Adam Davidson, CEO of Trident Royalties, discusses offtake milestones and catalysts to boost FY24. Watch the video here.
Nobody is ever stuck in a share. They might have to sell at a loss, but they're not stuck. They just have to press the sell button. Whatever the current paper value of their BMN shares, it is worth exactly the same as if they sold up and put in somewhere else. If someone is stuck here then the only place they're stuck is between their ears.
Short term investment case: Production report for 2Q is towards top end of volume and bottom end of cost estimates and Orion deal gets the background legal and sign off completed in the next few weeks and you could see share price around 6p mark by end of August. At that point the share price may struggle to appreciate rapidly until Orion have offloaded the 57m shares or so they get as the first part of the deal ( which Orion are not currently renegotiating because as soon as they said they they wanted to vary this element BMN would be obliged to quickly inform the market as it is major share price sensitive news).
In the recent 2022 results RNS the company said we have received an average of $37.99kg/V up to that point in 2023. It forecast lower prices for the rest of 2023 and lower again in 2024. It, for one, certainly doesn't see any pricing strength over the next 18 months. On the positive side the company's forecasting track record has been very poor over the years; on the negative side, they've invariably erred on the side of over-optimism which doesn't bode well!
On a related point, if we've been receiving an average of $37.99 across the group this year then we must have received a lot lower than this for much of our sales to offset all the $40+ Nitrovan sales and the $100 chemical sales being touted on here.
Any discussion of profits or not needs to be clear about what is being included or excluded. Are you talking EBITDA of the vanadium mining and processing alone, EBITDA of BMN as a whole including Belco, Imaloto, etc, including estimates for some or all ITDA items or writedowns, etc. Without complete clarity about these then both person A saying we'll make a profit and person B saying we'll make a loss can both be correct at the same time. Schrödinger's BMN if you want!
By far the biggest statement of how undervalued the new CEO thinks the company is to put his hand in his pocket and buy a chunk of shares (£50k minimum, ideally multiples of this and not some nominal amount), set an example to his fellow directors, and demonstrate a big change from what has gone on before his arrival. Then he'd then have as much invested in this as many on here, myself included, really feel the pain of further appalling share price performance, and accelerate the process of regaining shareholder confidence and trust in the BOD.
It was the CEOs comment about dilution that I was alluding to when I said talk about this was a bit misleading. Yes, in theory they could have negotiated dilution, but the original RNS made it pretty clear thant cash repayment was the expectation once the 14 July 2023 date was hit.
Having re-read the 19 Jan 2022 RNS which stated the terms of the Primorus CLNs plus comments below on this board, the following appears to be what's gone on:
1) BMN did originally grant Primorus an option on the CLNs so Pdub is correct in saying BMN had control of this. I was incorrect in saying it was Primorus who called all the shots here.
2) Primorus did two out of a possible six conversions. My interpretation of the RNS is they did these at a 20-day vwap of the BMN share price on 28 Feb 2022. This appears to be in the region of 9-10p. The BMN share price was briefly higher than this in early March 2022 so maybe Primorus got lucky and converted and sold one tranche during this period. However the share price has been well below 9p since then so the second tranche would have made a loss for sure (and perhaps the first too).
3) I was wrong to suggest they could convert up to 30m at 3p to settle the £900k balance. Any final conversion (up to one-sixth of the total) would have again been at 9-10p so it's obvious why Primorus weren't interested in the other 4 conversion opportunities.
4) the final sentence of the original RNS covering Primorus says "To the extent the BMN CLNs are not converted or redeemed by 14 July 2023 they will be repaid at face value plus accrued interest by Bushveld." This is what kicked in on Friday and the word 'repaid' strongly suggests to me that cash was always the intended method here and talk of dilution as an option is a bit misleading.
Lots of comments yesterday that BMN is flush with cash and this was their choice. The original RNS suggests they didn't have a lot of choice - cash was required now to settle - and the fact they've had to negotiate eeking out the payments suggests the cash situation isn't as great as touted. Yes, we may be making a small profit on current V sale price versus the V AISC (though I remain doubtful) but getting Belco plant commissioned will be eating cash for no revenue as yet, the Mustang deal isn't closed so we don't know what additional cash may be involved here and, of course, if we were that flush with cash and cash flow it would have seemed sensible to include at least some element (even just a million dollars) in the recently announced Orion deal. That would have sent a very strong message of confidence to the market. The confusion caused in the recent results RNS and conf call about potential additional finance raising doesn't give a good impression either on this. Others will disagree and that's fine. It's my view and, as you've seen, I get it wrong quite a lot and I'll be delighted to do so again in this case!
Primorus own the CLNs so call the shots on repayment. Their options were approx 30m shares at 3p, cash or some combination of these. Primorus are no fools and can foresee the problem involved in offloading 30m shares at an average of 3p to get their money back so cash is by far their best option. Unfortunately BMN are so strapped for cash that the best they can offer here is 100k per fortnight over 4 months at 10% interest like some sort of pay day loan repayment. £910k is not a huge sum really and if BMN had the cash they'd pay it up front and not incur interest. It's not a pretty story and delusional to pretend it is anything else. 4pm Friday RNS are invariably bad news and this is the case here.
Pdub - one minute you say time to move on, the next you reopen the discussion! Anyway....
