Member Info for Valuation-it-is

MO
Have you worked out what the likely royalties payable to CUSN will be from CL?
If they are large enough, they might be the equivalent of the funding cost for buying CUSN in its entirety thus giving a bidder the $3bn of tin at South Crofty and the minerals at UD for nothing.

This doesn't cover DLE processes which may be less costly..................

https://www.thoughtco.com/lithium-production-2340123

Fira - Many thanks for the BBC 2 prompt For those wishing to watch on catch up TV.............

https://www.bbc.co.uk/iplayer/episode/m0010d00/villages-by-the-sea-series-2-4-charlestown

Fira I suspect the same will be true for the 27 gigafactories planned for the EU. If all the gigafactories are behind the 2025 deadline, my bet is that the rule about % local content will be quietly dropped.

Otherwise I thought the Nissan concept car looked pretty good. Most of the EVs look like unappealing chiseled bricks.

https://www.telegraph.co.uk/business/2021/11/29/nissan-puts-sunderland-centre-18bn-electric-drive/

Fira "2025 production date looming."

One wonders if the 27? gigafactories planned around the EU will be able to find enough Li to satisfy their needs? It may not just be a case of when the factories are finished, it may whether there is sufficient Lithium for them to make batteries.

https://ceo.ca/cusn

MP Alexander Stafford: “China’s dominance of rare earth metals has left Britain strategically vulnerable”

The UK should consider building rare earth refining capacity in its freeports and industrial clusters to counter dependence on China for critical minerals according to an article by Alexander Stafford, MP for Rother Valley and Business, Energy and Industrial Strategy Select Committee Member.

Stafford notes that post-COP26 and the UK’s Net Zero Strategy, financial markets and government policy are in keen pursuit of the green industrial revolution. However the critical minerals needed to develop the UK’s Net Zero industries are at high risk of supply chain disruption and Britain needs to act.

‘In March, I led an adjournment debate in the Commons to highlight the issue to the government. I was therefore very pleased to see that the Net Zero Strategy included a commitment to publishing a Critical Minerals Strategy next year. This strategy must set out a roadmap to diversify our supply chains, reduce dependence on China and move towards a more strategically and environmentally sustainable arrangement,’ he writes.
‘We should take this opportunity to bring new jobs to the UK, our friends and allies, while addressing critical imbalances in the global economy.’
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Lets hope Cornwall's MPs support him.

See page 23 of
https://cornishmetals.com/site/assets/files/4930/202110-cusn_corp__pres__web.pdf
Looks like there will not be a shortage until 2025. Is that your expectation too , MO?

DB
The Cornish Lithium offer to TechMet is not being made to anyone other then TechMet as far as I know.

Company video - 3 minutes in - https://cornishmetals.com/investors/corporate-video/
JORC resouce 2017 around 44,000 tonnes tin in the ground
After drilling 2020 hoping to increase resource to 60,000 tonnes in the ground
When SC mine re-starts, company is looking for a resource nearer to 75,000 tonnes tin in the ground

75,000 tonnes at $40k per tonne = $3bn value

Bubble 15.15

Cracking idea Bubble. If it is, it would cause a stir. So I have had a look........................
Note 5 within https://cornishmetals.com/site/assets/files/5422/2021-01-31-fs.pdf
expands on the situation, here is the text relating to y/e Jan 2021 without the table
MARKETABLE SECURITIES

The Company holds common shares in one TSX-V listed company (January 31, 2020 – one TSX-V listed company) and
in two private mineral exploration companies (January 31, 2020 – two private mineral exploration companies).
During the year ended January 31, 2021, the Company received common shares of a private company at a value of $64,789
(2020 - $64,445) pursuant to an option agreement, which were recorded as a recovery against exploration and evaluation
assets (Note 10).
During the year ended January 31, 2021, the Company recorded an unrealized gain of $391,797 (2020 – $164,344)
associated with the change in fair value of marketable securities.
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I think the unrealised gain will at least in part arise due to the issues of shares through Crowdcube by Cornish Lithium, which fortunately showed rising valuations per share.

I had a look to see who controlled Cornwall Resources ltd (CRL) i.e. Redmoor, and the Gov.uk website states that 75% or more is controlled by Strategic Minerals plc. So from that, it is not clear if SML owns 100% or somewhere between that and 75%.

