focusIR May 2024 Investor Webinar: Blue Whale, Kavango, Taseko Mines & CQS Natural Resources. Catch up with the webinar here.
Mike that's relatively straightforward. Ignore for a minute that any additional debt reduces npv just to keep the calc simple and assume par value is 160p for x shares not fully built and 160p/4 for 4x shares not fuly bult 40p. Double that at production. So if you think current shareholder structure and 20p issue worst case and it isn't going to be 100% equity 8p is a screaming buy, obviously.
Maybe reduce those numbers slightly if $100m+ additional debt to carry but then we might also get equity on better terms.....
Sorry 1.2bn shares in total including convertibles.....
Theorist I'm thinking something similar and maybe 3:1 is 'worst case' if they can't raise above 20p. If you assume 310m shares including the convertibles (ignore options now, they might never be in the money except the cheeky one which converted in September and sold before the news landed, hmmm) it would end up with 1.2m share give or take so perhaps 60p-80p reasonable value at production on 80% NPV for line 1 only. I could live with it.
Sadly, I couldn't take up the offer and I'm guessing many LTH might be in the same position - 800k shares x 3 would be 2.4m new shares at 0.2p is £480k and literally no way I can magic up that number. So whatever equity deal they propose they will have to accept many won't be able to take it up and they might have to offer it to wider martket unless they want the cornerstones to end up with disprportionate number of shares through the raise.
Theorist and Trex thanks for your posts really helpful. I've come to similar conclusions:
- cornerstones don't want administration
- 20p seems a sensible (minimum) raise price and hopefully they would like it higher and
- definitely some debt in the mix so it isn't all equity which obviously needs the banks to be aligned and happy
Nobody wins from administration - nobody.
So the million dollar questions we can't answer at the moment:
- how much is required
- what the structure of the deal will be
We're not going into administration in December, of that I am as close to 100% certain as it is possible to be. GLA
Strow - it is definitely an interesting development with respect to the longer view. The challenge I think will be - has the capex of all projects gone up so much that these mines are just less attractive to build, or did something specific go wrong with this project which led to the overrun? The reason I say that is because the Vermelho DFS was already a big number and it looks like for the A1 DFS we are going to end up with 2-2.5x DFS capex in the end. Just using the same multiplier will mean an awful lot of money to raise to develop Vermelho and it isn't going to be from cashflow from Araguaia especially if there is more debt to pay down as a result of the refinance.
So whilst I am moderately hopeful that having La Mancha+Glen in the driving seat will push the projects along at perhaps greater speed than they would have done with Horizonte management it doesn't make the capex any easier to fund, if it has risen significantly since DFS. GLA
Here's the rub. Their mine:
"Battery grade nickel sulphide and copper
mined in Brazil with leading carbon
footprint and ESG characteristics
utilising hydropower"
Our mine:
"an open pit nickel laterite mining operation that delivers ore from a number of pits to a central rotary kiln electric furnace (RKEF) metallurgical processing facility"
nickel sulphide != nickel laterite w. RKEF. Specifically you aren't going to extract the iron from the product to produce battery grade nickel from Araguaia 1, at least, not in any meaningfully commercial way.....
Hi Walster - the info on the boards is useful and interesting, thanks.
Not saying it can't go into administration but it definitely won't be re-born as a battery plant - with $400m+ sunk into a project which is 65% complete which is targeting 100% (in the first phase) ferronickel output at around 30% nickel content, it would seem impossible to me that they completely change the flowsheet now.
In the future, Araguaia line 2, nickel matte, Vermelho HPAL / nickel matte yes perhaps, but for now, Araguaia 1 IMO will remain 100% ferronickel for the stainless steel industry.
Yes they've got big hitters/financiers onboard. Lets hope they can earn their bread in a way which can keep a few crumbs thrown to us gamblers ;) GLA
RNS 29 Dec 2021 confirms the SCSP fund has the holdings:
La Mancha Fund SCSp
19.9%
0
19.9%
La Mancha Capital
Management GP S.à r.l.
19.9%
0
19.9%
Interesting from that press release 2021.07.23 from La Mancha the 'For Further Information contact:'
La Mancha
Karim Nasr, +44 (0)20 3053 4292
karim.nasr@lamancha.com
Name rings a bell......
Https://lamancharesourcecapital.com/portfolio/
5 current holdings, all public.
