Member Info for tedoby

We're boxing Queensbury rules whilst COVID - 19 hits us with a ball pane hammer!

What on earth are we doing?

Every Lab in the UK should have been working 24/7 on this weeks ago!

It's a bloody disgrace!

We're sending Doctors,Nurses and their support to the without defences or the right tools!

It's just ubforgiveable!

Poor decisions by the Government from the outset in this followed by poor management of thge already weak strategy they embarked on. They were against what the WHO were saying at the outset which was test test test and from that treat and or isolate and then test test test again.

They thought they knew better. Now its "egg on face" and blame others!

We left a gap at about 170p which we're just filling.

Almost done then its back up we go IMHO.

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Prem has many partially or wholly owned enviable assets in its portfolio that are currently taking centre stage. It has an investment of just over 5m shares in Circum Minerals which is just one. But it's one that's just about to transformational to Prem in many ways. Here’s some information on Circum and the project it owns that some LTH’s are sure know well given it’s been part of Prems portfolio to a greater or lesser extent for several years now.

It’s long been known that Circums intends to either launch it’s Danakil potash project in Ethiopia as a public company or sell it outright. From its latest presentation and recent letter to its shareholders we now know a little more about it’s intentions. We also lnow from Prems RNS’s that Circum is more or less on schedule to achieve its objectives.

Moreover and significantly we also know that Prem has pledged to give its shareholders a choice of how the shares Prem hold are dealt with come the day of the corporate action which is truly extraordinary. Overview :-

Circum is a private company of substance. It has a “Board” of six Directors each of whom have an extremely high net worth but more significantly appear to compliment each other as experts in their own field. Circum was founded by Canadian billionaire Stephen Dattels who is still the company Chairman I believe. Some of the six are very close to Prem in many ways but especially SD. He and GR are closer than many of us realise and it is he that is offering ongoing financial support to Prem through one of his lending companies Regent. Stephen has made his interest in owning shares in Prem but particularly in Zulu well known to GR and why wouldn't he! If you DYOR you'll see he has considerable experience in Lithium mining and knows a good opportunity when he sees one after all.

https://www.google.co.uk/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=2ahUKEwjz0YTA3NvnAhXNT8AKHSgVAM8QFjAAegQIARAB&url=https%3A%2F%2Fstephendattels.com%2F&usg=AOvVaw2o0IpZRUdjSndHPJlPNdPN

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Circums BOD’s are supported by an extensive and competent management team and together with outsourced specialists they form a team with an extremely high level of skills. A team easily more than competent to develop the Danakil project into a successful potash mine if that’s the way it goes.

Circum through its wholly-owned subsidiary, Circum Minerals potash Ltd. has held a majority ownership of Danakil since 2013. It was originally owned by AgriMinco but they sold 70% of it to Circum and 30% to Prem. Circum subsequently bought out Prem in 2014. But Prem has been buying back the shares since then and currently owns just over 5%. As things stand Prem holds 5,010,333 shares in Circum.

The project has the potential to be a world class asset and one of the largest potash mines on Earth simultaneously producing both Muriate of potash (MOP) & Sulphate of potash (SOP) from the same boreholes.

It is situated in the Danakil evaporite basin which is recognised as one of the hottest places on Earth. Temperatures there are over 40* C for most of the year and that’s an ideal climate for the mines evaporation process. Just about as good as it gets. The area is also well mapped for potash having been extensively explored for more than 100 years.

The potential resource there is nothing short of mind blowing. The licensed area covers 36,500ha which is over 140 square miles. It’s a similar size to the Isle of Wight for scale. So it’s big. Very big!

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There's an NI 43-101 compliant reserve and resource of 5 billion tonnes of potash salts there at grades of over 18% KCI at varying depths from a shallow 80m to as deep as 500m. Again as things stand. There's also an additional 7 to 9 billion tonne potential identified reasonably accurately by a detailed seismic survey.

