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I am talking from first hand experience on production assets in Russia. The information we get is as i mentioned in my post and as a company we have adjusted to this environment by re-domiciliation.
I have no benefit nor need to scaremonger. I invested £100k in this and losing big time, so i would love to see EUA do well.
Just wanted to share info on the significant restrictions faced by EUA in selling its Russian assets
1. UK is one of many countries considered as hostile by Russia
2. For sale of Russian assets by an entity from a hostile country, special permission must be obtained from relevant Russian ministry
3. The permission would require the sale to be at 50% of the assessed market value of the assets and then from that 10% has to go as a donation to the Russian budget
4. No person holding a passport from UK/EU/EEA could sign off a resolution authorising sale of the Russian subsidiary if attached to that are warranties or other security requirements. This would be contrary to sanctions in force
Unless EUA can somehow get an exemption from the Russian rules, then sale s just not feasible. Maybe company needs to be re-domicilied to a jurisdiction that is total neutral, not hostile for Russia and not sanctioned by the West. Qatar or Abhu Dhabi come to mind. Alternatively EUA has to construct and mine itself with key partners
Then reality is that if the Russians want to nationlalise this then not much can be done under any structure. Key therefore is that management and key shareholders are ok with Russian leadership.
My thoughts on this one remain that it is an enticing longer term investment story
Near term there is ARG1 for which the financing has been raised and capital increases done. ARG 1 is the driver for HZM to grow as an independent mining company. The share price will re-rate where we come to succesfull production ramp and cash flow generation which we will know in 12 months time, but if one wates until then probably you have to pay say 50% more for shares.
Then medium term we add ARG2 on top and that is with much lower capex / funding as it is an add on line with some key equipment already secured. This will really start to drive the cash flow and value creation. Who knows about ARG3 thereafter
We also then have the separate resource VM. With the forecast Nickel demand from EV, my thinking is that the 42k tonne larger project as per the Vale work will end up being the one done. That is to much for HMZ to swallow so they sell 49% of the resource to a mining major and develop VM together on fast track, with the sales proceeds financing the majority of HZM funding cost share.
The above path will lead to huge value creation, multiples from where we are today. They key is succesfull start and ramp up on ARG1 to prove that HZM can mine profitably
I am also very enthusiastic on the prospects of HZM. Although I could not participate in the capital raising's, I used the opportunity to more than double my holding at prices well below £1. More than start of phase 1 ARG, I am looking forward to phase 2 ARG which significantly increases annual production but at a fraction of the cost. More so, some key equipment is already purchased and funded
I do believe that the SP will follow that of ASX listed Nickel Industries as the production across the various phases builds up. There can be a re-rating in multiples over the next years for those that take a long term view, like the institutional investors have done.
That position definitely respected, many will not touch a mining share while there is no mining license.
I have risk for higher long term return. In my case i see that MDA is coming and that financing will follow. This may not be what actually happens
I have topped up with another 100,000 shares.
Short term this placing has dragged down the share price but I see many positives from this;
1. Funding needed to pay for mining licence/surface rights. The implication is that the MDA is coming up
2. Funding to get Hypromag German plant moving ahead, linked with increasing share in Hypromag Germany to 66%. Very positive for the long term
I see it very unlikely that the company will not get the financing package for development of the Songwe mine. There is a huge focus in the West to become independent of China of RE materials, enough that I can see government guarantees to Lenders.
If there is something interesting in the Rutile deposits, probably sale of the resource to Soverign (or license out) would be the best way to obtain any value from this.
Fulmar/Picked, totally agree with your assessments and m aware about the very large additional highly prospective exploration areas. I was looking for market cap £1.5-£2 billion in 3 years, but it could be a further multiple of that if there is significant production expansion. I am always comparing back to Equinox Copper in Zambia that was finally acquired by Barrick for A$7 billion.
If I may ask, what are your targets on HZM, long term hold to realise all these future potential benefits?
MKA is so undervalued, under the radar that it is a screaming long term buy. There have been some important developments at the start of 2023 (Songwe environmental approval, CoTec investment and Malawi professionally progressing MDA regime) but there is allot more to come.
Putting aside the rear earth mining in Malawi there is a huge potential licencing business for the magnetic material recycling. The company will have a number of its own plants but I can also see the model expanding rapidly into licecing of 3rd party production in Europe and the US. This will mean little capital requirement and a stead/growing revenue stream from licencing.
I have now invested about £150k in this (across both UK and Canada listings). I am looking at minimum holding period of 3 years, so one for the long term. If anything I actually hope share price does nothing for a few more months so that I can slowly accumulate more.
There is no Nickel producer with the potential scale of HZM, that has a market cap below £1.5-£2bn. Nickel Industries is one of the very few comparable to HZM and that is trading at around A$3bn. With VMH I personally feel HZM is better but that is a moot point, although we should keep in mind that VMH was started as VALE flagship Nickel project so there is a huge quality resource there and future expansion possibility from current reduced scale development.
