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@Jiving said: “Marty's comment links this announcement with the previous Port MOU, to state we are now de-risked in our two key areas”

This re-wording is way too strong. Marty himself only goes as far as “…the partnership with CEC to develop a range of power solutions supports a pathway to further de-risk the Zanaga Project from the two largest development challenges…”

“…a pathway to further de-risk…” is not the same as “…now de-risked…”..!

The question for the amateur sleuths here is whether this makes a bigger announcement more or less likely…..

Thank you @Ex. Some sort of “Register of Theories’ is needed here though. I can’t keep up….

“Our Q3 trading was as expected and our outlook for FY25 remains unchanged. We have made good progress against our objective of turning around our USA performance, with USA DTC in positive growth in Q3. We continue to actively manage our costs and are on track to meet our inventory reduction target for FY25.”

Whilst there’s nothing much to get excited about in the release, “no alarms and no surprises” is perhaps a good outcome here. Management appear to understand that they need to build credibility by meeting their own targets and avoiding banana skins.

The trading update today shows them doing exactly that.

Anyone who bought 14 years ago at £1.56 has sold to retail and moved on..!

@allthatguff - here’s the prompt I used:

“What is an appropriate discount rate for valuing the Zanaga Iron Ore project”

I’ve just run it again, and received the following response:

“ To determine an appropriate discount rate for valuing the Zanaga Iron Ore Project in the Republic of Congo, you must consider a range of factors, including political risk, country-specific economic conditions, industry risks, and project-specific challenges. Here’s an approach tailored to Zanaga:

Key Risk Factors for the Discount Rate

1. Country-Specific Risks:

• The Republic of Congo is a politically and economically risky jurisdiction, with challenges such as weak governance, potential for expropriation, and infrastructure deficits.

• Country risk premiums for politically risky countries often range from 5% to 15%, depending on credit ratings and sovereign bond spreads. For the Republic of Congo, a country risk premium of 10-12% is appropriate.

2. Industry Risks:

• Mining is a high-risk sector due to price volatility, high capital intensity, and regulatory hurdles.

• Adding an industry risk premium of 3-5% reflects these uncertainties, particularly for iron ore, whose price can be cyclical.

3. Project-Specific Risks:

• The Zanaga Project’s size (30 Mtpa production over 30 years), remote location, infrastructure needs (pipelines and ports), and reliance on financing add significant project-specific risks.

• A 2-3% premium accounts for these unique challenges.

4. Market Factors:

• The current cost of equity for Zanaga Iron Ore is approximately 8.44%, but this excludes country-specific and project-specific adjustments.

Estimated Discount Rate for Zanaga Iron Ore Project

Based on the above components:

1. Risk-Free Rate: 4% (based on long-term U.S. Treasuries).

2. Equity Risk Premium: 6% (global average).

3. Country Risk Premium: 10-12% (Republic of Congo).

4. Industry Risk Premium: 3-5% (mining sector).

5. Project-Specific Premium: 2-3%.

Total Discount Rate = 4% + 6% + 10-12% + 3-5% + 2-3% = 25-30%

Why This Range is Appropriate

• High-Risk Environment: The Republic of Congo has significant political and economic instability, which justifies a high discount rate.

• Mining Sector Volatility: The iron ore market is cyclical and sensitive to global economic conditions, requiring a higher risk adjustment.

• Comparable Projects: Discount rates for mining projects in high-risk countries typically fall in the 20-30% range.”

@allthatguff - the ChatGPT answer I quoted proposed a CRP of 10-15%…

In my post on Jan 17th (quoted below) I proposed 25%, inclusive of 10% for CRP:

“ My view is that a rational investor would likely look to utilise a nominal discount rate closer to 25%. Remember this rate reflects the return they are looking for in exchange for risking their valuable capital.

I would deconstruct the 25% as follows:

Risk-free rate: 5%

Equity risk premium: 5%

Country risk premium: 10%

Project risk premium: 5%”

What discount rate would you expect a prospective BUYER to utilise?

@allthatguff - JFF, here's what ChatGPT has to say on the subject...

"Determining an appropriate discount rate for the Zanaga Iron Ore Project in the Republic of Congo requires a comprehensive assessment of various risk factors, including political, economic, and project-specific risks. Here’s a structured approach to estimate this rate:

1. Base Components:

• Risk-Free Rate: The current yield on long-term government bonds in stable economies, such as U.S. Treasuries, typically around 4.17%.

• Equity Risk Premium (ERP): The additional return expected by investors for taking on the average market risk, generally around 4.06%.

