Member Info for slowlyslowly

There was. It has. No idea.

Fixed in the original thread.

Yes, the reduction in costs, the consequent change in break-even target to one that's readily within reach, and the speed at which he's got geologists on the ground developing the JORC

Thanks for pointing that out, Savvy - my mistake. Here's the correct [3/3]

Q: And the rare earths market, that's really hotting up at the moment?
A: Yes, it's been in the news a lot lately between the Chinese and the Americans. It's been used as a weapon by the Chinese in the trade war, and it's very strategic in a number of industries we all know about: electric cars, wind turbines, drones; it's very, very strategic in sophisticated American defence systems, and every cell phone and every laptop has rare earths in it.
Q: As far as the most recent set of accounts, year 2, June, "tough" I believe it's been described. How would you like to sum up this current year that we're in now, going forward?
A: Going forward it's a phase of redeveloping the strategy, targeting a much bigger resource, a much bigger production target, and at the same time continuing to trial-mine the area, because the mining that we have been doing is proving what we know about this resource. The product is very benign; in other words it's got no uranium and no thorium to speak of; in other words, the radioactivity levels are very, very low. That's been proven by the fact that we're shipping it to China. The Chinese won't allow any radioactive materials into their country, and the fact that we can ship it on the open seas is also an indication of the material. We're continuing to prove the ease of mining and also the ease of processing this material. All of this will continue in conjunction with me developing a far bigger JORC resource, on which we can then plan our production targets more accurately, and we can then look at the next phase which is some kind of beneficiation to take us up the value curve steeply, which we will do once we do that.
Q: So you feel that this project has some real potential?
A: Undoubtedly so. I've invested heavily in it myself, and I wouldn't have done that if I didn’t' think it had the potential.
Q: George, nice to meet you. Thanks very much.
A: Pleasure. Thank you.

[3/3]

Q: So, essentially, what's been happening up until now, Rainbow’s been trial mining?
A: I would classify it as trial mining. They've been mining the high-grade veins. This is difficult in the environment and we need to go back to a more conventional mining method, which is to mine the deposit with systematic bulk mining with more mechanical mining. It's a free dig deposit which means it's very cheap to mine so your mining costs are very low. And your processing costs are very low because it's just with some crushing and gravity we're producing the highest grade concentrates in the world which is about 55-57% Rare Earth Grade concentrate, and that concentrate is streets ahead of anyone else in the market.
Q: And of course there's an offtake agreement already in place.
A: There's an offtake agreement with Thyssen Krupp, that's correct. At the moment our material is very sought after.
Q: Where would you like to see production? What kind of levels are you targetting?
A: If I'm correct about what I see, I've been to sites a couple of times, I'm going to target 10,000 tonnes per annum as my initial production target.
Q: And that is when?
A: I need to do the geological work and the feasibility work, and I need to build a new plant, because the plant I need to build is a lot bigger than our current one. Coupled with that we'll be looking at doing the first phase of beneficiation of our rare earth concentrate, which will take us up the value curve steeply.
Q: And as you point out it's still early days with you at the company, but you've already managed to cut a fair amount of cost?
A: Yes, within my first month I've managed to cut about 40% of the in-country cost and get our break-even level of production way down from about 270 per month tonnes of concentrate to about 100/110 tonnes per month of concentrate. And that is just to make sure the company survives so I can grow it from there.
Q: So how soon would you like to have a JORC resource?
A: I'm targeting February 2020, which is just a few months away, I'll have the initial JORC resource. And I'll also have confirmation of the blue sky potential of this deposit, which is that it's mineralised everywhere this area that we're in. It's all within our mining concession and Kiyenzi is just one of many, many, many deposits we have within our mining concession.

[2/3]

Q: So, essentially, what's been happening up until now, Rainbow’s been trial mining?
A: I would classify it as trial mining. They've been mining the high-grade veins. This is difficult in the environment and we need to go back to a more conventional mining method, which is to mine the deposit with systematic bulk mining with more mechanical mining. It's a free dig deposit which means it's very cheap to mine so your mining costs are very low. And your processing costs are very low because it's just with some crushing and gravity we're producing the highest grade concentrates in the world which is about 55-57% Rare Earth Grade concentrate, and that concentrate is streets ahead of anyone else in the market.
Q: And of course there's an offtake agreement already in place.
A: There's an offtake agreement with Thyssen Krupp, that's correct. At the moment our material is very sought after.
Q: Where would you like to see production? What kind of levels are you targetting?
A: If I'm correct about what I see, I've been to sites a couple of times, I'm going to target 10,000 tonnes per annum as my initial production target.
Q: And that is when?
A: I need to do the geological work and the feasibility work, and I need to build a new plant, because the plant I need to build is a lot bigger than our current one. Coupled with that we'll be looking at doing the first phase of beneficiation of our rare earth concentrate, which will take us up the value curve steeply.
Q: And as you point out it's still early days with you at the company, but you've already managed to cut a fair amount of cost?
A: Yes, within my first month I've managed to cut about 40% of the in-country cost and get our break-even level of production way down from about 270 per month tonnes of concentrate to about 100/110 tonnes per month of concentrate. And that is just to make sure the company survives so I can grow it from there.
Q: So how soon would you like to have a JORC resource?
A: I'm targeting February 2020, which is just a few months away, I'll have the initial JORC resource. And I'll also have confirmation of the blue sky potential of this deposit, which is that it's mineralised everywhere this area that we're in. It's all within our mining concession and Kiyenzi is just one of many, many, many deposits we have within our mining concession.