Last private holding exited 2015.
Hi Strow, maybe it is possible to contact them to confirm, I tried to look and couldn't find public information (admittedly didn't try particularly hard). Just odd to me that they exited all 3 private investments ever, in 2015, and all the 'current' investments are public and listed on the various exchanges. I have a best guess they can't hold private cos (liquidity or the terms of the fund) in the fund - in which case all the talk of this going private (unless it is Glencore that buy it from La Mancha/Orion) isn't going to happen.
What that means is if they want to keep it public and keep liquidity (see the collapse of their other deal I put on that post where they wanted buy in but wanted liquidity for $300m third party/market investment) then they can't own a significant portion of the company and/or allow it to be 'pseudo-private' owned by 2-3 institutions (so 30% glen/30% la mancha/30% orion with none able to buy, and none selling shares, might not work for them because 'float' is too low?). That's why I think they might seek some buy in from other investors and is possibly why the main man is heading up this phase of the deal making but the challenge remains how to raise equity from a £25m mcap base. The other problem is if they DO invite third parties to the table to fund they have to protect the shares they bought at 90p and 140p to an extent.
That's why I think it's a rock and a hard place - of course there's no guarantee but I think if they can get finance away in some shape or form it won't be at the 9p equity level. Just my opinion.
La Mancha aren't in a great place right now - they have to protect their investment by getting the mine built (they lose their investment pretty much if they don't) and ditto Orion. The sum required must be large otherwise this whole debarcle would have taken 2 weeks, not 2 quarters. The low nickel price isn't helping because to attract other third party investment, and also to reneg your loans with the banks, you want it to be strong for everyone to be confident that a particular cashflow model will meet interest payments and so forth.
So La Mancha aren't liking the situation but they have put the big man in to sort it out. I'm increasingly of the opinion that they will want the equity price to be higher, it is counterintuitive because you would expect that if they are putting up a lions share of the finance they want it low but in this particular case, I don't think the latter is the case. Unless a party wants to make an offer (maybe Glencore in that position) it actually suits them all better to do some as debt and some as equity at a higher price and possibly invite other institutions to the table or also do a market placing. But all of that is very difficult from £25m mcap which is why I think they will try to get the mcap up before they do the finance deal.
Just my thoughts and I could be 100% wrong. In terms of why the above might also take some time - they will want to be as close to certain on the new figure as they can be - any error now could be catastrophic for the project. So it is almost better to do more analysis now and raise the right amount than get it wrong again when more money has been poured in. That said, total cost goes up with every day it isn't being built so there is a balancing act here between certainty and cost. I'm pretty sure they're working on it round the clock right now. GLA
Also for the 'they want it for themselves they want it private out of administration', why, when they had the opportunity to tale the below deal private, did Glen and La Mancha want $300m raised on open market? Would have been just as easy to take it private no?:
https://www.africabusinessplus.com/en/817045/la-mancha-fund-founder-naguib-sawiris-interested-in-appians-nickel-assets-despite-acg-takeover-failure/
"but it depended on raising $300 million in equity on the markets."
If Glencore want to own 100% of horizonte, they do have their chance now, but this will have to go down with La Mancha's approval through normal route of bid and thry won't get it for cents. Much more likely imo is they find a way to satisfy both with Glen getting what they want on the product side and la mancha prootecting their equity investment. All imho and gla.
Hi strow not sure the connection (I was invested in pere for a while which owned part of minto though - maybe you are saying one of our ex non execs is domiciled up that way) but I definitely agree that the two appointments (la mancha and ex glen) are signs they want to protect their existing investments not squander/abandon it. Until we have more info the doom mongers of which there are many will simply prey on fear. The funny thing is unless they are short they are doing it for amusement value only which I find bizarre. No money to be made from amusing yourself, usually. As I said I think la mancha will want to find a solution as will orion as will glen.