Again for scale a large mine there producing 5m tonnes of MOP & SOP a year combined would give the project a mining extraction rate or ROM of 27.5m/t’s a year and give the project a LOM of over 5 centuries. Just incredible!

And yet again just for perspective that would give the project an in ground value of nearly $650 billion at today's potash prices. Using the adage of valuing the project from its in ground resource we get to roughly a $6.5bn to $10 bn Market Cap at its height running in a steady optimised state of the 5m tonnes annual production rate I’ve used.

I believe Circum now has a new DFS for Danakil. But as far as I'm aware it's a private document that’s currently undisclosed. The new one is now based on further studies to optimise the project. The development of the processing plant has been modularised enabling Circum to build the mine in phases to produce much better economics and at the same time requiring a much lower initial Capex.

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For now as shareholders we’re only able to consider Circums latest information in the public domain along with any further information we're given by Prem or are able to wheedle out of them. Significantly amongst other things the new DFS will enable a bankable valuation to be made and the importance of that to both Circum as a selling document in an outright sale or to raise finance in an IPO cannot be overstated.

We're told that Circum is at a crossroads with the project and there's been debates going on behind closed doors amongst its Directors as to which way to take the project for some time. Circums recent update confirms:-

“The Boards approved strategy is to achieve a liquidity event for shareholders either through an outright sale or development of the project. Strategic Sale/Partnering Process As advised previously, various parties are in the process of undertaking due diligence and given the size of the project this is a time consuming process, however, it is expected that it will be concluded by year end. These parties could either acquire the company outright or contribute a significant portion of the equity leading towards the development of the project.”

The update goes on to say:-

“The company is, however, doing some preparatory work including debt and offtake workstreams for an IPO in the background and should market conditions change, this option could be activated.”

So Circums BOD's are running two scenarios. One preferred and the other secondary.

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Furthermore the update tells us:-

“In the event that the project is taken forward to development it is intended to finance Capex through a combination of debt and equity to enhance project returns. A leading London based financial advisor was appointed last year to structure a suitable debt package. Excellent progress has been made in this regard, with Expressions of Interest being received from various commercial and development banks for the entire debt package. In addition, there have been strong indications of support by various Export Credit Agencies to provide the required commercial and political risk insurance.

The Board of Circum is optimistic that the positive developments noted above will result in a successful achievement of a liquidity event for shareholders in due course.”

Should a mine be developed by Circum the plan is to achieve a steady state production of 3.5mt's/ annum in less than four years. Based on the estimated total resource that production rate would give the project a Life Of Mine of roughly 750 years which is the best part of a kiloyear or 1 Millennium. So it’s a huge mine from that perspective too.

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Circum was granted its mining license over two years ago which is valid for an initial 20 years, renewable thereafter in 10 year increments. Circum has also obtained Government approval of its Environmental and Social Impact Assessment and Environmental Management Plan. Since then they appear to have been working on getting the $1bn Capex finance arranged. No doubt all aspects necessary for making a start on constructing the mine will be under consideration too not least of all selecting a suitable contractor to build the mine.

The processing plants have now been modularised and Circums plan is to ramp up production to 3.5mt's/annum in four phases in order to minimise the Capex needed and to mitigate risk. Potash mines are renowned for needing disproportionately high Capex which is why we see very few get beyond feasibility stage. So the planned construction period for the mine of two years may at first appear long is probably commensurate.

Phase 1 production target of 750kt's /annum is set for 2021 leading up to a phase 4 optimised and steady state production of 3.5mt's /annum by sometime in 2024. The modules have been designed to enable either SOP or MOP to be focused on to allow Circum to adapt its production to to changes in demand and market forces.

The development this way adds exceptional optionality to the project as Circum can bolt on more production modules over time after the initial construction period and it makes any additional phases beyond phase one largely self-funding out of WIP.