There's an interview, posted today, with George Bennett CEO at https://www.proactiveinvestors.co.uk/companies/news/904673/rainbow-rare-earths-hits-reset-button-as-it-moves-towards-more-efficient--operations-904673.html

[1/3]

Q: With me here in the studio today, from Rainbow Rare Earth, I'm joined by George Bennett. George, good to see you.
A: Thank you.
Q: You took over as chief executive towards the end of August.
A: Correct
Q: What attracted you to Rainbow?
A: The opportunity of a world-class rare earth deposit - the mineralogy and the metallurgy of the deposit is streaks ahead of everything else I've seen, and I believe it can be developed into a world-class rare earth mine.
Q: So what are your plans as far as developing, and how are things going to change under your watch.
A: My background is, I have a lot of experience, I've listed two gold exploration businesses - one in London, one in Australia. One's got two producing gold mines, the other one has got a very good gold asset in Tanzania. So we've had success in both those companies, and then I've started a mining engineering business called MDM Engineering which we listed here in London, and I sold that 4 years ago, but during that time I built 22 mines throughout Africa and I did about 100 feasibility studies on various projects. So I think I have a good understanding of how projects should be managed, how it should be handled, and how it should be built, having built many of these things for other people. So for Rainbow I need to develop a JORC resource which I believe hasn't happened in the past, which one would normally expect when developing a mining project, and I'm going to go back to basics which is to develop a sizeable JORC resource which will give me a 10-year life of mine at a decent production level, which I'm targeting 10,000 tonnes per annum. But I need the JORC resource to prove I can do that, so I need to produce the JORC resource first, and I've already started that in my first month. I had geologists on the ground last week focussing on the deposit which I think is going to give me the 10,000 tonnes per annum and 10 years mine life.
Q: Which deposit is that?
A: It's a deposit called Kiyenzi within our mine lease area. We have 30 targets, 6 of them are old Belgian mines which were historically mined by the Belgians. I can tell you that with my experience in African that in the last 30 years perhaps 9 out of 10 modern mines built in Africa have all been built over old colonial mines. So the fact we have 6 in our concessionary area I think is a very good indicator of how good the area is.

According to Kentan's post, it docked on 9th then moved off on 11th - 48 hours.

https://investorintel.com/market-analysis/market-analysis-intel/rare-earths-revival/

Happy to take credit for Card's excellent research, Stimpy. If CC keeps the research flowing, and you keep the nice comments coming, we're all happy. :-)

https://www.smh.com.au/business/markets/rare-earths-miner-slams-complicit-manufacturers-over-china-predicament-20191008-p52yu2.html

You may be right. But I think, generally, market makers are good enough at their jobs not to get left holding a baby. If PIs are selling, they'll start picking them up, but quickly lower the bid and the ask until they find the level where they can find buyers for the shares they're picking up. Even shares that have crashed drastically don't seem to leave market makers holding shares they can't offload.

Could you give another example of a market maker who ends up holding a position above 15% for 6 or more weeks at a stretch?

The uncrossed closing trade was a further 1.1m sell at 2.62.
Tiny in percentage terms (0.25% of shares in issue), but a significant chunk compared to the rest of the day. (1.8m shares traded throughout the day (1113k sold, 679k bought)).

Yes, Dan, they're a market maker. This is how market makers make a profit.

I'm not disputing that they are doing this. What I am claiming is that this is not all that they are doing.

Again: They're doing two things at once, but because we only get TR1s for their total position it's easy to confuse them.
1. They're maintaining a holding of about 19%.
2. They're one of the market makers for ADME, which means they (like others) buy and sell to keep the market liquid.
Role 2 means that their total position fluctuates in the range 18.5% to 19.5%, and every time they cross the threshold of 19% they have to notify. But 1 is steady as a rock, and their target holding seems to have been a steady 19% since HH sold.

You're simply pointing out that they are doing the second of those things, and that they're doing it well enough to be profitable. But nobody is disputing that. My point is that they are also doing "Role 1". By explaining how market making works, you haven't disproved the other side of this.

The share price only touched 4p momentarily on the day the Sheikh's sell was announced; nobody loaded up at those levels - just one or two lucky folk picking up a few.

