The next focusIR Investor Webinar takes places on 14th May with guest speakers from Blue Whale Growth Fund, Taseko Mines, Kavango Resources and CQS Natural Resources fund. Please register here.
This is the reason I don't agree with lowball estimates for funding shortfall ($50m/$70m whatever). Not producing nickel for an extra 6 months from the assumed timeframe (with the assumed timeframe being 1 year from first metal to full nameplate) already costs $130m in lost revenue from being at nameplate for 6 months less than envisaged. And there is debt to repay.
The funding shortfall is a higher number and it is better we know it soon - the market doesn't like the uncertainty.
Need to check on progress but I think the hydro dam is commissioning this year. It was/looked well advanced on the latest videos I watched and there is a lot of public information about it. I think the rail is just sidings which shouldn't be hard to add and is only needed at production not while you build the mine. Roads you need of course. Yes it is taking a long time and we may still need to weather a global recession before the commodity bull market arrives....
You gotta call pumping out for what it is. 90p next week is possible, but unlikely. 0p is possible, but unlikely. A number of us as pickedpeck says have been invested a long time (2018 for me) with much higher averages and we have 2 choices pre finance deal - hold, or sell. I (personally) think the short term outcome will be north of here, not bust, and the long term outcome obviously depends on the level of dilution (if any - and I don't see no dilution as an option).
Fearmongers on the flipside feed on fear, if you can't accept 0 as an outcome as a long term holder of course you should sell, personally I see a much higher probability of a higher sp than today, than bust, so I hold. If anyone is actually short (as opposed to looking for a lower entry which is typically what the doom mongers are doing - they don't have the balls to actually short) then they can keep plugging it that way and the market will decide. Actual shorts IMO will be toast if the company announces something that means survival of equity which can land any day now - one thing I would not do in this situation personally, is short.
Anyway to all the posters who haven't been here for the last 5 years but now lend us their expertise on what next - welcome - and welcome also to some old hands like djryan/publican777 who are always happy to come back to a board where they lost money to tell everyone else I told you so.
It's a sorry situation and not what LTH wanted, but IMHO it lives on. GLA
Obviously a lot taking a position here for what was inevitably an opportunity for a nice bounce yes. Wonder how many will hold for the finance deal. The problem with the finance deal is you don't know when it lands, it could be tomorrow or it could be November 14 or literally any other date.
A lot of traders (despite the pumping :) ) will get nervous because actually many consider 0 still a possible outcome despite the uber bullishness to drive sentiment. I know I would if I was sitting on a 20% or 50% gain and it could be wiped out.
Which is kind of a shame because from 20p this is a 5-10 bag opportunity over a few year timeframe (assuming finance deal is at least 'ok' for equity). But traders will already have moved to the next 20% opportunity.
FWIW I think traders will be replaced by other types of buying (perhaps hedge funds specialising in distressed situations) once the company hints that a deal is in the offing. That's when I expect to see a bit more substantial rerate.
I can live with equity in the 25-50p range to save this company and hopefully we get towards the top end of that range, I do think it is possible. GLA
>>Was, how do u know what they will or won’t except.
From Glencore's 2022 accounts:
"For 2023, basis 2022 cash flows, we are
recommending to shareholders a $0.40 per
share (c.$5.1 billion) base distribution, made
up of $1 billion from Marketing cash flows
and 25% ($4.1 billion) of Industrial
attributable cash flows. "
Now think what you're saying. Horizonte's current mcap is somewhere around £55m and Glencore own 17.7% of it. So what you're saying is when another entity (presume miner, but it could be anybody) offers them £10m, for a resource containing 4m tonnes of nickel, a commodity they are one of the largest producers / traders in the world of, they'll prefer the £10m to the 4m tonnes of nickel. They'll be selling if for £2.50 a tonne at that point. And this is a company which has paid out a $5.1bn dividend to its shareholders. Yeah - that's going to happen.
I'm not saying Glencore won't bid for the lot but unless they join with the other principals (and La Mancha are the obvious choice here because of their large shareholding) the other two will want at least what they paid for their shares. That's our insurance. I re-iterate - if Glencore were the only shareholder we'd be totally screwed, and if another miner wants to buy it now, they'll have to make Glencore an offer which is more attractive than owning 4m tonnes of nickel themselves. Neither of which (IMHO) is going to happen....
>>Im expecting an offer down here, soon, why wouldn't someone with deep pockets go for it at this cheap mkt cap.
Because La Mancha, Orion, and Glencore (unless it is one of them making the offer) won't accept the bid. Doh ;)
Also final word on the JM bashing et al. An expensive mistake but a mistake and not by intent. Loving the people on this bb and elsewhere who have maybe put up a shed, if that, criticising a junior company for not delivering to plan a $700m project exactly to budget in the outback of brazil. This is a geologist who has spent 10 years getting the company to this point and has 4000 contractors/staff working on site. He hasn't built 10 of these in the last 10 years, this is his first one. Sure he hires in the technical expertise but problems were bound to arise. The challenge right now is the size of the problem - it isn't a $10m problem or a $50m problem its an 'as yet to be defined but probably $200m problem'. I guess as investors what we should take away from this is buying pre revenue juniors with major upside and high capex is very risky because when it goes wrong - wrong is a big number.