2. Country Risk Premium (CRP):

The Republic of Congo presents significant political and economic risks. While specific CRP data for the Republic of Congo is limited, we can draw parallels from neighboring countries with similar risk profiles. For instance, the Democratic Republic of Congo has a total equity risk premium of 17.16% as of January 2023. Given the similarities, a CRP in the range of 10% to 15% for the Republic of Congo is a reasonable estimate.

3. Industry and Project-Specific Risks:

• Mining Sector Risks: The mining industry is subject to commodity price volatility, regulatory changes, and environmental concerns. An additional premium of 3% to 5% is typically added to account for these factors.

• Project-Specific Risks: The Zanaga Project plans to produce 30 million tonnes per annum of high-grade iron ore concentrate over a 30-year mine life, developed in two stages. Considering the scale and infrastructure requirements, a further 2% to 3% premium may be appropriate.

4. Calculating the Discount Rate:

Summing these components:

• Risk-Free Rate: 4.17%

• Equity Risk Premium: 4.06%

• Country Risk Premium: 10% to 15%

• Industry Risk Premium: 3% to 5%

• Project-Specific Risk Premium: 2% to 3%

Estimated Discount Rate: 23.23% to 31.23%

Conclusion:

Considering the high-risk environment of the Republic of Congo and the specific challenges associated with large-scale mining projects, a discount rate in the range of 23% to 31% is appropriate for the Zanaga Iron Ore Project. This rate reflects the compounded risks and aligns with industry practices for projects in similar jurisdictions."

I have been involved in many valuations for businesses in developed nations where discount rates close to 20% have been used. I'd be wanting to add on quite a lot for Zanaga's location! You should also recognise that this is no longer a low-interest rate world.

As I pointed out in an earlier post, discount rates are ultimately determined by buyers. Sellers are effectively price-takers - they can choose only whether to accept the buyers offer or not...

@allthatguff: "Since you are so bullish SB, maybe you want to have another go at your last very underweight 77p calculation attempt for Stage 1? My feedback was that you were giving away the self-financing stage 2 of the project totally for free (ie 18mtpa)."

Cashflows from Stage 2 are about 10 years away at best? At the level of discount rate likely for a project of this nature (see my earlier post for detailed discussion of this) those cashflows will have negligible impact upon the NPV. My trusty HP calc tells me that the NPV of £1 in 10 years time at a 25% discount rate is 5.6p! So the inclusion of Stage 2 will make little if any difference to the current NPV.

Even at the "10% real" rate used for the investor presentations, £1 in 10 years time is only "worth" 20-something pence today.

I know that's a counter-intuitive proposition. But it is a hard reality - investors in high risk/reward projects or business accord little if any value to cashflows over ten years out.

My view is that Stage 2 is essentially irrelevant at this point.

I’m very positive about the opportunity here - even if I don’t subscribe to some of the punchier “valuations” proposed by some posters. Nevertheless there is every chance that this can be a multi-bagger for those with the bravery and ambition to hold.

The macro picture for iron ore is well outlined and discussed by some of the excellent regular contributors. As are the dynamics (well, the visible ones at least) and motivations of the existing parties involved. The smoke signals from the company suggest that an inflection point is near.

Hope died for many holders (the IPO participants etc) a long long time ago, and there’s every chance that the market has overly-discounted ZIOC’s prospects and share price. An “inverse bubble” if there’s such a thing? From experience; such price dislocations can persist far far longer than expected, but when they unwind they do so far far more quickly than might be anticipated.

ZIOC may be a classic example.

You have to be “in it to win it” though… I am. And I am looking forward to watching events unfold over the next few weeks,

Are we adult enough to discuss negative possibilities, what might go wrong etc? Or is this a choo-choo only board?

It’s just that in my professional career we spent far more time and energy looking for what we’d missed or got wrong than we did publishing puff-pieces and perusing the Lambo catalogue.

We could conceal the discussion under a positive thread header if you like…

This one is a valid/worthwhile endorsement because it’s a genuine actively managed fund run by a major house. To date most of the fund holdings disclosed have been indexers or specialist boutiques. This is noteworthy because it’s neither of those.

It’s not that close, still 18 days away! We may get venue & timing etc details next week. I expect that any substantive release - especially a voluntary suspension is involved - will be delayed until Monday 10th. If explanation is required (hence the “briefing”..?) then interested parties won’t want a material gap between making the release and providing the briefing. It’s good/standard practice to keep suspension periods to a minimum also.

From experience the greatest risk to the company’s plans (assuming they have something major to announce as appears to be the case!) is a leak, or “unusual” trading patterns. Either could bring forward any announcement as there is a danger of a false market being formed.

I interpret the extended notice period given as the company waving as big a flag as it dares. Anyone contemplating taking a position in ZIOC ahead of the Feb 11th briefing needs to act soon to ensure their participation, as it’s entirely possible that timeline could be shortened.

