the process which would move P1 funding up to c$50m. In addition the SPG partner offering ops expertise would likely need to change (maybe to AET or Alkeemia ?). Fuel cost changes, interest rates (although DFS NPV 10 seems fair) etc

We now have the situation where the DFS is only modelled on 40% of the resource and the LOM has materially shifted but neither can be included in the DFS without further costly and timely infill drilling.

Then there is all the optimisation changes that Mike says should provide a nice bonus when the DFS is updated.

What is out of our control is how much of these moving parts potential financiers want to see formally re-modelled and which elements they are happy to consider outside of the process; further complexity arises if some of the options are looking at P1/P2 combined whereby LOM and updated JORC have a material impact.

My instincts are also that prospective funders will want to see P1 and P2 separated in terms of NPV. P1 break even will be highly sensitive to the changing upfront costs and fuel costs etc whereas the entire project not so much.

So the JV MOU is 50:50 between Bres and the Singaporean outfit Triessense who in turn have to fund the SPG plant 50/50.

The unknown Asian SPG partner was to provide operational expertise to the JV only. This was speculated at the time to be a Chinese company given their expertise in downstream processing. Depending on the source of funding (US etc) it may well be that this partner will need to change which in itself might pose a few operational headaches but that's one for another day !

I recall the litigation funder has not been named but for some reason at the time people were leaning more towards it being Burford Capital as opposed to LCM. Burford do indeed have an excellent track record but we clearly cannot be sure it is them involved.

Interesting that the party has not been named publicly whereas other arbitration plays deem it appropriate to name the funder. One would think this is price sensitive news for SHs given relative success rates and indeed the recent issues LCM have faced; indeed Panthera felt it appropriate to reassure the market re. LCM and to comment on the fact that most of the funds have already been secured were anything untoward to happen to LCM. Emmerson would not, one would presume, be in such a fortunate position given they are behind the PAT arb curve so to speak.

From Tgram

https://africa.businessinsider.com/local/markets/after-china-exit-us-emerges-as-preferred-financing-partner-in-ugandas-dollar319bn/4zhp2pb

Hey FF - that margin you quote is average over LOM which will take into account scale, downstream processing - pricing agreed selling concentrate to the JV operation nearby in Gulu etc. It is not realistic to expect P1 to generate the same average margin on concentrate as the full scaled up operation with downstream JV partner.

Mike has previously said in interview/s that P1 has indeed been designed to be profitable to facilitate funding but without the in country processing it becomes barely worth our while. For sure micronisation added since then would have improved margins but lets not kid ourselves this is all about processing in country hence why the DFS is now consolidated.

Anyway the point is I think it's good to discuss such matters, especially if have more than a fair chunk invested here. Whether people choose to take anything away from it is a different matter !

To be fair I think it helps to have eyes open and discuss such matters; it certainly does for me given this is my largest holding. Also Bres have previously highlighted Transport infrastructure as a risk in the Nov prospectus and we know that the DFC requested more details not so long ago.

Any P1 potential financier will for sure be having discussions regarding logistics. P1 is only intended to be marginally profitable (more about proof of concept) so logistics assumptions can swing the break even very easily. For my money we will therefore see a combined P1 & P2 solution as I think it will provide more security for the funders given the relative NPVs of each phase. Let's see......

Transportation infrastructure:

Central to the Group’s ability to become a commercial mining operation is access to a transportation system through which it can transport future production to a port for onward export by sea. The Orom-Cross Project does not benefit from close proximity to the nearest port, which the Group has determined will be the optimal route for production to be transported from the Orom-Cross Project to global customers, although there is an existing road and railway network. Any proposed transportation system, including port facilities, will require obtaining necessary permits or authorisations. In addition, any delays in (i) obtaining the necessary permits and authorisations, (ii) the construction or commissioning of any new port facilities (if required), or (iii) raising finance to fund the infrastructure development, could prevent altogether or impede the Group’s ability to export potential heavy mineral production. Any such issues in respect of a transportation system for the Group’s product could materially and adversely affect the Group’s business, results of operations, financial condition and prospects

I think this from the RNS covers off the funded until the hearing.

"The net proceeds of the Fundraise ensures that Emmerson remains in a strong financial position while navigating the arbitration process and has sufficient working capital to supplement the drawdown from the litigation funder to ensure funding in place beyond the anticipated hearing date".

Agree on the comms. I guess it must have been oversubscribed and scaled back to meet the 100k exactly so why not shout about it if so !

Applied for some with II given they are effectively saying funded now until the Hearing date. They were always going to tap the market at some point as the litigation funders were only making a contribution towards G&A. Panthera SP responded very well after they did their last G&A raise for similar purposes. Caveat of course is the current geopolitics etc.

