Member Info for Valuation-it-is

Https://www.bbc.co.uk/news/uk-wales-66453932

Holes in the ground becoming valuable.

Source :-https://www.telegraph.co.uk/business/2023/08/10/eu-gambles-ukraine-crucial-gas-storage-winter/

(Source shows graphics)

EU gambles on Ukraine for crucial gas storage ahead of winter

As capacity shrinks, the West has no choice but to rely on the ‘power bank of Europe’

By Eir Nolsøe 10 August 2023 • 6:00am

Ukraine Gas Storage Capacity EU

Oleksiy Chernyshov, the chief executive of Ukraine’s largest oil and gas company Naftogaz, wants Europe to store its gas in war-torn Ukraine.

Naftogaz believes it can become the “power bank of Europe”, he says, despite the conflict.

“I would like to underline that the infrastructure we are using is underground,” he adds down the line from Kyiv as a missile alarm sounds in the background.

While the pitch may sound improbable, Ukraine has found a market: Naftogaz is storing gas for 21 suppliers from EU countries like Germany, Switzerland and Romania, Chernyshov says, and the European Commission has publicly backed traders tapping the country.

Ukraine – which has capacity to store 31 billion cubic metres of gas and is offering European companies around a third of that – looks increasingly attractive despite the obvious risks.

“There is a substantial storage capacity in Ukraine,” Ben McWilliams of think tank Bruegel says.

“When the Soviet Union was sending lots of the gas to the EU back in the 70s and 80s, large gas storage sites were developed on the western borders of what’s now Ukraine, essentially for ensuring this year-round flow and a constant supply into the EU.”

Chernyshov doesn’t hide from the fact that foreign companies turning to Ukraine are taking a risk.

“Obviously, there are more attacks with on-ground war going on in the east and southeast. But every Ukrainian region has been and is suffering from either potential or practical missile attacks,” he says.

The bulk of Ukraine’s gas storage capacity is 3000 metres underground in the west of Ukraine near the Polish border, far from the front lines.

Chernyshov admits: “Western Ukraine is less challenged, but it doesn’t mean it is not challenged.”

Suspected Russian attacks on the Nord Stream pipeline, the Khakhova dam and grain reserves show the Kremlin has the capacity and a penchant for targeting critical infrastructure.

Akos Losz from the Center on Global Energy Policy says: “Storage is not the easiest to target. The underground caverns are themselves not vulnerable to attacks, but above ground there are compressor stations and walls and pipelines that can be damaged.

“The transmission pipes themselves that are needed to fill and remove gas from Ukrainian storage can also be damaged.”

Russia still relies on Ukrainian pipelines as one of two corridors for the gas it sells to Europe.

“So far, Russia has refrained from targeting the gas export infrastructure but of course in war everything is uncertain,” Losz says.

But he adds: “If the gas infrastructure becomes a target of Russian strikes, then of course it’s vulnerable to attack.”

The revelation that growing quantities of gas are being pumped into Ukraine will spark concern that the healthy levels of storage are less reliable than they may seem with winter just months away.

The energy market remains on a knife-edge. Despite more placid prices for much of this year, European gas rose by more than 30pc on Wednesday to register the biggest daily jump since the start of the war.

The trigger was strikes at Australian liquified natural gas plants, highlighting how jittery markets remain in the face of any hint of supply threats.

Still, for the EU, storing gas in Ukraine is a calculated risk.

The EU has capacity to store around 100 billion cubic metres worth of gas, amounting to around a quarter of its annual demand.

The ten billion cubic metres of gas storage on offer could provide a lifeline through a difficult winter and expand its reserves by 10pc.

Sending gas into Ukraine through pipelines in Poland, Hungary, Slovakia or Moldova allows companies to buy when prices tend to be lower in the summer and retrieve it when demand is high in winter.

European Commission Vice-President Maros Sefcovic on Tuesday wrote on Twitter: “I welcome the fact that European gas traders are increasingly making use of gas storage capacities in Ukraine. It will reinforce Europe’s energy security.”

UK consumers would indirectly benefit from increased use of Ukraine’s infrastructure, as the backup supply would help to keep a lid on European gas prices which influence UK heating bills.

Swiss trader Axpo stockpiled gas in Ukraine before the war and is now closely monitoring the market, considering whether to start sending supplies there again.

Marco Saalfrank from Axpo says: “The return has to cover the risk you’re taking. If you have a very small return and the risks are big, it doesn’t make sense to go for this kind of business.

“We are [looking at] this risk-return and based on that we will decide if it makes sense or not.”

When the spread – meaning the difference between what gas costs now and what it can be sold for in winter – is large enough, they will likely go in, he says.

For commercial reasons, Saalfrank won’t disclose where that threshold is.

The European Commission has been working with Naftogaz for months on exploring how to remove barriers to storing gas there. Some are financial: it is working with lenders to provide some sort of state guarantee to energy firms to help lessen the risks posed by storing gas in Ukraine.

The difficulty of insuring against such risks means the companies that have already sent gas to Ukraine are willing to gamble and deem the potential returns to outweigh the risk.

