Member Info for Strangerstill

Ganfeng have played the Bacanora Board for a bunch of suckers. Bacanora effectively ceded control of Sonara to Ganfeng with apparently no safeguards and my suspicion is that Ganfeng is using the prospect of delaying the development of the mine to persuade the Board and M&G to back the deal that gives Ganfeng ownership for a lot less than Bacanora is worth. My suspicions are based on the fact that there have been no development updates because there has been no development. As long as Ganfeng do not put their share of investment into the mine there will be no development. As long as the development is delayed the share price will stagnate especially when it is realised that Ganfeng are in control of the development timetable.
Ganfeng has secured sufficient lithium resources through offtake agreements and share acquisitions to not heed the immediate development of Sonara. These include the Mount Marion and Pilgangoora mines in Australia, as well as the Avalonia project in Ireland. Its main brine resources include Mariana and Cauchari-Olaroz in Argentina.
Contrast what is happening with Bacanora with the situation at Lithium Americas (LAC).
Ganfeng owns 19.9% of LAC but are unlikely to gain control of LAC as long as LAC have Thackers Pass as the USA will not allow a strategic asset such as Thackers Pass to fall into the control of a Chinese company. LAC has a strong balance sheet with over $500M in cash to develop Thacker Pass, and Caucharí-Olaroz is fully funded from credit facilities. LAC does not need any more capital from Ganfeng to fund current projects.
LAC and Ganfeng are building the Caucharí-Olaroz project in Argentina (owned 44.8% LAC, 46.7% Ganfeng Lithium, 8.5% JEMSE (Argentinian state run company)). Although Ganfeng owns 51% of Minera Exar (the JV with LAC) Lithium Americas has received good minority shareholder protections. The amended shareholders agreement continues to require joint approval for substantive business decisions including material changes to:
Funding plans
Construction program
Project design and process
Capital and corporate structure
Production output level
Capital investment plan (including expansions)

Estimation of cash retained by Ariana after sale of 26.5% of Zenit.

All figures rounded to 1 decimal place.
Dividend to be distributed in total is £7.5 million and this is 50% of profit after tax therefore the profit after tax is £15 million.
Assume corporation tax at 20% then profit before tax is £18.8 (tax is £ 3.8 million) and cost of sales is therefore £8.2 million.
Cash retained will be £27 million sales proceeds minus £7.5 million dividend minus £3.8 million tax equals £15.7 million.
Add in cash reserves of £3 million and Ariana is sitting on about £18.7 million of cash after the dividend has been accrued for.
This then values its 23.5% stake in Zenit and its prospecting business at £22.6 million (market cap £48.8 million less cash after dividend of £18.7 million less the £7.5 million dividend not yet paid) which appears to be very low.
The 23.5% stake in Zenit should generate significant profit going forward.

An attempt at valuing Ariana.

Assuming cash costs of £500 per oz and sales of £1,100 per oz (cash costs higher than now and revenue lower than now) and taking the production profile in the last Annual Report this gives a profit profile for Ariana’s 23.5% holding in Zenit of ;
2022 6,000 oz of gold and £3.6 million profit
2023 9,000 oz of gold and £5.4 million profit
2024 12,000 oz of gold and £7.2 million profit
2025 15,000 oz of gold and £9.0 million profit
2026 18,000 oz of gold and £10.8 million profit
Ariana’s current valuation is probably £6 million less that its true value (at 8 times P/E). It is also apparent that on its share of the Zenit profits alone Ariana in 2026 should be worth about £80 million at a P/E of 8 and this does not take into account the current cash reserves and the fact that the reserves of all Zenit’s mines are being increased on a regular basis as Ariana conducts more prospecting thus increasing the life of mine of all the mines.

The above valuation does not take into account the valuation of the prospecting business and this is very difficult to evaluate from the accounts that Ariana produces. This, I believe, is one reason for the lacklustre performance of the share price. Investors are unhappy at trading off 53% of its share in the gold mining business for an amount of retained cash (amount unknown) and an expanded prospecting business where the profitability is difficult to determine.

Have your shares in a SIPP or an ISA. You can put £20,000 in a shares ISA each year and if you are working pile your spare money into a SIPP.

Comes from pasting another post on the Arian share chat - Should be what is Bacanora worth.

Waited 5 mins nothing happened so posted again et viola two postings.

From the feasibility study a decrease of 30% in the average lithium carbonate price, from $11,000 to $7,700, decreases the Post-Tax NPV from $802M to $148M for the whole project.

