Member Info for Tornadotony

Lawrence,

A number of pieces are emerging. First of all Fernando Marino arrived in August and has a track record of improving ferronickel capacity output from mines. He clearly wanted changes and it could well be that the production might get upgraded possibly from 14,000 to say 16,500. If that was so then $175M extra cost would be re-paid back and $30M contingency picks up the rest.

The second factor is that the company warned in many RNS prints that it was inexperienced in ramping up the plant. I will recall Jeremy referring to commissioning phases and so forth. Stacking up tonnes of mined ore was in the original financing. I believe they have realised a post production plant cost that it takes time to get the plant fully operational. They have Fernando with his 35 years experience with Vale nickel mine experience to do all of that.

I suspect what is spent on plant and more additional works is probably $50M and that the vast majority of the cost is getting all the new designed elements commissioned and tested.

Glencore want an inexpensive well designed mine. La Mancha and Orion will want a good result and the banks will be looking at the revenue and cost streams in all of this. The only reason why the designs would have changed is learning of a far better way to operate. We have all been tested today. I have traded around on HZM to acquire a 20% free carry. I am well down on what I hold. I am not sure about anything but I decided to keep the faith. Fernando came along and changed things quite possibly for the better. If I had spare cash I would average down today but those funds come available next month.

I am not giving up on HZM and I do feel they will succeed in the end. A key item in the review is whether Fernando has seen a way to deliver more nickel production per annum.

Fernando Marino has clearly changed things during September and is ex Vale Ferronickel miner.

Theo I am waiting for a phone call back from HZM. A re-design at such a late stage should have an economic reason behind it otherwise why do it. The previous design was worked on for years along with everything else and approved at due diligence and was approved again back in June. They clearly came up with better ideas and have discussed it. Having components delayed or a change of a supplier contractor is always possible and things can run a quarter late. $30M was set aside in case that happened. They must be finding changes that reduce production costs or something like it. I also wonder if line 2 costs are being thrown into this as well.

Have opted to keep my small investment here with a 20% built up free carry. Last year we were blind sided and the share recovered two months later. La Mantra, Orion and Glencore clearly want a better more advanced mine. They did not sell off on the last big drop 155p to 84p and I doubt if they sold off today. I do not believe Jeremy Martin is a fraudster. He has put many years of his life into HZM and is determined to get this project right.

This work, along with a comprehensive cost review, has resulted in changes to the design and execution scope, which are expected to increase the overall capital expenditure requirement by at least 35% (of current capex budget) and delay first production to Q3-2024.

In brackets it says of current capex budget which is probably say $160M and is the overall capital requirement a forward statement. What is the current Capex budget is it now or going back to the start of the project? Glencore and Orion and the bankers are sorting it out and we will know what it all is in mid-November.

One press article has interpreted as from the beginning but it does match up with the general commentary in the RNS in my opinion. Two months ago we were on the last 4 months of construction.

My own reading of current is the percentage over what was left to be spent. Logic surely suggests that is the case. If we have a 9 month delay and $50M is a downside on the enterprise value, however does it improve the capacity of the entire mine and gives a true project de-risk from now on the project and delivers nickel when economic conditions perhaps command a better price anyway. Around £190M has been wiped off already which is panic selling.

I have called the company and the manager will get back to me asap. The question has been raised.

The current Capex remaining on June 30 was $208M. The company spent a lot more last quarter. I suspect the monies on what they wanted to do was around $50M. If we have an overrun of 10% overall, it would not be the end of the world. Has anyone telephoned the company this morning?

Impossible to get quotes this morning. First of all contrarian warned us. I took profits and rebought back. Fortunately it is a small part of my portfolio so will stick it out to the bitter end. Glencore and the major partners will back it to the end. Fresnillo had a big mine build that had this kind of problem. JM needs to explain how this unfolded.

Mhenderson and other readers,

In other words all the waste they did not process for years that generated extra profit on the ROCE has been corrected with lower ROCE over the past two years. They recommended that after all this correction not to buy the stock as probably they want to buy it at a cheaper price.

Contrarian wrote his comments on the toilet seat and shared the output on here.

Https://goldseek.com/article/comics-bidenomics-all-revisions-go-down-all-time

This is a good article that sums up how bad things are getting State side. Looting and shop lifting is getting so bad over there that retail in USA is going to the web and avoiding physical contact. Gangs are now targeting delivery drivers and the distribution system. USA is reminding me of what happened in South Africa in July 2021. How the currency can go higher is just unbelievable.

Whatever game they are playing on gold they certainly used up 20% of their fire power on open interest this week.

