Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
Tuan you've just arrived and all your posts are negative. Are you short? Looking to buy? Or just here to 'advise'? Just wondering (who you work for - but I could be wrong). Most retail investors are out with big losses already, maybe smart money is buying their shares right now or not. There are of course many entities which wouldn't want a company like Horizonte to succeed - as it could produce nickel at lower price than say Indonesia.....
The main/only protection I see for PIs which another poster has commented on today but I also assumed very early in this process was Orion and La Mancha because they will hopefully not just agree to anything and will keep it orderly. They put in $200-250m, lets assume $65m of that the convertible bonds get paid out in full leaves $135-185m (I forget the precise numbers and some was for Vermelho/royalty etc). Right now they own 33% of the company between them.
Using a mid figure of $150m as a guide for 33% of the company, at 30% of their investment a buyer would be paying $135m in total for the equity - £110m gbp (assume 1.2x fx) and around 42p a share.
So the question is, will a third party or Glencore take on all the debt, the completion to build cost, pay up the convertible bond, and stump up $135m for the total equity (of course, for Gelencore the total equity payment is less as they already own 17%).
We will see. I'd be happier the higher the price and I'd be pretty down about 0p.
Sadly I disagree with those thinking it goes forward in current form - I do think the opportunity to do that was to get the finance deal done which clearly hasn't happened (probably because the sum required is large). Downing tools and re-start will be a huge cost and will have to be borne by however this goes forward from there.
I think the best chance now is an orderly sale, to somebody (Glencore? other bidders?) at numbers Orion and La Mancha are happy with. Hopefully not administration. Right now I'd be over the moon with 50p and I'd take anything reasonably 25p+. Whether Orion/La Mancha would take that is a question but what are their options if they aren't capable or willing to stump up the whatever hundreds of millions of $ required.
For me this became a sale outcome when the contractors downed tools I think people hoping for a continuation of build/eventual dividends etc are likely to be wrong. But I'm happy to be wrong also as I have been on many previous occasions! Something like 35p might represent c. 30% of La Mancha and Orion's blended average and maybe they are prepared to suffer 70% loss (I'm not sure what the situation is in that scenario with the convertible bond maybe they get paid out ahead of the equity).
It's a sad outcome but I'm resigned to it. Especially when the alternative is 0p. None of the above is a recommendation to either buy, or sell, this is a very individual decision but I'll hold for outcome.
And in the second fundraise:
participating in the Fundraise via the Placing agreeing to conditionally purchase 24,340,744 Placing Shares (the "La Mancha Participation")
That cost them ~£22m (current value at 8p ~£2m).
Good money after bad it turns out? But they're pros.
From the main fund raise (I have annotated the current value):
· 533,845,825 new Ordinary Shares pursuant to the Orion Subscription, raising gross proceeds of approximately £37.4 million (approximately US$50 million) (current value £2.1m @ 8p)
· 759,128,764 new Ordinary Shares pursuant to the La Mancha Subscription, raising gross proceeds of approximately £53.2 million (approximately US$71 million) (current value £3M @8p)
So I might have been a sucker and lost money but they were bigger suckers and lost more money. And they're pros.
Which means people not invested here are here to gloat. Human nature you see, I see it all the time in all walks of life. Enjoy your champagne/f types gemtlemen! You indeed are the wise ones among us and may you take solace in that.
Rover I do think the solutions got more difficult after the first rns and no suspension. The sp went to 20p which is already a difficult point to finance from with equity. Whether the sp is 10p or 20p now imo only and I may be wrong is completely irrelevant to the financing. Its the cost of the overrun (we don't know yet) and what that does to npv/irr that are key and factor into that calculation prevailing Ni price and outlook etc. The financiers at first look had a look and drew a deep breath (at best, as they did bother to go to Brazil) and said we need to think about it some more. I guess that means it isn't a straight no as we'd be already up for sale at thos point.
I don't think the company goes down in December I think we will go through to q1 24. But what happens then is hard to predict. A sale is not unlikely in this scenario but right now what is hard to predict is in a sale exactly how much (if any) equity gets. Yes ****show sums it up well because the contrast to the corp video dated 28 sept couldn't be more startling.
ElectricLion your argument is very valid, and only the people who either 'knew' another $200-250-as yet undisclosed (m) would be required to complete the build would be in a position to make that assessment. What we know is Orion and La Mancha paid, duly, hundreds of millions of dollars for their shares at £1.40 so if the price was wrong they got that decision spectacularly wrong. And they're pros who apparently do a lot of DD, and site visits, and sit with the management team for hours on end before releasing the funds....
For me it keeps coming back to - Orion and La Mancha. Because:
Banks - I understand. Anyone who will pay up the loan they will talk to. So a min sale value $300m - that's not much, when more has been spent.
Glencore - I understand. It might cost them $$$ to finish this project but they can hire people to do that and for them the purchase/sale value isn't a lot. If they are the predator many think they are, their strategy would be obvious at this stage.
Orion and La Mancha I don't understand. Between them, including the convertible bonds (which I assume rank behind the senior debt), they held/hold OVER 50% of the equity here. They would be happy for that to go to 0? Or, they just don't have enough between them to finance the rest (and banks/Glencore aren't playing ball, for different reasons?)
I keep coming around to - if I've lost it all, Orion and La Mancha have lost $250m and I just don't see that outcome, so I still think some kind of financing deal where they do 'ok' (even if, I don't.....)