Bag of fag packet calculation would estimate the Post-Tax NPV at $14,000 to be $1,396 million of which Bacanora holds 50% so $698 (£501) million. Bacanora has access to all the funds it needs to build its half of Sonara so considerably de-risked. Value of the offer is £260 million so 52% of the real value of Bacanora (not including any value attributed to Zinwald). With the development being fully funded and all licences and permissions in place I would not be happy with anything less than 75% of the NPV so a share price of 97.5 pence.
Taking the estimated net profit after tax when the mine goes into operation and assuming a LiCO3 price of $14,000 per tonne with a P/E of 12 the share price would be about £1.60 which is 2.37 times the current offer.

The offer is well short of the value of Bacanora by any calculation, I cannot understand why the Board would recommend it as it is not in the shareholders’ interests. What inducements have been offered to the Board?
Why would any institutional investor sell at this price when hanging on for three years would see a return of over 200% of the current value?
Something fishy is going on.

From the feasibility study a decrease of 30% in the average lithium carbonate price, from $11,000 to $7,700, decreases the Post-Tax NPV from $802M to $148M for the whole project.

Bag of fag packet calculation would estimate the Post-Tax NPV at $14,000 to be $1,396 million of which Bacanora holds 50% so $698 (£501) million. Bacanora has access to all the funds it needs to build its half of Sonara so considerably de-risked. Value of the offer is £260 million so 52% of the real value of Bacanora (not including any value attributed to Zinwald). With the development being fully funded and all licences and permissions in place I would not be happy with anything less than 75% of the NPV so a share price of 97.5 pence.

Taking the estimated net profit after tax when the mine goes into operation and assuming a LiCO3 price of $14,000 per tonne with a P/E of 12 the share price would be about £1.60 which is 2.37 times the current offer.

The offer is well short of the value of Bacanora by any calculation, I cannot understand why the Board would recommend it as it is not in the shareholders’ interests. What inducements have been offered to the Board?
Why would any institutional investor sell at this price when hanging on for three years would see a return of over 200% of the current value?
Something fishy is going on.

Lithium carbonate is now $14,000 per tonne, the offer becomes more derisory every day.

Ariana is very undervalued in my opinion. I feel that the Board made a good move in forming the JV. Ariana gets revenue of three times the cost for successful prospecting from the JV, this in itself is a good little earner for Ariana, on top of which they then get 23.5% of the profit of the mined gold without having to put any capital into the mining and refining. A very rough example; say it costs $0.5 million to prospect an extra 20,000oz of mineable gold, Ariana gets $1.5 million revenue up front and the gets its share of the eventual profit (say $600 per oz as a conservative estimate) so another $2.8 million.

As long as Ariana can successfully deliver economically feasible prospects it is sitting on a gold mine of revenue for very little risk in the short to medium term. Whenever an RNS comes out regarding the prospecting carried out by Ariana it always seems to be good news with positive implications for the mineable reserves.

The formation of the JV has given Ariana a war chest to go and expand its prospecting to Cyprus and Eastern Europe, and although these are long term ventures, if Ariana is as successful in future prospecting as it has been in the past, then the long term prospects for Ariana look excellent.

As every week goes by the price of Lithium Carbonate goes up and the offer from Ganfeng becomes more and more derisory. The last price I saw for Lithium Carbonate was 13,500$ per tonne, way above the value used in the feasibility study. Surely the institutional investors must be aware of the increasing price of Lithium and therefore the increasing value of Bacanora and must be aware that the offer from Ganfeng is becoming more derisory.

I have a SIPP with II and have registered to use their resolution voting facility. So far I have been able to vote on resolutions for the following companies; KGF, APH, CAML and FXPO. APH and CAML are both AIM shares and I had no problems voting on their resolutions. The process is very good you get email notification of upcoming resolutions for the companies you are invested in you then log in to II go to your investments and there is a flag that tells you that there are resolutions you can vote on.

IG on voting on resolutions

Do you offer proxy voting?
When you invest in stock via your share dealing account, we’ll hold the shares on your behalf in our nominee account. This means we can vote by proxy on your behalf.

If you’d like to vote by proxy, you’ll need to send us a signed proxy form available from the relevant company’s website. We’ll also need:

Your IG account number and full name
The date and location of the company AGM
Your shareholdings over the ex-date
Your voting intentions for each of the relevant articles published in the notice of the company AGM
Please post the proxy form and relevant information to:

Corporate Actions Department
IG Markets Limited
Cannon Bridge House
25 Dowgate Hill
London
EC4R 2YA

IG will need to have this information seven working days prior to the deadline date for voting at the AGM, otherwise we will unfortunately be unable to facilitate your request. You’ll be able to find further details about proxy voting in the investor relations section of your chosen company’s website.