If all goes to plan (and here is the risk) then HZM could be trading at a 4-5x multiple of today's SP in 3 years. For me the risk is well worth the reward and I am now holding 240,000 UK listed shares. The day to day price movements dont concern me at all as I am here for the longer term.
Yes there are still many risks, but I am beginning to feel that MKA is a grossly undervalued and represents a rare opportunity to get into a strategic mining / recycling share that may re-rate multiple times over the next years
Absolutely there will be dilution along the way but that new equity is what will get this going. Maybe not an interesting one for short term traders, but personally that is not something that I get involved in.
I am here for the next 3 years for sure, after that will see. That is if we re not bought out before that
I am involved in Russia for my employer, who has not been able to sell out. Now decisions have been taken to provide subsidised loans in Rubles to promote export projects and critical investments. The effective loan interest is cut by more than half.
Possibly any interested party to acquire EUA assets has been waiting for this as it will make a huge difference to the return on investment.
I picked up another 50,000 shares this morning
Have not posted for a while.
I am not expecting an asset sale any time soon. M&A activity in Russia is on ice and any deals happening at very low valuations as the vultures circle to pick up good assets for nothing.
I am at 80% loss so for me not much else to do than sit on the shares and see what develops. Company can maximise cash flow from WK and consider mining the resources itself vs waiting for a change in the political/economic situation that may make sale viable again.
In my full time job, I have had to deal with my employers production plants in Russia. Sale at a decent price is just not there so the plants need to be operated, expanded and run for cash generation. Same considerations for EUA
I picked up 300,000 shares today and yes was the one lifting the price to 15p to get them. This adds to the 450,000 Canadian shares I hold.
The are big risks here but if we get ML, CoTec transaction goes ahead, we get news on recycling development in the US then there is huge upside, which will then make a needed equity raise less dilutive.
Personally I am here for minimum 2-3 years and looking for a multiple on the price paid for the shares today.
I fully agree, financing is not an issue for long term investors.
The key is the ML followed by info on the Pulawy FS (and importantly the NPV). If all good then financing will come, the West is desperate for near tern Rear Earths. Yes there will be equity need and dilution but that is the case in any new mining development, with the big gains to come longer term.
The investment in Hypromag gives another near term exposure to Rear Earths and recycling is being commented on everywhere as the next huge thing.
Therefore for me, ML is the critical thing. Then after that I don't care what share price will be next 12-24 months, after that we are looking at a significant multiple on todays price.
I feel that there is very significant long term value in HZM and we have a company that may reach a market value anywhere between 5x-8x of what we see currently. The key is long term as this will not happen overnight
Line 1 AR is funded through to completion and for mining we now have a relatively near term timeline to production and cash flow.
Line 2 AR I believe the company has already acqiured second hand equipment at a fraction of the cost of new similar equipment, from a now now operational nickel mine in Brazil. There is therefore no lead time on this equipment suply and costs for line 2 should be well under control
As the share price rises driven by the above two factors, I get less concerned about heavy dilutions, but yes we will have capital raisings so this is part of the mix
Then we have VM, where we do not have anything reflected in the current market value. The resource is well known as Vale did the work already for a very large scale operation. What we await is the DFS for the level at which HZM are able to finance and operate. This battery grade nickel is in huge demand and we can see huge deals around VM
I am here for a long time and can see similarities in HZM and equinox copper (copper mining junior in Zambia) which was finally acquired for A$7 billion
Unfortunately with the war/sanctions EUA no longer has a rational market valuation. What we have is fear and fear that this gets nationalised, can never be funded or will never be able to sell its products into the market.
The (EU) company I work for has invested billions into Russia/Belarus production facilities and we have been reassured that nationalisation of business assets is not on the agenda. For sure nothing can be funded right now so EUA is a hole in the Ground.
I did not get out so now it makes no sense to get out. Things can change very quickly in this game, for better or worse. If things in some way normalise, then EUA will have a value again, possibly higher with Nickel and PGM supply having been reduced over the effected period.
I said it some time ago and I will say it again now, Russia will not invade Ukraine and there will be no apocalyptic NATO-Russia confrontation. Yes Russia is mad that NATO keeps on growing in East Europe and for Ukraine, an ex soviet state, to fall under NATO is extremely hard to swallow and the West knows this also. What was impossible to swallow was that an ex Russian area , Crimea, which was ceded to Ukraine on establishment of the Soviet Union would end up in NATO hands and Russia was allowed to take that back to cool things off.
NATO - Russia are as always engaged in a war of words, showcasing military might and so on but neither wants a war and the dire economic consequences that will hit all. There is no elephant and mouse here, both sides will lose badly.
There will be no war, just like there was now war at the time of the Cuban missile crisis
Keep focused on EUA resources and deal making. This is the only important matter, the rest is just noise and big market players making use of it.
I would expect the licences are tied in to environmental matters, state production royalties and so on. I am not an expert on mining licences but believe that the entity doing the mining / extraction would be the one holding the licences. Having said that, there is the possibility that on the PGM sale scenario for example, that EUA retains an x% annual royalty stream as part of the deal.