The SML plc accounts state that SML bought the remaining 50% of CRL in July 2020 and had 100% at the 2020 year end.
So it seems we have to look elsewhere to find out what CUSN's second private company investment is.

Dumbpunter

I think you may find this link helpful.
https://www.hcrlaw.com/blog/pre-emption-rights/

Within "So, where can pre-emption rights be found? There is a statutory pre-emption right contained within the Companies Act 2006 which states that on an issue of shares, all existing shareholders of the company will be entitled to purchase a number of those new shares which are pro-rata to their existing shareholding."

Cornish Metals exposure to Cornish Lithium
The Cornish Metals Pre IPO presentation states:-
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Lithium exposure through Cornish Lithium
Cornish Lithium has the right to explore Cornish Metals’ mineral right areas for lithium-in-brine & geothermal energy. Cornish Metals has a 25% free carried interest on the first project advanced to completion of a Bankable Feasibility Study within its mineral right areas, and a 10% free carried interest on all subsequent projects advanced to completion of a Bankable Feasibility Study.
Cornish Metals will receive a 2% Gross Revenue Royalty on all metals produced from brines or geothermal energy produced from within its mineral right areas.
From January 2017, Cornish Metals benefits from annual cash / share issuances from Cornish Lithium of US$50K per year in years 1-5, US$100K per year in years 5 –10, US$500K per year from year 10, and US$1,000K per year from year 15.
Refer to Company news release dated January 19, 2017 for further info.
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My note
Since Jan 2017 CUSN has probably received the £50k per annum by way of shares. Sso far, that is probably 5 years worth of issuance. Until the TechMet announcement the issue prices had been rising. So the valuation of the 5 x £50k holding will be significantly more than £250k now. The CUSN balance sheet shows investments , but there seems to be a second investment i.e. not in CL, so the full figure given does probably not relate to CL alone.

Further note. Not all Cl's endeavours are on CUSN mineral rights areas, so not all CL projects will provide a royalty or free carry investment for CUSN. I think, but do not know for sure, that CL's Trelavour Hard Rock project is outside the CUSN mineral rights area. CL's brine efforts at UD, do fall within CUSN's mineral rights area.

Tyson

For CUSN, the deal Cornish Lithium has announced is mostly good news.
All of the impacts on CUSN are small, but to go through them

1.Impact on CUSN revenues :- likely to be positive as this appears to bring forward by about 5 months CL's timetable for starting operations. So Royalties may kick in a bit sooner.
2. Impact on free carry projects - as 1 above - the value CUSN may derive from its stake in projects set up on CUSN's mineral rights areas may arrive sooner.
3. Impact on CUSN's holding in CL shares. Because the holding is small the impact is immaterial to CUSN. The dilution of the interest and the transfer of value is small (£100k perhaps) offset hopefully by expertise TechMet may bring to CL. I cannot be more definite than that because the terms of the warrant given to TEchMet are unclear.
4. Another multi-million pound investment in minerals /mining in Cornwall will only help to raise the profile of Cornish miners generally,( e.g. Telegraph article) making finance providers more aware of what is developing in Cornwall. CL's JeremyWrathall is very good at publicity/communications and this is another example.