@ex, what’s your take on the post confirming that the O2 Arena has been booked for Feb 11th?

It’s possible that the ASX listing will be facilitated by a placing of existing shares held by NEM. They get out of their larger-than-desired position by providing shares for interested Oz instos to buy via a book-build of some sort, and no new issuance is required which is good news for existing holders.

Obvious placing was obvious. If you couldn’t read/interpret what was happening here, you need to think about finding another hobby…

@bobwindy is correct. There will be no voting/decision making at the briefing.

As I said in earlier post, my working hypothesis is that we’ll get an RNS at 7am (or possibly 5pm) on Monday 10th. If some sort of shareholder vote/approval is required (many possibilities as to why this could be the case…) then the necessary procedural notices and required information will accompany it. Hopefully a big announcement accompanied by a detailed circular! The briefing will be an opportunity for the directors to explain whatever they are proposing, and to ask shareholders for their support. Any actual vote will take place 21 (or whatever, as required) days later.

This is just idle speculation on my part - YMMV, DYOR etc…!

The board of this trust released an RNS this morning saying that it has entered into an agreement with SABA pursuant to which SABA won’t make any proposals to shareholders or engage in any attempted takeover etc.

This is clearly great news for Blackrock (and probably for the board of the trust) but is it great news for SHAREHOLDERS of the trust?

The trust trades at a significant discount. As a shareholder I may well have welcomed an intervention from SABA - whose involvement/activity with similar funds has resulted in discounts being closed up.

Have the board of BRWM acted properly in the interests of their shareholders, as opposed to the interests of Blackrock?

@NewKOTB - I expect ZIOC to be a focus for one or more of LSE’s ramp squads next week. They’ll have a good go at creating urgent activity against the 11th Feb deadline, with the idea of selling into any spike (eg not staying onboard for any announcement) they can create. LTH’s discussing 450p etc are (unintentionally!) doing pre-prep/groundwork for them…!

I don’t expect any announcement/RNS much in advance of the 11th. That a “briefing” is considered necessary suggests some complexity, and possibly a decision for shareholders to make.

Actually - here’s an entirely speculative guess at how this may unfold:

1. Ramping effort from DegsyAlmomdNewmontGoldMasksNewNorm and co, or JOHNRAMBO (remember him?) next week. If successful there’ll be a spike which will then be sold into. LTH’s can ignore this…

2. No actual announcement until Monday 10th

3. Outside chance of a voluntary suspension on Monday 10th, alongside substantive RNS setting out whatever it is they have to say

4. Monday 10th announcement (sale, farm-in/out, funding, tender, whatever) to contain something that requires explanation and possibly a vote or other acceptance. Perhaps an asset disposal that meets one of the class tests, perhaps a SoA - many possibilities. IF I get time, I’ll make a post about thresholds/resolutions/votes etc to explore this. But in essence something they need enough of us “free-float” shareholders to support.

5. Briefing on 11th will explain background and tell us why we should support what they propose - basically “This is the best offer you’re going to get…”

6. A subsequent vote or acceptance process of some sort

YMMV, DYOR etc - this could all be very wrong!

Here’s the good news holders have been waiting patiently for…

“ Gore Street Energy Storage Fund plc, the internationally diversified energy storage fund, is pleased to announce a portfolio update and the energisation of "Big Rock" - the 200 MW / 400 MWh asset in California - bringing the Company's total energised capacity to 621.4 MW / 792.1 MWh across five grids.

Trading and Portfolio Update:

For the calendar year ending 31 December 2024, the Company is estimating an operational portfolio revenue of c.£37.7m (weighted portfolio average: c.£10.83/MW/hr)1 and an operational EBITDA of c.£24.5m representing an EBITDA margin of 65%.

Based on the 2025/26 mid-case NAV revenue forecasts from several third-party providers, the annualised 12-month portfolio revenue run-rate during FY 2025/26 is estimated2 at c.£72m on 753.4 MW of operational capacity. The operational EBITDA margin3 for this period is expected to be 69%, a 4% increase compared to the 2024 calendar year largely due to improved economies of scale as the new larger Great Britain (GB) assets stabilise. The increase in revenue to £12.32/MW/hr can be attributed to the Company's increased geographic diversification following assets in construction becoming operational, resulting in a greater proportion of assets in higher-yielding markets.

Since the start of the current financial year4, GB revenue has steadily increased over recent periods. Market indices (Modo 1-hour BESS Index) indicate that December 2024 was the highest monthly revenue for BESS in the GB market since July 2023. Dynamic Containment saw its highest average price since July 2023, a sign of the recovery of ancillary services prices in GB, reflecting a slower build-out, along with more competitive bidding strategies in the market.

…”