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@dallasdaz the 300m options from 2016 were cancelled at the 2017 AGM. You may remember that they were granted two days after the 2016 AGM without any discussion having taken place. As a result the shareholders proposed a resolution for the 2017 AGM requesting that any grant of options to BoD should be approved by 75% of shareholders. The Bod countered with the LTIP instead, which I believe most shareholders felt was also a reasonable approach. The LTIP was approved at the 2017 AGM, and the 300m options were explicitly cancelled at the same time.
@mermillions posted for you on the other board
If my understanding is correct, KDNC has been able to take on the Amapa project because of an unusual combination of circumstances, connections and capabilities -- including but definitely not limited to Kiran's Brazilian connection and Andrew's networks in Singapore and commodities trading. The involvement of Indo Sino is no accident, and I would be astonished if the plan stopped at 27% JV ownership for KDNC. The only reason that would happen (in my opinion) is if risk materialises that prevents recommissioning from being completed. Otherwise I expect to see 49% ownership approx. 2 years after the settlement agreement, if not before.
Just my opinion, DYOR etc. etc.
Looks like the same buyer as for MMS Lake Giles...
And we're off...
"As regards the secured bank creditors, we believe all parties are aligned to complete and execute the agreement which will see Cadence become a 20% shareholder in Amapa. I look forward to updating you on further developments as we move to complete the final stage of phase 1 of our Amapa investment plan."
This has been trotting in my head since January. Why does the PRJ use a USD-BRL FX rate of 3.6?
The last time the rate was this low was 13 May 2018 (3.59917). Then it peaked at 4.20668 on 14 Sep 2018. It only fell back a couple of times to anywhere near 3.6 -- 29 Oct 2018 (3.6401) and 04 Feb 2019 (3.65855).
(source https://www.xe.com/currencycharts/?from=USD&to=BRL&view=5Y ).
From this I infer that the PRJ financials were developed and locked in no later than late 2018, which makes sense given the timeline of events on this project.
What I am scratching my head about is how to incorporate the more recent FX rate (much more volatile since the start of the pandemic, and currently at 5.75673) when developing updated financial projections. Clearly certain elements remain USD-indexed (in particular DIP financing, iron ore prices, shipping costs). However, I would expect others to correlate more closely with BRL (transport, labour costs, environment, certain creditor repayments if these were originally in BRL, certain elements of capex and depreciation that may be "local" rather than USD-based, and so on).
The challenge here is that the PRJ financials do not provide a detailed enough breakdown to be able to reliably assign amounts at this level of detail. Any bright ideas on how to approach this?
@observer842 I would have expected the price for sinter (58%) to be lower than the $61/t for spiral concentrate (62%) or $80 for pellet feed (65%). I'm guessing this means that sinter makes up only a minor part of the stockpiles.
@observer842 my approach on the sensitivity analysis is that I will make new spreadsheets in USD that contain all the formulae currently found in the BRL sheets. I will then add tonnage and price per ton for each year and for each ore type. I will also include NPV attributable to KDNC at each level of participation. Then people can play with their own projection of ore prices over the next 17 years to test different scenarios. For verification, using PRJ parameters should give the same as what we see in the PRJ documents.
I'll not be releasing this today, focused on family time for now.
Good catch @tomcat-14, thank you. I've uploaded a corrected version 3, here:
https://drive.google.com/file/d/1aTzua1Z78OCeGvPb0Y2TAjRbAtPev3FZ/view?usp=sharing
Any idea on the quantity of sinter to be sold in years 1 and 2?
Thanks @EV_Bull. Yes that’s all part of “valuation and sensitivity analysis” that I want to do next.
Note - when you click on the spreadsheet link, it comes up in Google Sheets. I would recommend that you download the file so that you can then use it in Excel on your own computer.
That should say "the errors are minor (less than BRL 1,000) and I have highlighted them for clarity.
Here's an updated version with the "correct" exchange rate (i.e. BRL 3.6 = USD 1.0), as inferred from the PRJ document and discussed here on 24 Jan and 31 Jan of this year. (I still struggle with this FX rate from the broader perspective -- I think that some of the financial tables should use the current / projected FX rate when converting to USD -- but I haven't thought this through yet and my brain is too fried after a long week to figure it out today.)
This new transcription is as accurate as I can get it from the new PRJ tables that I posted earlier. Figures in blue are transcribed, figures in black are calculated. All of them match the numbers in the PDF, with a couple of exceptions that I am not able to reconcile. The errors are minor (
The three tables now link to each other where appropriate, so next step will be to use them to do some valuation and sensitivity analysis. Watch this space.
PRJ tables PDF: https://drive.google.com/file/d/1NLPdUGCYgaUz3gFlu_xYQP8YaUiQ75N_/view?usp=sharing (reposting)
Transcription v2: https://drive.google.com/file/d/1Y7f8jJC-olPYZFznDCV7FSau6qDoPCMV/view?usp=sharing (I deleted the earlier version as it was inaccurate and liable to create confusion).