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The Capex needed to get to phase one is said to be $1bn. Although the figure mentioned in Prem's recent Webinar was $1.1bn. I'm not sure but I imagine the additional $100m is for contingencies which is an allowance that should alway feature.

Solution potash mining uses exceptionally high volumes of water but Circum's process is designed to predominantly use saline brines from the existing water table. Hydro geological studies have been undertaken that show Circum has access to sufficient brines for well beyond its initial operations from the nearest three alluvial fan complexes. All within its license area and very conducive to mining planned and reflected in Circums appraisal.

In field test work, over 600 million litres of brine (roughly the equivalent of two hundred and fifty full size olympic size swimming pools) but only 1 weeks supply of water the mine needs was extracted without any significant impact being observed in the water table. Based upon these results and extensive groundwater modelling expert engineers have concluded that the alluvial fans are excellent aquifers of sufficient storage and yield to supply the required volume of water to satisfy the mines demand beyond the envisaged requirements called for in Circums mining plan.

Nevertheless the groundwater supply is finite and whatever the limitations of that source will almost certainly be the factor that will determine the LOM and more importantly it’s optimised production rate. The water usage is estimated to be 30 gigalitres per annum which is 30 bn litres. Danakil will be allowed to use that amount of water under Ethiopian Law given as I say it will be collected from within it’s licensed mine area

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The SOP & MOP is able to be extracted in solution from the same boreholes. They are able to be kept entirely separate in the boreholes as they are situated in well defined salt layers at different levels. It's quite an important point to make as it brings flexibility to the mining plan as does the plant modularisation all of which will allow the mine to vary the output for each type potash at any time to its advantage. It’s only when the brine is pumped into the drying beds that the two types of brines are separated to dry. Initially I imagine the mine will produce more SOP to enable it to finance the ramp up from phase one out of profit rather than dilute the equity any further or take on more debt.

SOP & MOP have both cost and value differentials. Cash Costs (CC’s) or mining production costs if you prefer are said to be less than $40/t for MOP and $112/t or thereabouts for SOP. Both of those rank amongst the bery lowest costs in the world.

Revenues after offtake commissions are more difficult to assess but I have them at about $150/t for MOP and nearer $350/t for SOP respectively.

In Prems recent Webinar we were told that Circum had secured the $750m debt finance it was looking for and two Brokers were negotiating the $350m balance needed to be raised in equity with eight funds or interested parties. All of that seems a while ago now and it seems the negotiations may have changed tack slightly as they are nearing a conclusion.

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The intention is to ship the potash from the mine to the port using huge “roadtrains” via a newly built dedicated road financed by the Ethiopian Government to the port in Djibouti. But even so to ship 3.5mt's/annum is going to be a big ask.The mine will be capable of producing considerably more than 3.5mt's/annum but to do so the mine is going to need a rail link. A combination of both road and rail may be the optimum.

https://www.google.co.uk/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=2ahUKEwiv8cbA3dvnAhURTcAKHQD2BYgQwqsBMAB6BAgLEAQ&url=https%3A%2F%2Fwww.youtube.com%2Fwatch%3Fv%3D0iFkKRh5kcM&usg=AOvVaw0s-jdVaz20mpYk5YiiwQ_h

In fact rail transport has also been evaluated by Circum with the intention of incorporating it into the project economics once production in the Danakil Basin exceeds 3.5 m/t's per annum.

World fertilizer prices ebb and flow on the basic law of economics supply and demand as we all would expect. In recent history we've seen potash prices fall and they only bottomed out last year. They now continue to follow an upward trend and slow rally in line with the forecast by the majority of experts. All of this bodes well for the Danakil project. SOP prices also continue to demand a considerable premium over those for MOP and I can't see that changing. This is what Circums update tells us:-

"potash Markets potash prices have continued their recoveries from the 2017 lows, owing to tight global supply/demand fundamentals, aided by increasing market demand for both SOP and MOP. The SOP price premium over MOP has been increasing but is expected to taper as China has relaxed its regulations on SOP exports. Positioning on the cost curve will be the key to success, this is where Circum, as one of the lowest cost producers, will have an advantage over other producers."

