Member Info for StarBright

I 100% agree that future dividend policy is a (perhaps “the”) critical question for GSF. It will be very interesting to see how the revenue / cash-generation picture is changed by the various large projects being brought into production. Also by the operational changes in the UK grid which appear to have a material impact upon domestic BESS revenues.

In fact, there’s every chance that an extremely positive picture might emerge over the next six months:

- TTC realised

- 2024/25 divi target achieved

- material revenue increase(s) from recently energised projects (US & UK)

- clarity over capital allocation (eg dividends vs new project funding) policy

But there are also factors outside the company’s control that might be materially positive:

- recovery in UK BESS revenues

- today’s CPI print increases the probably of UK rate cuts

- external pricing through transactions “supports” NAVs across the sector

- discounts across the sector may be narrowed by consolidation/m&a

- DFMs stop selling..!

Based on a properly covered dividend of 8pps with forward visibility, my price target here is 80p by the end of the year and anywhere up to 100p in the longer term as rates fall and yield-seeking investors are tempted back.

This has been a tough hold. I didn’t think that the sp would drop into the 50s let alone the 40s. But for investors with averages from (say) 60-something pps upwards, the opportunity for capital gains alongside the dividend is very real.

YMMV, DYOR etc etc….

@alwayshoping, I find it very hard to believe that there’s a “done deal” somewhere in the background. If there is - whilst the benefits of the apparently cheap GLEN exit have accrued mostly to a group of “family and friends investors” - the directors have taken a huge gamble that the rest of the shareholder base is asleep or acquiescent.

Governance remains a major risk here alongside financing…

Q4 declaration *should* be somewhere around June 19th.

However if there’s positive news on the TTC (specifically, realisation via a sale) then it is likely that they will take the opportunity to re-confirm their dividend intentions in the TTC RNS. The companies comms since Christmas perhaps suggest there is an active debate between the board and the investment manager over the deployment of any “surplus capital”. I would like to see the managers appetite for additional projects constrained somewhat, with a greater focus on returning capital than on funding new/exciting projects. It will be particularly instructive to see what they say about dividend expectations going forward.

DRAX offer for HEIT is fantastic news for GSF as it comes from outside what I call the “cosy circle”, so provides strong price validation…

[On March 17th after the Foresight offer for HEIT I posted this: “ To be super-picky for a moment, it would have been marginally better to have seen an offer from outside of the renewables funds industry. My sense is that all of the firms in the sector use pretty similar methodologies, discount rates, power curves etc. Selling assets to each other provides a mark, but not necessarily a very strong one. Witness the Irish, who spent a decade selling the same houses to each other at ever-increasing prices until funding ran out! An offer from a private equity fund or a company from outside the cozy circle would provide the underpinning for a true re-rate across the sector.”]

ChatGPT (sorry, but it’s a starting place for those interested…) explanation of H-CAES. In simple terms, surplus electricity is use to compress air which can be released to power turbine generators during period of lower demand. Similar concept to BESS but on a larger scale:

“Hybrid Compressed Air Energy Storage (H-CAES) is an advanced energy storage technology that integrates traditional compressed air energy storage (CAES) systems with renewable energy sources, such as hydrogen production, to enhance efficiency and sustainability. In a typical CAES system, excess electricity is used to compress air and store it in underground caverns. When energy demand increases, the compressed air is released, heated, and expanded through turbines to generate electricity. Traditional CAES systems often rely on fossil fuels to reheat the air during expansion, which can reduce their overall environmental benefits. 

H-CAES addresses this limitation by incorporating hydrogen production into the storage cycle. During periods of low electricity demand, surplus renewable energy is used to power electrolyzers that split water into hydrogen and oxygen. The hydrogen produced can be stored and later used in fuel cells or combustion turbines to generate electricity, providing an additional energy output during peak demand periods. This integration not only improves the round-trip efficiency of the storage system but also reduces reliance on fossil fuels, aligning with low-carbon energy goals.

Relevance to the UK Energy Transition:

The United Kingdom has set ambitious targets to achieve net-zero greenhouse gas emissions by 2050. A critical component of this strategy is increasing the share of renewable energy sources, such as wind and solar, in the national energy mix. However, the intermittent nature of these renewable sources necessitates effective energy storage solutions to ensure a stable and reliable power supply.

H-CAES offers a promising solution to this challenge by providing large-scale, long-duration energy storage that can balance supply and demand fluctuations inherent to renewable energy. By storing excess renewable energy and converting it back to electricity during peak demand periods, H-CAES systems can enhance grid stability and reduce the need for fossil fuel-based peaking power plants. This capability is crucial for the UK’s energy transition, as it supports the integration of higher proportions of renewable energy into the grid.