But if it were easy, we'd already have a financing deal in place......
...who bought their shares at the 2p and
No not the shares, the asset. Hindsight trading is a wonderful thing, but today we're at £25m mcap after 20:1 consolidation. Pre-finance we had £50m mcap. If we'd only invited bids at that point and not attempted to get finance deal (which was obviously hugely dilutive) lets say a 50% premium on 8p we could have had 12p (£2.40 in todays money).
Moral of the story is junior miners who haven't walked the walk before shouldn't attempt $500m mcap projects. Anyone got any counterexamples where this did work out (with this kind of capex)?
Funny thing is, I think we might have grumbled a bit back in the day 'lowball offer of 12p' etc.etc. but quietly we would all have taken the small win (bigger for those who bought their shares
I read into it that they were pretty confident a financing solution could be found WITHOUT suspending operational progress because they carried on full steam with build till now. If they had suspected finance terms were not forthcoming then as CaptainSwag suggested should have suspended operationally much sooner to preserve cash longer and be in a better bargaining position as Ni price improved (if that's what required) or everyone had done their DD and the number was known (if that was required).
Makes me wonder if:
a. the price of the overrun has gone up (hence they couldn't agree a deal in 6 weeks) or
b. just not so palatable to senior stakeholders right now with Ni price dropping 'wait and see' or
c. just too many parties at the table to get consensus. FWIW Glen as others have pointed out could probably fund the capex from loose change, they pay out $bns (multiple) in divis each year.
Who knows. I'm resigned to losing a lot of my lot, perhaps all, and will hold come what may not really worth selling up now. The only protection I see is La Mancha and Orion get 0p in most scenarios where I get 0p.
The corp video from September 28th tweet has not aged well - the funding RNS landed soon after. Also seems pointless now talking about Vermelho and A2 as this is existential. Yeah you can probably double your money from todays 10p to 20p if everything goes swimmingly but that's small consolation to LTH I guess.
I'm hoping for a 50p buyout but that might be pie in the sky, no idea.
Mv01 scenario 1 I think company ceases to exist, banks take the assets, Orion + La Mancha = 0p. I don't think it will happen. In other scenarios equity is worth 'something' but the market is betting something is a small number. I guess after the latest RNS 0p became a lot more probable than I thought was possible even a couple of weeks ago so that's the punt here now which way will it go. Impossible to say in a 'equity survives' scenario whether 10p is a good entry point because the financing landscape is now almost entirely uncertain....which is probably why long term holders such as pickedpeck sold up and didn't take the risk.
Lawrence joking aside it's a harsh lesson as I'm sure many have learnt investing before, and will learn again. Nothing specific to AIM, Horizonte, or this cycle, or anything, it's just never 100% given no matter what you think. Look at Lloyds in 2008 etc etc. My dodging the bullet was in effect diversifying into holding about 40% net wealth in Horizonte (down from 100%) after the initial funding but it hasn't worked out for me on many fronts - latterly I've been adding here as it looked closest to nailed on, so increased the position and also, everything I diversified into is on it's ar se also (and GRL is in a similar predicament to this albeit not on the same scale). So I could lose say 60% invested in the next couple of months if both go badly. Which sucks because it's a lot of money. Of all of them Horizonte did look the most solid, if a little less exciting after all the new shares were issued.
Hard to see the bright side. Weather here matches my mood - it's absolutely hoying it down. Never mind tomorrow is another day. GLA
Looking on the bright side, I always hoped we'd get back to 10p. I was once offered a smidgeon under £100k to sell 1m shares at that price, when I had 26m to sell. Well here we are again. Shame about the 20:1 consolidation in the meantime! ;)
For me the only thing that can save is us is that Orion and La Mancha don't want a $0 return. That's it. I do see our fortunes to some extent tied to theirs so lets hope they do want something back for 140p price invested.
>>£200M are £0.74 per share
Yes but only if they pay that and take on the debt.
Lawrence - I used to think even in a sale we would be ok because the NAV and what got sunk in already (which the buyer is effectively buying) must be worth a decent whack . They aren't just buying the Tier1 nickel in the ground asset they're buying a 70% complete mine with +$400m spent on it.
The problem of course is the debt - they have first dibs on the sale value no doubt with penalty clauses. So in a sale my guess is the first $300m goes to the lenders and shareholders get what's left.
It's a distressed sale so who knows. Maybe the smarter punters (no pun intended) were right and this goes to Glen for peanuts or something. I'm pretty jaded about it all tbh. It's a monumental ****up by the mgt team. If you can't develop it sell it so shareholders get something back.....
Lawrence stop derampig, we're a 2xTier1 assets. Just no cash to develop them with. what a ****show.
The banks et al have to do their DD once the engineering study is complete, that was communicated in the last RNS. The question then is, because the engineering study is material, in theory this should be disclosed to market and not await the 'final' package and the DD to complete. Because the number is likely to be quite big it isn't going to be great for the SP UNLESS they can hint at the makeup of the package. In any case I suspect the makeup of the package is already known as they've been bashing it out for minimum 6, and possibly more weeks now. So FWIW I don't think a drop in SP (if that's what happens when the engineering study lands) is particularly going to affect the package but then WDIK.
Better would be study + package in same RNS but can't see it if the lenders have to do DD.