Chernyshov says: “Starting especially in July, we felt a higher natural demand from the major traders to store gas in Ukraine, taking the business risk by themselves. It’s a good market-driven situation when the market is quite hot and the traders are willing to take those risks.”

Wednesday’s sudden jump in gas prices could dampen the interest in Ukraine as a storage hub for now, analysts say, but soon there will not be any capacity left in Europe so it’s likely to remain an attractive option.

For war-torn Ukraine, holding gas for European companies provides a growing stream of income. It will also feel reassured by the fact that the EU has a stake in protecting Ukrainian gas infrastructure.

Flows to Ukraine will likely keep growing, even as troops battle on the front line hundreds of miles away.

Pawgee

I think there is a huge amount of ore still to be confirmed at SC. The recently discovered wide formation for starters. I think it is likely CUSN have other gems dotted around their mineral rights area as well. With top quality management and backers with deep pockets, this company looks set for a good run to me. Much depends on the tin price. With little investment over recent years and other projects taking a long time to come through, CUSN with much infrastructure in place at SC is well placed to be ahead of the game. Great news for Cornwall and the UK.

Have you any thoughts about the challenges which may arise in the short term over de-watering?

Pawgee

Interesting thought. Clearly there is a growing need for a lot of plant and much capital to finance it. And that is coming ever closer as time goes by. Investor logic, -reducing costs - would argue to minimise those expenditures by sharing plant or using it in different time periods. Processing in one place would require transport from other places. Rail and road connections would become key.

One wonders if the same could be said for management - Often skills are hard to come by and in early stages are needed for only for a few years for each mine - better to be able to spread the skills out over several mines over a longer time period.

It will be the investors with the deepest pockets that will probably decide what happens. They will finance the takeovers or the expenditures.

There are a number of billionaires around, big listed cash rich mining companies and funds such as VBR which have recently raised hundreds of millions, so it looks very plausible. And now the UKIB has entered the scene and may push an agenda from HMG.

For the Lithium boys much depends on whether the Lepidico process is more cost effective than BL's in-house method, and for tin, whether TUN plant can process SC output and if transport could be sorted out. (Rail? ) If so, I think VBR might take a look at TUN with their holding in CUSN's in mind.

Smelting will be the next thing to consider. Enter HMG. No sense in building resilience in production if smelting takes place in China. But is it an attractive profitable proposition? Plymouth has a gas main connection, train connection and tax free zone.perhaps it needs a Rolls Royce SMR as well Hmmmn.

Https://www.telegraph.co.uk/business/2023/08/09/china-goes-for-the-jugular-on-strategic-minerals/

From the Telegraph a few minutes ago.

"European gas prices have made their largest jump in a single day in five months amid the threat of strikes in Australia.

The benchmark contract for liquified natural gas in the continent has surged by 22pc today, marking its biggest jump since March.

The leap to more than $38 per megawatt hour puts European gas prices at their highest level since the end of June. Prices stood at less than €29 on Monday.

It comes as workers at Chevron and Woodside Energy Group facilities in Australia have voted to strike, potentially increasing global competition if the industrial action impacts exports.

Nick Campbell, a director at consultant Inspired, said Asian buyers “are likely to bid up LNG imports” to replace Australian exports if there are disruptions, which will affect Europe as well.

Europe has increased its reliance on liquified natural gas imports as it reduces its reliance on Russian gas in response to its invasion of Ukraine.

Mr Campbell said: “LNG has become a baseload supply in the European gas supply mix, therefore any signs that this flow is at risk leads to support in price.”

Gas prices were already coming under pressure amid longer-than-expected maintenance works at sites in Norway, the biggest exporter in Europe."

Earlier, the boss of Germany energy giant E.On warned of the potential for price rises this winter.

Good afternoon lovelyboy

I think it was the knowledgeable Cornish Knocker who wrote that he was going to join CUSN or Cornish Metals. Southwesterner may have joined them too, but my guess is he is a well informed Lithium man. I wish they both could post.

A second major UK supply of lithium roars into sight. First British Lithium with Imerys, now Cornish Lithium backed by the UKIB, EMG and Techmet. JLR may be able to source from the UK for its gigafactory. .....

Hi MO

Your exchanges with SW'er are now even more revealing. Thanks again.

It is worth revisiting the post of Southwesterner of 9 Jan 2022 15:45. See in the thread below.

One can understand now, from his final paragraph the value that UKIB, EMG and Techmet are seeking to release.

It is a shame Southwesterner stopped posting on this board.

Hi Nubi

I think that was the number after the Jan 2022 issue. I guess there would have been another issue in Jan 2023 of around 500,000 shares leaving the total at around 7.2m held. The CUSN accounts note 8, give some details about the issue (but not the number of shares):-

"During the year ended January 31, 2023, the Company (CUSN) recorded a recovery against exploration and evaluation assets of $137,062 (2022 - $129,252) for the fair value of the CLL (Cornish Lithium ltd) shares received."

So CUSN received another Canadian $100,000, in shares, which were valued at C$ 137,062 .

I think that tomorrow we may find the value of those CLL shares has gone up considerably as finance now appears to be in place (or agreed with conditions perhaps) to take the company to production.