Thanks Rooky and DDumbpunter

DP Shareholders in Cornish Lithium currently have pre-emption rights - i.e. if the company wishes to issue shares it must go to its shareholders first and offer the new shares to them. This is the way of protecting ownership. If it did not exist the BoD could issue a load of shares to new people and the ownership of the company would change. So pre emption rights are there to protect ownership, and the value held by shareholders in the company.
What CL is doing is asking shareholders to vote away pre-emption rights so the BoD can sell shares, at a lower price than recently achieved, to some new influential shareholders. This they consider will benefit the company.
My view is they could offer the shares to existing shareholders first and any not taken up could be sold to the newcomers. That would be likely to achieve a higher price as well as there would be more buyers for the same amount of shares. So also less dilution.
Matters are complicated by the fact that directors own just over half of the current shares, so it seems they can vote this resolution through despite what the other 40+% think.
After the share issues the BoD would no longer have more than 50%. So they would not be able to disadvantage the minority in the future. That is until you read the resolution, which cleverly asks if shareholders will vote away their pre- emption rights for 5 years. So clearly the BoD are considering further issues to outsiders, keeping existing shareholders out of the share sales.
I think the above is an appalling way to treat those people who have risked their savings to support the company through its earliest and riskiest stages. No doubt the directors can make up for the dilution they suffer by way of incentive schemes warrants or bonus plans. But their existing shareholders do not have these possibilities.
Then there is the question of value transfer.
For example imagine a company that issues 100 shares at £1 each for cash. After the issue the company is worth the £100 it has in the bank. Then let us say it issues another 100 shares to a newcomer that it likes at a price of 1p each. The company then has 200 shares and is worth £101. But consider what has happened to the initial shareholders. They now own 50% of the company rather than 100%. The value of what they own has dropped from £100 to £50.50p, whilst those who paid £1 for their shares have seen their value rise from £1 to £50.50p. This example, whilst exaggerating the impact, demonstrates how value is transferred from the original to the new shareholders. Clearly the original shareholders would not like it, and that is why pre-emption rights are so important to guard carefully and not give up lightly.
In Cl's case its last raise was at 16p. It is proposing with its new issue to sell its shares at 13.5p. Whilst not so large as in my example there will still be a transfer of value from the old, to the new shareholders. Not much fun

More thoughts on Cornish Lithium NOT Cornish Metals.
(Posted here as CUSN has a very small stake in Cornish Lithium and a royalty agreement with them.)

I think the shares in the raise should first have been offered to existing shareholders and if more money was needed than offered , then TechMet should have been introduced into the equation.
This company belongs to its shareholders. Their percentage ownership is being reduced, and some of their value is being given away. And they are being asked that the directors be able to do this again perhaps repeatedly over the next 5 years.
Why five years? Because this change will take the shareholding the directors have personally below the 50% level. So unless they get this through now, they may not be able to ram it through in the future.

MO Hope you get down from that tree OK.
Whilst TechMet may bring a lot of expertise and financial backing to Cornish Lithium, it is coming at a significant cost to existing shareholders.
Existing shareholders are being asked to sign away their pre-emption rights for 5 years. That means they can be and likely will be, cut out of financing rounds which may offer cut price shares. An example of which we are currently contemplating. CL will have to raise £200m in the not too distant future, if the pilot plants work well. So existing holders may find their interest in the company severely diluted. Not only that but a lot of the upside in their shares may be lost. Given existing holders have shouldered the financing of the most risky period, any high returns that arise should rightfully accrue to them.
The argument that it is difficult to raise finance and so a lot has to be given away to attract further finance, does simply not ring true. Lithium producing companies are some of the hottest stock market property at the moment.
I do not know if a a 50% plus or a 75% plus aceptance vote swings the proposal. If it is 50% and the directors are for it, then shareholders other than the board will lose their pre-emption rights whether they like it or not.
The amount being raised from TechMet is not significantly different to that last raised by Crowdcube. My view is that existing shareholders should have been given the right of first refusal in this offering. But no, the discounted offer is only to TechMet who are also being offered board representation, warrants and a distribution agreement. The details of which have not been disclosed.

Rooky
Is the full page article you refer to, the same or different to this one published on line on Thursday?
https://www.telegraph.co.uk/business/2021/11/25/cornish-lithium-hunt-makes-funding-breakthrough-bid-power-electric/

Will they increase their tin and add copper exposures?

From one of their announcements.............
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About TechMet
TechMet is a private company building world class projects that produce, process and re-cycle "technology metals" critical to EVs, renewable energy systems and energy storage. TechMet's target metals include: lithium, cobalt, nickel, rare earth metals, tin, tungsten, and vanadium. TechMet's core investments include:

Brazilian Nickel PLC – nickel and cobalt production in Brazil
Li-Cycle – lithium-ion battery recycling.
US Vanadium – vanadium specialty chemicals production in Arkansas (USA).
Tinco – the largest tin and tungsten mines in Rwanda

TechMet also has an interest in a producing Rare Earths metals project and is developing TechMet Ventures to invest in new opportunities across the supply-chain.
TechMet was privately backed until late 2020, when it received a major investment from The US International Development Finance Corporation, a US Government funding agency, which now holds a 25% equity interest.
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