Good job that HZM is an inexpensive source for nickel. Base case for the project was $14,000 per tonne and allowing for inflation say $17,000. Secondly if people want to drive cheaply they stay with their old petrol or diesel cars where possible. It is utterly pointless to make the public buy EV cars not ESG compliant using electricity sources that are also not ESG compliant. The real issue about climate change is the absence of good quality engineers and investing on new engineering solutions and technology. We give thanks to woke mandarins with classics degree in the arts who advise ministers on what to do and company execs that have their equivalent commissars who know nothing about the full product cycle and what happens to waste by products and what gets destroyed in acquiring new materials or maybe they do and just keep quiet about it . The lack of joined up thinking is probably a result of the destruction of the education system especially at Universities. A number of hobby horses there to jump on regarding the stupidity that surrounds us but better to have the Friday evening beer in the pub instead. Tony

Https://insights.issgovernance.com/posts/nickel-supply-risks-and-esg-issues/

The above article gives some fairly comprehensive information. Do you buy a car that sources nickel by dumping waste in the sea, uses coal fire to source energy production and significant deforestation to extract nickel reserves. If yes the EV makers buy cheap Indonesian nickel and make it utterly pointless to buy the EV car in the first place.

USA shut down unlikely to impact the markets that much. The absence of economic data is likely to have no impact as the revisions across board have been so huge as to render previous data as useless and politically interfered with by the Biden administration. Zero hedge published an article last night revealing stats which showed USA economy is actually losing jobs in the workforce and none are being created as a net figure in 2023. It also revealed that consumer strength in USA was based on erroneous data and their financial net position was $1 trillion dollars less than previously. There is some delayed data from Michigan consumer data that identifies the consumers had maxed out several months ago. The hiking in USA may be at an end. Yesterday the USA hedge funds backed off taking on JCB on the yen. Overall we should find out in October if the tightening cycle has peaked. I suspect November will reflect a different backdrop and HZM has a good chance of rallying back up again.

It was quite obvious contrarian has a short CFD on HZM and pumping his own bias on the trade. He failed to make money on the long side and so trades on the short which is how he may operate his own portfolio. He would do far better on AAZ and would see what I mean looking at the volatility.

In my opinion, a rally in the share price starts when they announce a dividend as they may decide it is 8p instead of 12p for example. The company may reserve equivalent of 4p on buy backs. Let us assume it is 17p before divi is announced. One of the following may occur;

The share price goes up to 21p prior to the qualifying divi date. Some people will buy to get a nice divi and risk holding the share. Ex-dividend it would go to 13p at the open. The company can buy more shares at 13p instead of 21p. Let us say they buy back stock at an average of 14p and the acquire 21% more shares than if it were 17p or 50% more shares then if it was at 21p. This model favours increasing the share price post dividend as some buyers would join the company on purchasing when buy backs arise.

A second option is giving 12p divi straight off. This may give a higher price rally to 25 or 26p and then it goes down to 14p ex-div,i but suppose nobody buys after the divi it could well continue to fall back down to 5p. The incentive of a buyer removing stock to Treasury is not present. Also some people may take the divi and take a CGT loss on the rest and we could end up with more sellers. Having only £3,000 as CGT annual limit encourages more decisions like this arising across a wider portfolio.

It would be concerning if the price simply fell earlier on the news of what the company was going to do and what we got no rally at all. If a good dividend is in the offering it would be a significant poor show if the board bought no shares after the announcement. If they sold stock and gave the excuse of tax reasons we would also have a major red flag. So how all this gets handled is fairly important.

Regards Tony

Most of my positions are holding up, but RBW has done the best.

Options in gold will be known in Friday's COT report. They clearly went short when the market was deeply short already. The relationship between TLTs and gold broke down in 2022 and is documented by Sprott. The reason for the breakdown is that physical gold within bullion banks is extremely low. What they are now doing with gold is highly leveraged and playing on low sentiment. It would not take much bad news for the public in many countries to buy gold. Gold in pounds is still a lot higher than it was end of June and early July. Only in America is it cheaper as those bullion banks need to buy at a good price and they need a lot of it. Hang in there and be prepared to raid your piggy banks.

Yes sotolo regarding oil costs being higher,

The company accounted for it in the AISC target. Hopefully increased production will help a little. The company Capex may have been higher. The analysts have not revised the earnings forecast for this year. A good 3rd quarter may well have cleared 11.5c for 9 months with a low target of 3 cents in Q4. Around $15M or so in other savings was hoped to be delivered in H2 and that may help as a partial off-set in other higher costs. Tony

Pleased you folks have the info and visibility of what has to be done. I only wrote the one comment yesterday with the whole saga going on and had no position in AAZ. An exercise in demonstrating power over the company to the local people is the only reason why I can see this was dramatized as it was. The declining gold price at present would have the share at 60p in any case. As for 100p in 5 months time may depend on gold and copper prices that prevail at that time.