Enjoy!
OK folks, here's the source document for the PRJ spreadsheets. You'll see that it is still tricky to read in places, but fully legible with a little effort and logic. The biggest update here is on the cash flow statement which was pretty much illegible before. This now provides a basis for DCF analysis.
https://drive.google.com/file/d/1NLPdUGCYgaUz3gFlu_xYQP8YaUiQ75N_/view?usp=sharing
And this is my first transcription. The numbers should match the source document. My ideal end state is a fully working set of numbers on interlocked sheets that update automatically when income changes based on iron ore prices -- we are not there yet. The source document contains quite a few rounding errors -- some of them I have managed to reverse engineer, but others are more complicated and I have overwritten them so as to get the information out sooner. I'll post an updated version once I have got the whole thing working.
https://drive.google.com/file/d/1oJYRX0f49bd6GUk18LTD6_aR2Qqewti5/view?usp=sharing
Ever since the Amapa PRJ was published, it has irritated me that we cannot get a clear read on the three spreadsheets at the end of the document (p. 15804 Cash Flow, p. 15805 Profit & Loss, and p. 15806 Balance Sheet). Some may argue that these numbers are irrelevant because DEV / KDNC / Indo Sino will run their own updated numbers once the new agreement is in place (which they will, to take into account all the factors and assumptions that have changed since 2019 when the PRJ document was filed with the court).
Nevertheless, the PRJ numbers constitute the baseline for the court case and (to some degree) for the settlement agreement, and are therefore interesting to understand in detail.
I am allergic to boxes that remain unticked and so I have spent many months tracking down anyone in the UK or Brazil who is able and willing to provide a legible version of said documents. This finally panned out earlier today, and I will share the details once I have had time to review and digest. Most likely over the weekend.
DYOR. Then do some more. It always pays...
Of course @MB, silly me. This should do the job -- me toca a una sin mover al otra :)
One thing I could never have anticipated about this investment was that it would lead me to keep half a curious eye on maritime shipping trackers. Makes you wonder what else is in store. Anyway I see that OD is just pulling into the Macapa Bay anchorage. Time to settle back and see how the various predictions play out.
Good analysis from @Bannor at 0945. I agree that it could be a viable strategy for KDNC to monetise the JV assets via "disposal sooner" rather than "production later" -- but at the right price of course.
On a related note, Albemarle is betting big on lithium demand outstripping supply:
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https://www.mining.com/web/albemarle-bets-on-turnaround-in-wave-of-green-car-goals/
BloombergNEF expects supply of lithium hydroxide, or battery grade lithium, to be tight this year and prices to rise along with battery consumption. It also expects lithium demand to grow almost eight-fold by 2030 from last year’s levels. Albemarle lifted its demand forecast by 14%, and now expects it to exceed 1.1 million tons by 2025 from about 300,000 tons now.
The electric-vehicle proclamations by manufacturers combined with existing favorable subsidies and regulations in Europe and China mean “the demand side is very encouraging,” said Eric Norris, Albemarle’s head of lithium.
The company, which also has bromine and catalyst operations, plans to spend the money from the capital increase in the next three to four years to bring on 150,000 tons of Lithium Carbonate Equivalent capacity, mostly around conversion assets and mainly for hydroxide.
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Thank you for resuscitating those notes @Masterbaker. Even I hadn't read them for a couple of years. Notwithstanding the intervening shenanigans and shifting timelines, I remain convinced that there is value tucked away in the soft rock of Sonora. I expect that value to materialise in a couple of different ways. Of course it's up to everyone to figure out their own approach.
Interesting to see the market behaviour this morning. SP rise of 2.8p (from yesterday's 16.5p close to 19.3 at time of posting) equates to an increase of GBP 4.15m in KDNC market cap (USD 5.75m @ 1.38443 FX). This is slightly above USD 4.9m, which is the share of the initial stockpile profits (total USD 10m) that KDNC would "own" once it takes full 49% ownership of DEV. (I appreciate of course that KDNC won't actually see any of that cash.) This all suggests to me that the market is confident that KDNC will effectively take 49% ownership, and that the project will progress -- but that valuation of the main project is currently priced at a big fat zero in the SP. If my read is correct, then we should see some serious action once "further announcements" are made and ore starts to ship. Let's sit back and enjoy the ride, finally! My opinion only and DYOR etc.
Here's a link to my updated DEV PRJ Financials file. It now includes the Balance Sheet from the DEV PRJ document, in addition to the P&L. The transcription is challenging with lots of blurry text. Years 2031-2035 are still not quite right, but the errors are small and I won't have time to spend on this for a while, so I am posting now warts and all. USD conversion pages use the implied BRL/USD FX rate of 3.6 as per posts on this thread earlier today.
https://drive.google.com/file/d/1Lh3xuSNrQXvoS7Xc4YN2bONjDDBuW1lq/view?usp=sharing
Cashflow statement will follow once my eyes have recovered from deciphering this second sheet.