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There was a noteworthy event that happened last year too but it isn't quite so well broadcast. In or around August India being one of the largest end users entered into a huge long term offtake agreement with the Belarusian potash Company (BPC) one of the worlds largest producers. The prices agreed were at a premium to the then market prices of about 25%.

The effect of that has been not only to lift the market prices generally but more importantly to lay a floor on future prices to prevent them falling close to or below cost. All good news for Danakil. This is what Londons ICIS said at the time:-

“The global muriate of potash (MOP) market is bracing for a flurry of trading and price fluctuations after Indian buyers finalised negotiations for a crucial long-term import contract at a $50/tonne increase”.

So what does all of what I’ve written come down to for Prem and it’s shareholders. Well for starters it tells us that we have a 5% holding in what is looking very likely to be a world class potash mine regardless of who the developers are. It’s reasonable to assume that a bankable valuation will have been made on the project using the new DFS which will give support to values arrived at by the other methods.

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Those of you familiar with the NI 43-101 Certification that it’s mandatory for valuations to be made on the project once it’s in production. Unfortunately for us however that document remains undisclosed for the time being at least.

It’s not difficult to see that Circums BOD’s are now favouring an outright sale of the project. The signs are clear and you don't have to look too hard to see Circums update supports that view.

However as a measure of prudence Circums BOD's are also taking certain steps in the background in readiness to develop a mine in the event the outright sale option becomes unattractive.

For obvious reasons it’s a strategy that any shrewd BOD’s would adopt. That is not wanting interested suitors to believe an outright sale is the only option being pursued.

At the end of the day going this route the outcome will depend upon what a suitor is prepared to pay for the opportunity and what circum are prepared to sell it for. Nothing more and nothing less.

Given some major shareholders paid $2 or slightly more for their shares I imagine an offer would need to be somewhere between $3.00 and $4.00 per share for negotiations to start. So between $12.5m to $20m or thereabouts to Prem.

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If there is more than one buyer in the frame each one will know that and will want in the end to give their offers their best chance by submitting the best offer they can. They will most likely have been told what number their offer needs to start with and why shouldn’t they!

The IPO route did look likely to me up until the recent update. But now I think quite the opposite. I feel some of the interested parties are now seeing the potential in Danakil may be improving. Their consideration appears to have moved on from wanting to be a substantial investor to one wanting full control. This is the reference in the update that’s persuaded me to change my mind:-

“The company is, however, doing some preparatory work including debt and offtake workstreams for an IPO in the background and should market conditions change, this option could be activated.”

Going the IPO route the Government has invested in and largely completed the necessary infrastructure works. Capex debt finance has been all but arranged. Capex equity finance is either being resolved too it seems or provisionally agreed. Permitting has been granted and the team is in place and so on.

Arguably at present Prems shares can be substantially valued at over US$10m. The benchmark being the latest price at which Circum accepted subscriptions

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As a comparison there is a benchmarking exercise to do against the neighbouring Danakali potash mine in Eritrea. Whilst that’s interesting Danakali is a few years ahead of Danakil. It's much smaller too and is a j.v. project. All of those factors make quite a difference. A valuation on this basis would put Prems investment much higher than $10m. So I think a valuation on Circums last subscriptions whilst the safest way to value Danakil it’s probably too conservative and misleading.

Alternatively again when Danakil is producing 3.5m/t’s of potash in a steady state in three to four years time the mines “earnings” should be about $400m at todays MOP & SOP prices which suggests its Market Cap should be near $4bn to $5bn at that point on an earnings metric equation using a p/e ratio of 10. the ratio should be at least that to reflect Danakils unprecedented resource size and extraordinary LOM.