The next step may be an IPO.

OP 17.37 "Or offer these generous terms, on what is in effect a short term convertible at extremely high interest and with an extremely low conversion price, to shareholders,"

You have hit the nail on the head. This should be offered to shareholders. If we give up pre-emption rights, we get the sort of treatment we are experiencing.

Perhaps more to come in rare earths?

See

https://cornishlithium.com/company-announcements/landmark-us67-million-investment-for-cornish-lithium/

Pawgee

As referenced today at 10.59 "RE: Cornish Metals / Cornish Lithium"

p34 of the presentation states:-

"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."

I think it is likely that the 10% interest on subsequent projects also refers only to those within CUSN mineral rights area rather than those outside - for example on Lord Falmouth's mineral rights areas.

Perhaps the listing document will clarify definitively............

Cornish Lithium exploration and option deed On 18 January 2017, the Company, CML UK, CML and Cornish Lithium entered into a deed granting exploration rights (“Exploration Rights”)to Cornish Lithium, in respect of lithium contained in hot springbrines and associated geothermal energy (the “Licensed Minerals”) on all areas of mineral rights that CML owns in Devon and Cornwall as at 18 January 2017, subject to adjustment under the terms of the deed (the “Land Area”). The deed also grants options to Cornish Lithium to take mining leases for the extraction and commercial exploitation of the Licensed Minerals in the Land Area. This option may be exercised at any time during the “Exploration Period”, which ends on the “Expiry Date”. The Expiry Date is any date upon which Cornish Lithium fails to pay in full any Exploration Fees (as set out below) which are due and payable upon such date. The Exploration Fees are: (a)an initial issue of ordinary shares of Cornish Lithium to CML UK having a value of US$50,000 (“Consideration Shares”). This issue has taken place; (b)Cornish Lithium may extend the Exploration Rights on an annual basis for a further period of up to four years until 18 January 2022, subject to the issue on each anniversary of Consideration Shares to CML UK having a value of US$50,000. CML UK’s holding shall nevertheless be restricted to 10 per cent. of the fully diluted share capital of Cornish Lithium, unless there is a subsequent financing which dilutes CML UK’s holding in which case its holding shall be topped up, but only up to 10 per cent. of the fully diluted share capital. After 18 January 2022, this 10 per cent. restriction falls away. The Exploration Rights were extended for a further year at a time, with effect from 18 January 2018, 260

18 January 2019, 18 January 2020 and 18 January 2021 with the issue to CML UK of 18,655 ordinary shares of £0.0001 each, of 11,658 ordinary shares of £0.0001 each, (following a 100 new shares for each existing share sub-division by Cornish Lithium on 25 September 2019) of 714,592 ordinary shares of £0.000001 each and 413,946 ordinary shares of £0.000001 each, respectively; (c)Cornish Lithium may extend the Exploration Rights on an annual basis for a further period of up to five years (up to but excluding 18 Janu

...Cornish Lithium, to the issue of Consideration Shares having a value of US$100,000, or to the payment of US$100,000 in cash, from 18 January 2022 and on each subsequent anniversary until 18 January 2026; (d)notwithstanding the above, if, on 18 January 2022, Cornish Lithium has not completed or is not actively working towards the completion of a bankable feasibility study on any of the Mineral Rights, CML UK may prior to 18 January 2023 restrict the Exploration Rights to up to 50 per cent. of the Land Area (with Cornish Lithium deciding the locations to be excluded), but this does not affect the amount of Exploration Fees payable; (e)Cornish Lithium may extend the Exploration Rights on an annual basis for a further period of up to five years from 18 January 2027 (up to but excluding 18 January 2032) on the issue of Consideration Shares having a value of US$500,000 or the payment of US$500,000 in cash, on each anniversary, but as regards any such issue or payment, Cornish Lithium shall receive royalties otherwise due to CML UK or CML up to US$250,000 per year of extension; (f)if the Exploration Rights are extended pursuant to the above provision and a bankable feasibility study is delivered by 18 January 2032, then the Exploration Rights may be extended indefinitely on an annual basis on the issue of Consideration Shares having a value of US$1,000,000 or the payment of US$1,000,000 in cash, on each anniversary, but as regards any such issue or payment, Cornish Lithium shall receive royalties otherwise due to CML UK or CML up to US$500,000 per year of extension. CML will have a free carried interest of 25 per cent. in the first project to have a bankable feasibility study completed on it and a 10 per cent. free carried interest in each subsequent project that has a bankable feasibility study completed on it (the carries ceasing after the completion of the bankable feasibility studies). CML will have a 2 per cent. gross revenue royalty, payable from any production of metals from brines and a 2 per cent. gross revenue royalty payable from any geothermal energy produced and sold to the national grid or other system.

Quite a lot more on the CUSN board.

Lot of excitement on the CUSN board today re Cornish Lithium's announcement. If you take a look it might provide some cheer.

Lovelyboy

Agreed. It will be interesting to see if the UKIB gets involved. But take a look at :-

https://www.ukib.org.uk/where-we-invest

Particularly Investment principle 2. I think that makes it easier for them to finance CL than TUN.