IG on voting on resolutions.

Do you offer proxy voting?
When you invest in stock via your share dealing account, we’ll hold the shares on your behalf in our nominee account. This means we can vote by proxy on your behalf.

If you’d like to vote by proxy, you’ll need to send us a signed proxy form available from the relevant company’s website. We’ll also need:

Your IG account number and full name
The date and location of the company AGM
Your shareholdings over the ex-date
Your voting intentions for each of the relevant articles published in the notice of the company AGM
Please post the proxy form and relevant information to:

Corporate Actions Department
IG Markets Limited
Cannon Bridge House
25 Dowgate Hill
London
EC4R 2YA

IG will need to have this information seven working days prior to the deadline date for voting at the AGM, otherwise we will unfortunately be unable to facilitate your request. You’ll be able to find further details about proxy voting in the investor relations section of your chosen company’s website.

I consider that Ariana Resources is one of the better companies at keeping shareholders updated on the operational side of the business. I have looked at the RNSs of three miners that I have shares in; Bacanora, Ariana Resources and Central Asia Metals. I have identified those RNSs that give operational information in this year to date.

Bacanora has given two operational RNSs; the Annual Report and Accounts and Early Site Works. The rest of the RNSs have been around share issues and Ganfeng.

Central Asia Metals have given four operational RNSs; 2020 Sustainability Report, two operations updates and the Annual Report and Accounts.

Ariana has given six operational RNSs; four updates on its drilling programme, production guidance for 2021 and 2020 Production Results and General Update. Kerim is frequently interviewed by Proactive Investor, I have counted four times this year so far, and is always very informative in his interviews.

I consider that Ariana’s operational updates to its shareholders are as good as any companies; I suppose that the problem is the general poor communication from all companies to shareholders on operational matters.
Where I will criticise Ariana is on its website which is woefully out of date, it would not be difficult to ensure that the website is reviewed and updated to reflect the latest operational and strategic position of the company at least at the time of every Board meeting.

I have always been in favour of the JV with Ozaltin as this allows Ariana to concentrate on its excellence in exploration and prospecting to the point where a prospect is ready to be developed. The raising of capital, building the mine and the subsequent mining and processing of the ore being left to Ozaltin and Proccea where they have the experience and resources. Ariana still gets an effective royalty of 23.5% of the profits and should be able to make a good profit on the prospecting work carried out for the JV on a remuneration of three times prospecting costs for viable prospects.

I received exactly the same reply to my email, must be a bit replying .

I have just sent the following to Bacanora

Dear Peter,

Following last week's announcement for Ganfeng to acquire the outstanding shares in BCN, I am writing to ask the reasoning behind the Independent Board's decision to 'likely recommend' the offer?

I have been invested in Bacanora from 2015 and have followed the company through every stage of development, with the knowledge that if everything works out, there will be a reward at the end. This has been a huge risk on my part but Bacanora has always promoted the message of how much the eventual project will be worth. I am a minority shareholder with just over 164k shares, but Bacanora is an important section of my folio. The board of Bacanora have always been very positive about bringing Bacanora into production and realising shareholder value, this has kept me invested in Bacanora.

The offer of 67.5p undervalues Bacanora especially as Bacanaora has just gone through a large placing to get construction financing. A fully funded Sonora, is worth much more than 67.5p. When cash is taken into consideration, the offer is even more unacceptable, how can the Board believe that this represents shareholder value? The Board of Directors of a public company have a primary duty to protect shareholder’s interests but the Board of Bacanora appear to have abandoned this duty.

BCN is about to go into construction, I would hope the board back their shareholders and follow through on what has been a long journey. I want to see Bacanora realise it's value for shareholders and while I accept that acquisition was always a possibility, it has to be at the right value. Sonora is strategically important to Ganfeng and they have more than enough reserves to pay a reasonable price for what will be a world class lithium producer.

Best regards

Anthony Strange

Thanks for the updated information

Thanks for the info I did miss the fact that the approval had been given however small investors still hold 35% of the shares and should make certain that they are not shafted by this BoD.

I hold 164,050 shares and will vote against.

I am invested through Interactive Investor who send me notification of every time there are resolutions to vote on for my investments. The voting is done through the Interactive Investor website. It is a really good service.