Working that equation back on a reasonable ROI I get to a value at IPO of approximately £750m. Prems holding may be diluted in percentage terms to say 2.5% going that route. For simple maths that would put the value of Prems holding at around $17.5m which would 0.15p per share to Prems shareholders.

It seems there may be a lock in period for the shares needed to maintain an orderly market. For how long and if it’s necessary will be at the behest of the main funders we’re told. That being the case it’s unlikely to apply to all shareholders and perhaps not to Prem if its holding falls below the 3% trigger of “significant" shareholder.

Setting aside the length of this post I hope some of the thoughts I’ve shared in this overview are of interest.

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This is a genuine and rare opportunity for Prem shareholders to benefit to the extent of as much as 0.15p if not more in addition to the value of their shares and possibly more but please DYOR as always.

If after looking you think a Corporate Action in whatever form is unlikely to happen any time soon, then so be it. I’m not one to give advice but if that’s your conclusion then if you were to ask my advice would be to look closer and think again.Time is not at large on this.

I'll close this by saying I believe we could see Circums Corporate Action be the first out of the Prems "news blocks". Prems EPO news has to be so close now investors more savvy than I are saying they can almost smell it. However I say as close as that may be the news on Circum is now running slightly overdue and Circums BOD's are certainly not known for procrastination!

AIMHO

The Government's Gazette is used to announce acts or statutory instruments by the president and cabinet. The Gazette itself is the official Government newspaper of record for all legal and regulatory announcements.

Any communication or announcements sent to the Government's Gazette have to have been signed off by the OPC (Office of the president & Cabinet) (OPC). Communication from the OPC is tightly controlled and mining is a sensitive area because of the politics involved, anti-corruption push and international relations with other countries.

There is light at the end of the tunnel on the current batch of EPO Applications and the result of Prems EPO Application could be RNS'd any time now . The Government's Gazette runs with a backlog on announcements but I'm in no doubt the MoM (Minister of Mines) will know exactly when the results will be published.

The EPO Applications are dealt with in a regulatory process having 7 key stages. I believe Prem is one of forty or more Applications being dealt with all of which are now at key stage 7 - the last one.

Attached is a "copy and paste" of key stages 6 & 7 of the process. Stage 7 calls for the results of the Applications to be SENT for Gazettal. Emphasis on "sent".

Inter alia it specifically does not call for the results to be PUBLISHED in the Gazette before the Applicants are formally sent the results (Approved Order).

Indeed the MoM would want all Applicants to be informed simultaneously by his Ministry and the results then published in the Gazettes to notify its wider audience simply as confirmation:-


6. Application recommendation and Approval Assigns EPO No. eg 4886….

General Notice sent to the Minister and then to President for APPROVAL or REJECTION.

7. EPO Gazettal Approved General Notice sent for Gazettal.

Approved Order sent to Applicant.



AIMHO and as I say Prems Approved Order could be RNS'd any time now.

You're more than welcombe  CF.

Your absolutely right. "So much of the area being rich in minerals"

We know Zulu's EPO area sits largely on a formation of rock known as the Greenstone Belts. These belts are known to the richest gold deposits on earth.

We also know that the  Great Dyke feature that trends nearly north-south through the centre of Zimbabwe runs extremely close to the EPO area. It may even go through it in part.

It consists of a band of short, narrow ridges and hills running for approximately 550 kilometres (340 m). The hills become taller as the range goes north, and reach up to 460 metres (1,510 ft) above the adjacent well known Mvurwi Range. 

Perhaps what's less well known is there are further dykes running alongside the Great Dyke.  One on the west flank and one on the east.

These  dykes and ranges have been dated at over 2.575 billion years old and they are known host vast ore depositsincluding gold, silver, chromium, platinum, nickel asbestos and other REE's. 

A very exciting prospect for Prem and it's shareholders ! Very exciting indeed!

AIMHO.

GLA all GS's