Anyone know the background to this salt mine and the "previously held licence". Does it relate to the main mining licence area hence they are saying they no longer have it / Morocco have rescinded it or something other licence ?

My take on it is all the moving parts, interested parties, conflicts of interest etc must be exhausting. In addition to muted SP reaction.

Mike made a throw away comment re. Iran war and some taking eye off the ball. Perhaps DFC preferred option for P1 and P2 but it would delay timings as they will not be in a position to sign off for a while. So do they expedite with the likes of AFC for P1 only to get it all moving.

Also who they align with dictates whether China can be involved in any capacity since at present they represent the majority of P1 offtake.

Nice problems to have but exhausting just thinking about it. Need to get this one right even if takes a bit more time to nail down.

For Sale sign up for sure given this imo.

LTIP are effectively NCOs as Directors & PDMRs do not have to pay for the shares but are simply awarded them if criteria met. Need to check but given their performance shares, LTIP, options, existing equity that would mean Mike and the BOD must be in for 20m+ shares each at a very low average. In my mind c20-25p and they are out as they make serious cash at that level. DFS, P1 funding with strategic partner, buyout 30-50% of SP should seem them home in due course.

Ultimately whether or not PIs are happy with that price comes down to a degree on ones holding. I know I would take it which makes me think Mike & co definitely would !

Agree. Offtake is an interesting one actually. As said, Mike did reference in a recent interview that a pre-requisite of US/DFC funding may well be that China is removed from the entire supply chain which covers mine capex, expertise and also offtakes etc. Given that the majority of P1 offtake was to be China based then I suspect we will need to see this revisited as US backers remain the most likely outcome imo.

Not personally expecting offtakes to be an issue however but I do think there will be a need to remove China touch points from every aspect of the direction of travel which will no doubt have some initial impact.

Good to see the SP firming up. I recall saying at c3-4p that if we cannot all make healthy returns from this level then we may as well give up; the same applies to 9p. Everything appears to be lining up perfectly.

Hey FF - You can track on Companies House under filing history for Bres. They are still required to update Statement of Capital for warrant shares allotment which are they doing regularly.

As said might be a few days lag but minimal. Also Bres PR guys on Telegram group also confirmed that very minimal exercised since block listing hence gives me confidence in the c1m allotment.

Warrants not the issue now as slowed right down. Only c1m have been exercised since the blocklisting announced. Might be a few more on top of this with lag but minimal. Seemingly stickier hands now.

It's all about Finance now, on what terms and crucially if they can get a strategic partner on board for the entire project (P1 & P2). My instincts are P1 funding in isolation will not move the dial as much as we would like.

Personal preference remains a buyout (especially with jittery markets) but the SP is precluding this for now unfortunately. Typical buyout premium 30-50% as you just don't often see offers land at multiples of the current MC.

I believe we will still get notifications upon exercise as the block listing just makes it faster and cheaper for Bres with no repeat admissions etc; it has no impact on disclosure obligations as far as I am aware.

Also makes it clearer in Financing discussions with max dilution a known figure etc

You are right Spank in that Mike did reference AETC. He did however caveat it with words to the effect that their level of expertise is not at the same level as the Chinese etc and that there are some hurdles to overcome therefore.

Presumably Bres will also need to acquire some land for the plant and get it fully permitted as not within scope of our existing mining license. The point being a lot of unknowns at this stage hence we are where we are. Warrants clearly do not also help matters !

One of the issues that I think the market is struggling with at present is that we have 2 very discrete projects - the mine and the spg plant and a lot of the overall margin sits in the latter where most of the execution and financial risk happens to also sit. It is pointless therefore talking about X% of $1BN NPV therefore at this stage.

Mike in his recent interview talked about how they had previously agreed to utilise Chinese purifying expertise but that this might now not be possible given the political angle. Phase 1 funding only unlocks a fraction of the overall NPV and is proof of concept. There is a lot of uncertainty with Phase 2 from multiple angles hence the market is discounting it for now.

The point is patience is required and value should out eventually but I think the quick trade sale, that I was personally hoping for, is for now at least off the table as Bres look to recruit operational expertise to take this in to production; value accretive hopefully in the longer term but clearly comes with more risk and added time etc.

Although £4m + warrants + DFC cash seems excessive given where the business is currently at and would provide some cash runway. It also feels as if rushed though somewhat.

More to it than meets the eye I would say. I'm sure we find out soon but have a warm feeling !

Yeah discount is 9p to 7p as clearly forward sold post DFS.

Still it explains muted reaction to DFS. Well funded now however to what I am hoping is P1 and P2 funding in one shot as BRES need the SP up considerably if an offer at 30-50% premium is going to be meaningful.

Yes do it regularly. When do the transfer just make sure you tick the box partial transfer or else they do the lot and close the scheme !

Takes a few weeks as said for 1st time set up and then a bit faster for subsequent transfers.