- The Orion deal was signed on 30th Sept 2020 so COVID was well known about at the time.
- the falling V price is irrelevant to a discussion about missed production targets
- the Suez shipping issue had no bearing on missed production targets, nor did the war in Ukraine
- the bad weather in SA mostly affected shipping (i.e. sales) not production. The impact on production was limited in time and effect.
- I mentioned load shedding in my follow up post and didn't ignore it. It clearly got worse over time, especially last year.
My original point was that I felt that getting the production estimates wrong was a far more serious error on the part of FM and the BOD than the V price estimates as cindercone suggested. It's just my opinion, no big deal and will be long forgotten on page 25 of this board in another 24 hours.
Pdub - it was FMs job to set accurate production targets, not mine. He was CEO, he got paid the big bucks to get this stuff right and he gets criticized for getting it badly wrong. Of course my view is with hindsight because I can only see what happened. FM was the one with the info about kiln reliability, he was the one with the details about ore quality, about how much load shedding could impact if it got as bad as it did, etc.
I'm not suggesting it was an easy thing to get right and I'm sure FM and the BOD thought about the targets carefully. However this was largely under their control and they got it badly wrong and if lessons are to be learnt for the company and its investors then it needs to be said. They are much less culpable for V pricing projections because these are not in their control.
To me the bigger error in the Orion deal was not the vanadium pricing projection, rather it was the unrealistic projection of production volumes where the targets proved hopelessly optimistic. These were unquestionably FMs responsibility to get right and to make sure the Orion deal was serviceable in the worst case scenario. He knew how bad the kilns were and he failed to be realistic about the prod volumes and the time/cost required to get capacity and reliability to the required levels.
If the production had hit the projections then even at the weak V pricing levels we saw we'd have spent less capital fixing the issues and driven the C1 costs down. This would have made a huge difference to the cash flow and ability to repay Orion. And if V pricing had even been a just dollar or two better than we saw then we'd have been in very good shape if production vols were on target.
I also think the Enerox deal was a major mistake once it was clear that V production was way off the targets needed to service the Orion debt. Chucking millions of dollars at this when we hadn't got our core V production, revenue and profitability in good and reliable shape was a serious misjudgement in my view.
It doesn't need yet another discussion of this. Read back through harchris and trevorbrooking post history to see why US prices of $38 are either profitable or not.
The share price closed yesterday at 3.63p according to Google finance. This is exactly the same price as it closed on May 4 prior to the Orion RNS on May 5. Why would Orion now regard today's share price as any more of an impediment to conversion at 6p than the exact same share price on May 4?
When you look at the list of companies they cite as BMNs competitors further down the article then you know this assessment of BMN isn't worth the pixels it takes up on my screen.
Some interesting stuff posted this morning about VRFB projects and why some other battery technologies just won't cut it at the scale and pace of adoption required.
https://twitter.com/BMNperspective?ref_src=twsrc%5Egoogle%7Ctwcamp%5Eserp%7Ctwgr%5Eauthor
Thanks HC. Actually the $1/kg difference between your estimate and the company makes $4.5m difference to the top line over the course of a year so it is important to understand given the tight finances we have. However, as you suggest, it is difficult to nail some of this stuff down given we don't know exactly the geo or product splits for 2023 so your estimates are much appreciated.
One other thing.....do you have any insight as to why the trade payables are so high? They've always been high but seem to be getting higher. These are payables within 90 days and Ive always wondered who we have to pay so much to on a regular basis.
Wrong HippyDays. FM is staying on during July and is working with the new CEO. In last week's interview he was clearly enthusiastic about BMNs future and his continued involvement (probably on the energy side was my interpretation). This is a person who wants a change of role after 11 years not one who has been ejected against his will.
The company told us last week that they had received $37.99 on average for the year to date. That's the number to work from for 1h23 rather than worrying about day to day price fluctuations. It might also be worth figuring out how we end up with that number when the spot prices (especially in the US) together with our supposed Nitrovan and other product premiums suggest we ought to have been averaging more than this over the last 6 months.
CC - I think he'll spin it out as per the plan. Partly because he's a miner by trade, partly because he will want to focus on where the vast majority of his revenue, cost, and debt challenges are going to be for the next few years at least, and partly because if that's where FM and MN have interests then he can push them in that direction while he puts his stamp on the mining side.
A truce please! The first 20 posts or so on here today were good. And yes, I know who started it today. Other days it's someone else, but it's tiresome all the same.
Coffeecups,
At the moment BMN has got its fingers in too many pies and it needs to decide what sort of company it wants to be so it can focus its resources (assuming the immediate financial pressures are resolved). My preference would be as a vanadium miner/processor and ditch the other stuff, but this is me being a middle aged duffer playing armchair CEO. To this extent, I'd be more keen to explore ways of doing a JV on Mokopane (accepting that BMN would likely be the (very) junior partner) with someone with the necessary deep pockets and clout to make it happen. If the plan is to focus on V production then disposing altogether of the biggest long-term V resource would be a last resort imo. I'd strongly hope this partner was not China for geo-political reasons, but the current SA govt appears determined to cosy up to vile regimes so I don't have any faith there. Glencore would be my preference even though they are no saints either given their existing SA vanadium operations.
It will be interesting to watch as the new CEO brings his ideas to the business.