Moreover, the hydrogen produced in H-CAES systems can serve multiple purposes beyond electricity generation. It can be utilized in industrial processes, transportation, and heating, contributing to the decarbonization of these sectors. The UK’s commitment to developing hydrogen infrastructure and technology further underscores the potential role of H-CAES in the national energy strategy.” 

A few thoughts, in no particular order:

1) This remains a fascinating story, and it was interesting to see/understand how long some of the people involved have been associated with the project. That indicates their ongoing belief that it is deliverable.

2) Marty Knauth came across as warm and rather gentle for a mining CEO, in a positive way. He spoke very well about their engagement with local stakeholders for example. AT not such a natural builder of trust, but perhaps they are an effective combination.

3) I don’t have the knowledge/experience to assess their chances of success on the various work streams (eg proving higher grades, reducing capital costs) but they were presented in a coherent and credible way.

4) The timeline they outlined was quite detailed and doesn’t extend too far into the future. I think this horizon was a conscious decision - good if so.

5) They talked about how the workstreams can materially increase the project’s NPV. All good, but the persistent underlying issue is the disconnect between the NPV and the share price. They need somehow to increase market perception of the probability of delivery, as well as the size of the prize! Without a transaction (buy-in / out / whatever) though I think it may be hard to convert NPV increases into SP increases.

6) Whilst the can may have been kicked again relative to some posters hopes, it’s not been kicked that far. For me this remains an excellent candidate for a modest position in the speculative compartment of a private investors portfolio. It’s not yet at the point where generalist institutional investors are likely to commit client monies, but some specialist mining funds etc might be tempted…

DYOR, YMMV etc.

At the risk of stating the obvious, the price paid to GLEN was ~50% of the last traded price. That’s a matter of fact. It is likely that this price was negotiated a while ago though, when the traded price was lower.

However the absence of contingent deferred consideration is notable. If a high(er) offer for ZIOC’s equity emerges then GLEN has significant regret potential, and may face awkward questions from its own shareholders. Whilst they can probably brush aside the USD15m as “immaterial” today, an offer for ZIOC at (say) 200p would mean them missing out on over GBP500m - a sum that their shareholders would certainly consider material!

Buying GLEN out for USD15m looks like a major coup for ZIOC. It’s a shame they seem to be unable/unwilling to explain how it was achieved.

The question on the discounted GLEN exit price was asked, and no proper answer was given. To say that the project couldn’t be advanced with GLEN as shareholders so their shares had little value is a non sequitur. There was - evidently - no process for determining the market value of the stake. We are told that GLEN simply accepted a 50% discount to the last traded print.

Given the possibility that the project might generate huge value if advanced under different shareholders, it would have been normal for GLEN to seek contingent deferred consideration; a later payment conditional upon specific targets being met. Or perhaps a royalty. Such structures are very normal, and would have enabled the optics of a GLEN exit from the register etc. That no such arrangement exists leaves us to conclude either that GLEN have made a mistake, or that there has been (or will be) another transfer of value elsewhere. Or that GLEN know something about the advanceability of the project that the buyer(s) don’t.

Trahar tried initially to duck the question by saying “You’ll have to ask GLEN” but that’s nothing more than an attempt to divert. What has happened here can perhaps only be explained by the existence of undisclosed information. GLEN’s parcel of shares and the value subsequently derived from them - has ended up in the hands of friends and family at a substantial discount. It’s not a good look, frankly. Precisely the sort of murky obfuscation that deters institutional investors.

@Extrader, some interesting questions but quite detailed. I’m not sure that there’s much value in questioning them vs previously expressed intentions; this is the start of a new game now.

I want to hear what their vision / plan is, and I want to assess whether or not they can be trusted.

I’m hoping that they’ll provide enough of a pump that there’ll be a spike to lean into if I’m not convinced…

Sorry - hit “post” too early…

Whilst there are - evidently! - still determined sellers out there, there’s also a 500k share trade booked at 51.3p this morning that is likely a buy. It won’t take many of these to get the price moving in the right direction.

Excellent news.

To be super-picky for a moment, it would have been marginally better to have seen an offer from outside of the renewables funds industry. My sense is that all of the firms in the sector use pretty similar methodologies, discount rates, power curves etc. Selling assets to each other provides a mark, but not necessarily a very strong one. Witness the Irish, who spent a decade selling the same houses to each other at ever-increasing prices until funding ran out! An offer from a private equity fund or a company from outside the cozy circle would provide the underpinning for a true re-rate across the sector.