As a parting thought, lets take a peek at la mancha's holdings in the fund:
https://lamancharesourcecapital.com/portfolio/
Hey presto! They only have listed holdings, having exited the private holdings some time ago. Why is that relevant? Anybody paused to consider that their fund can't hold private companies in its assets? Just saying... now that would cause the 'going private/into liquidation/doing a deal with glencore/ this time next week pi's holdings are going to 0' brigade some confusion perhaps? Gla
But ferronickel won't trade at $12k/t over lom, if at all. All the financiers (which include one of the largest western miners/traders of nickel) know this otherwise they wouldn't have put up the $700m to date, John987 member since 11nov with 6 posts, wouldn't ypu say. As for the green boxes must be a slow night in the publican, can't see what it's referring to. Must invent a new persona - it'll be hard to spot though. Gla
Oh the mcap.will be in the hundreds of millions when finance is agreed because the npv is in the hundreds of millions if not billions. The question is not what will the mcap be but by how many shares do you divide it to find the shareprice. Billion shares is ok imo and maybe more is ok too.
I have no concerns (lonh term) on nickel.price. on price it may be a turn of good fortune that we are delayed production until it is higher (2025?) The energy transition is real and it is going to happen only question is how slowly/quickly. Nickel is a key part of it. We are always going to be way cheaper and cleaner on input cost (hydro v indonesian coal powered nickel) than much of the competition.
People are hung up on the current market cap but it is arbitrary because it is priced to fail. As soon as it is obvious it wont be allowed to go under the market cap will change. I think the biggedt thing people are getting wrong is thqt it in any way reflects the value of the company. If it is going to get wiped out the value will be 0p anyway but if it doesn't it will be a lot higher.
That said 3:1 would be ok. I make a 4-5p divi possible in that scenario so if you were buying now you would be buying 50% yield. Cheap, and at some point 'the market' will get it. I'm starting to think we will get better than 3:1 because I think other parties will be invited to equity and the incumbents won't want their existing shareholdings diluted too much.
Oh btw tuan, I made all my money (real money, £) buying when other selling. Assuming the market is rational is a big mistake investors make. Thr matket is irrational, this is generally well understood and it is pitrrally how you make money. I think the market is mispricing horizonte at 9p. Gla
When they had to raise $80m it wasn't available to all holders and so it won't to raise $250m or whatever the number is. They will have to get creative on the deal (hint, ex ceo of la mancha is now ceo here - not the guy you bring in to mothball a project but the guy to find a creative solution to a hard problem).
3 institutions own 15% of the co and the big 3 hold 51%. Thr banks don't want a haircut. The mine is viable at most resonable nickel prices and the long term nickel price will be up, not down. Two of the investors but especially Orion score a bit with dilution on their existing CLN. Other than that they mainly lose.
Here's what I think will happen:
- first rns makes it clear we go to q1. No administration in december.
- pieces of the funding jigsaw are released that make it clear funding WILL happen. This will move the sp north fast, back to where the big players want it to get finance done and preserve some of their previous investment. Q1 sometime. Glencore can go first with a deal on the ptoduct side.
- to keep the share liquid other investors (institutions) will be invited into finance at a price Mancha and Orion can live with.
Other outcomes are possible (eg Glencore bid for thr lot, possibly administration) but the above is what I think will happen.
You don't bring the guy with $68bn in closed deals onboard to not close a $300m finance deal. And tuan thanks but I don't need to borrow money, I'm a proper grownup with my oen bank account and everything, have my own cash, and thanks I did. 800,000 sh now, how many you buying (or selling)?. It's going to be £1 by next christmas if billyv has anything to do with it ;) and we'll all be eating lobsterman for breaakfast and drinking caviar. gla - this time last year Rodders we were millionaires (literally).
If we're shafted so are azvalor, condire, helikon (15% between them) who haven't sold shares. If la manch and orion dilute they dilute their 140p shares. There will be no high 5s after the deal for anyone but it will be done on terms that don't completely shaft pi's.
In the meantime I do like lobster but probably won't be able to afford it if the deal isn't a good one.
Crypto - we're all really impressed but if you had followed the stock a long time (which you haven't) you would know that even djryan doesn't get out of bed for a 100k on this one. But nonetheless impressive, well done you and I hope your bull run continues.
Meanwhile what people who actually hold the share (which doesn't include in its number tuan8 or hheader and so forth) are wondering is, whst happens next.
Shorting the stock for £1k/1p at 10p yiels £10k if it goes to £0. It loses £140k if it goes to £1.50. Long on the stock a £1k/1p wins £140k if it goes to £150p and loses £10k if it goes to 0p. Now I'm not a gambler (else I would be invested here) - but if I were, I wpuld have to think about that one carefully. Gla.