I am utterly unpersuaded that they're trying to offload the Sheikh's shares for a profit. If so, why did they bought more? And while they act as market maker, their percentage keeps going up and down, but they've held at 19% +/- for over a month now. If they're trying to reduce their holding to zero, they're not doing very well at it. They haven't even gone down 1% yet, after a whole month. What's more, the profits they made on the day the sheikh sold (selling the shares they bought at 10p for 12-15p) would more than cover the losses on his shares they still held. If they were just market making, they'd have taken a 3p per share hit and sold the rest for 7p the following day, still ending up in net profit.

As I've said a few times, they seem to fluctuate by a little under 1% as they operate as MM, but their baseline holding is holding very steady at 19%.

And you have to remember the other thing I've mentioned before: They've been the single largest shareholder at Tower Resources for some time now, even being praised by management as being a co-operative significant shareholder.

They don't just act as a market maker looking for the quickest day profit they can. They are doing that here, but they're doing something else as well. None of us knows what they're doing, but the idea that they're stuck with HH's shares and finding they can't get rid of them on the margins they want doesn't fit the facts.

Could it just be someone waiting for the chance to sell, but looking at Google, so mistaking a recent buy as an increase in the share price and so a chance to sell (unaware that they'd have got the same bid 10 minutes earlier)?

If they took a punt like that, why did they subsequently buy more?

And are they holding 19% for their own investment portfolio, or on behalf of someone else whom they wish to introduce to the company in some way?

Which is good, but the percentage is based on the number of shares in issue before today's placed shares start trading. When they do, the same holding will become 19.07%, so they've topped up to maintain rather than increase their percentage. That said, it's good to see that they do this each time there is a placing, rather than letting their holding dilute.

A few thoughts on today's results.

Let's look at what we know compared to (a) yesterday, and (b) IPO.

Yesterday, we knew: (i) we had a new CEO, (ii) his strategy was to move to mechanised mining, (iii) this would require further exploration, so that in some senses we're back at the exploratory stages, and (iv) the existing mines were not yet producing enough to break even. So the new CEO has experience in African mining (a plus), but would adopt an approach that would require more funds in the short-term before profits begin (a minus). I think this was why his appointment moved the share price neither up nor down.

The annual results adds figures on the capital required, and tells us the CEO visited the site before taking on the job, could see what needed doing, and has swiftly begun to do it. So I think the results should, if anything, increase our confidence in the CEO. The capex required is not news. Short-term the news that further funding is necessary will probably dip the share price.

Compared to IPO: In some ways, we're where we were then. We know we have good ore, and it's time to buy the kit and move into production. However we're in a stronger position. We know the high grade of the ores at Gakara, have a source of revenue from Murambi and an operational export route . We have a competent CEO with African mining experience not simply commercial experience. We know more that there is a lot of REO there. So I'd say we're in a stronger position than at IPO.

So, to estimate fair value: We IPO'd with 150m shares at 12p, mcap £18m. Price quickly rose to 14.6p, mcap £22m. The market regarded that as fair value knowing what we then knew. Today, we're stronger than then, so say fair-value mcap of £22m were it not for the fact that we need another £1.6m investment to buy the equipment needed (whereas the IPO covered the costs of the equipment needed at the time). So let's say a fair mcap is £20m today. Shares in issue = 380m. That makes an estimated fair-value share price today of 5.25p, probably slightly reduced because of the unknown variables within the going-concern calculations. So, say 4.5p. There's then scope for this to rise as the new mining approach becomes profitable and scales to the targeted 10,000 tonnes per year (double the original target).

The share price will dip as people digest annual accounts that mention terms like "fund-raising", but my current view is that this provides a buying opportunity for those prepared to take the risk and ride this medium to long term.

Thoughts of others?

Ah, OK. What this company does? Nothing.
It's a cash shell. Once upon a time, it was Photonstar LED Group Plc, but that ran into the ground and the one remaining subsidiary (Photonstar Technology Ltd) ceased trading earlier in the year. As a result, the company became a cash shell - it's a listed company that doesn't trade. The AIM Rules say that such a company has 6 months to either acquire another company (via a Reverse Takeover) or become an investing company, otherwise its AIM listing is suspended. So that's where we are.
But there are a number of reasons why, hype aside, long-term holders decided a successful RTO was a likely outcome here. So the investment case is that this company's listed status is attractive to a private company looking for a way to list in London. If so, the price will rerate when the suspension is lifted, and we (the previous BOU owners) will own a proportion of a renamed, trading company. The hope is that the company will be a growing one, and so our early-stage investment will more than pay off.
But as we're now suspended, it's too late for anyone to get on or off this train; we have to wait to see if an RTO does complete. We have 6 months for this to happen, otherwise the listing is cancelled.
Helpful?