But this is good news nevertheless, and I think there is more to come for holders here.

I'm glad you've got there in the end @shaun86....

As I said last week: "None of the names you mention will be executives of ZIOC. None of them will be managing the company or the project on a day-to-day operational basis. They are clearly identified as “investors” - technically investors in Greymont Bay, which is itself an investor in Zanaga. Whilst they may well offer some advice to ZIOC’s executive team, they won’t be joining it."

It will be good for ZIOC to have their advice - which I would expect to be v helpful around inflection points like an inbound offer for example. With their extensive experience and industry connection they will also be helpful to ZIOC in finding the "exec team" that the company will need to hire if it is to progress the project itself.

Agreed. Although the hypotheses (not originated by @Ex!) regarding Investec are nothing but apophenia, and should be disregarded. Investec opening an office in the DIFC (alongside all the other UK wealth managers chasing expat £££…) will be nothing to do with ZIOC. And the decision to add ZIOC to their RSP programme is likely just a normal course of events action driven by volume.

“It’s been clear from past presentations that healthcare institutions want Avacta to fully transition into Tx,”

Presentations by who?

@Icecool: Why would a “specialised Phase 2 healthcare investor” want ”DX gone at any cost”…?

Some investors might ascribe no value to an activity they’re not interested in. But I can’t think of any reason why a non-core business line would deter investment to the point that a pre-emptive disposal “at any cost” would make sense.

In the long run YES, price action will tend toward congruence. On a day-to-day basis NO, because of the actions of trading desks looking to exploit pricing/timing differentials. Arbs will quickly become the new bête noire of the many avid price-watchers here on this board. Expect thread after thread bemoaning the injustice of their activities on the sp…

Far from “sorting out the crooks and spivs”, the implementation of the cross-listing and subsequent increased interest from passive investors (not only ETFs) will exacerbate what many wrongly perceive to be price manipulation.

Do you really think that Mark Cutifani(66yrs), Tony Trahar (76), Tony O’Neill(66), Phil Mitchell(65) and Mick Davis(67) are the “executive team” referenced in the earlier 100% RNS which said “…the Company expects to recruit an executive team to meet the demands of the Company and the Project”..?

Oh dear.

Your fundamental mistake is that you think that Mark Cutifani(66yrs), Tony Trahar (76), Tony O’Neill(66), Phil Mitchell(65) and Mick Davis(67) are new members of ZIOC’s executive team.

They aren’t. They are INVESTORS, industry luminaries who’ve come in to provide capital and credibility to the next stage of the Zanaga project. None of them are being appointed to executive roles. Only one of them (Phil Mitchell) will sit on the board. None of them will have employment contracts with Zioc (PM’s will be a director’s service contract). None of them will be sitting in ZIOC’s offices or on site every day. None of them will be deciding whether to buy trucks from Caterpillar or Komatsu. In short, none of them will be members of ZIOC’s executive team.

Good luck with your investing. Tough to be successful when you lack basic understanding of how companies work, and are unable to read and interpret straightforward language in RNS releases.

I can explain stuff to you, but I can’t understand it for you @shaun86. You need to pay more attention to understanding the differences between the roles of directors, executive directors and executives.

A director is a board member but not (necessarily) an executive director. If they have an executive role, that must be disclosed. The recent RNS explains carefully that Marty Knauth will be appointed to the board. He will be both a board member and an executive. Greymont will be allowed to appoint a board member (Phil Mitchell) who will be a director - but there is no mention of this being an executive position.

The earlier RNS discusses the planned appointment of an executive team. These will be the senior mining engineers, project managers, financiers etc who will work for the company in delivering the project. ZIOC tells us they will recruit this “executive team” when “…funding has been secured and work on the development of the Project has commenced”. These executives may be appointed to the board as directors, but probably not. It will depend who they find for the roles.

At this point no appointments to the “executive team” have been announced.

I’ve read it. Unlike you I have understood it.

You should read it again, focussing on the difference between “investors” and “executive team”. None of the names you mention will be executives of ZIOC. None of them will be managing the company or the project on a day-to-day operational basis. They are clearly identified as “investors” - technically investors in Greymont Bay, which is itself an investor in Zanaga. Whilst they may well offer some advice to ZIOC’s executive team, they won’t be joining it. Most of them are senior figures who’ve brought capital and credibility. None of them will be working day to day for ZIOC.

They’ve brought the (effectively interim) funding that will enable ZIOC to find and hire the executives they need once the project is properly funded.