SJ don't get me wrong, if Glencore were the only major shareholder we'd be toast. If glen were 29% and pi's were 71% and glen said 'we're prepared to lose our investment to the banks unless you accept 25p for your shares and we will buy the company or it goes down' the only protection would be a counterbid from a.n.other major. Look at what they would be getting - right now for an investment of $200m they would get the 3/4 finished mine and all that resource to expand to 60ktpa+.
But Orion and La Mancha put in $200-250m at much higher numbers and will prevent that from happening. Glen can get as hostile as threy want right now because Orion and La Mancha won't exit below par. A syndicate of 2 or 3 iof the 3 is slightly more risk of happening and can't be ruled out but I don't know where the banks and eca's would sit with that. It looks unlikely to me that would happen - but for me, a risk.
Well the shorts are playing with fire also. 2 stages combined $2bn+npv current mcap £50m or whatever. If I wasn't invested right now and looking at what could happen, I would definitely go long, not short. When deal lands, mcap goes north for sure. Gla
Then there's A2 to come but survival is the name of the game for now, A2 is long grass stuff. The one thing I will say about A2 is, I think now no coincidence this is due to be released this quarter. The 'pitch' to both the cornerstones, and any potential new equity in this raise has to be - you are buying A1 + A2 if you subscribe for shares now. So buyers will have half an eye on the NPV possible from both stages of the mines. So the only way A2 helps us now I think is if it makes it more attractive for investors to invest. The flipside is, if trust has been broken (e.g. Fidelity bailing out) then will new institutions believe the BOD can deliver A2 when they subscribe. Until now, A2 has not been 'bankable' but now it can be - and hopefully all the lessons learnt from what A1 will _actually_ end up costing will be factored into the A2 DFS so that it can be a solid representation of something that can be built for the price.
I don't know what's going on behind the scenes but has to be a chance the CEO's position is at risk here IMO, but maybe only after the dust has settled. Needless to say this is last chance saloon I think for f***ups, I think if in 6 months time we find we need another $100m it's curtains.
And no I'm not selling - I'm locked into production or bust now. I never intended to sell (this tranche) before production but obviously now there is the unwelcome % probability, however small it is (and there is some % even if it is small) that it's bust in a few weeks time the big players not having reached agreement.
The raise could be more punitive than 200% dilution (i.e. 3 times as many shares in issue) too but I hope not. FWIW I am including the convertable loans in the dilution because they dilute - my pre dilution calc therefore is 315m shares not the current shares in issue and if you treble it you get close to 1bn shares in issue. With NPV $1bn+ at production then depending on nickel price you start to see £1/sh area as a possibility. Again hopefully worst case, maybe better than that is possible here.
Hi SJ - no, my worst case is raise at 25p (if you raise at 6-7p no way you get enough $ needed - if my assumptions are correct - these assumptions being around $200m needed some of which will not be equity). 20p is bananas pricing at the moment (but given there is an existential threat to equity not that much of a surprise). I think the equity price has to rise into the raise, and it should do once the cornerstones have 'underwritten' the raise because they don't want to be wiped out here. I guesstimate without going precise La Mancha and Orion put in $200m-$250m already and that's toast if the banks take it - and they won't let that happen.
So the raise IMO will be somewhere 25p-50p, after which I think the SP goes back to 50p ish as this will represent the new mcap of pre-debarcle, so £1.50 old money will now be 50p new money. Which means £1 at production, not £3 at production which was what I was expecting.
And that way Rover, and I, and you potentially can say we kept our shirt walk away and 6 years after investing in it (in my case) get our money back at breakeven or, if you're brave, then there's upside from A2, Vermelho etc. but do you think they can deliver when this has gone this badly wrong. My guess is a lot of long term PIs will exit at a relatively early opportunity, those who didn't sell in the initial sales anyway.
Risk for me remains the big guys take it private but it is a very complicated consortium now - 8 major lenders, 3 cornerstones, I think it is unlikely to happen. I also think nobody will buy it at this juncture just looks unlikely until mine is complete now.
For the raise to be 25p we need sp maybe 30p. For the raise at 50p we need sp at maybe 60p. As soon as it is obvious that equity will survive, the shareprice will go up, at least on this bit billyv and I are agreed! I think the company will have to announce news in the coming weeks that makes this obvious until then everyone is guessing - survival/non survival. At that point those short here/de rampers will be gone IMO because there won't be money to be made to the downside.
Rover I think you will get it but not in billyvalentine timescales. This is the number I am interested in too £1+ breakeven - I do think we get there but it will take time. My thinking is best case a1 producing/a2 finance plan will see this number worst case a2 also producing will see this number. It sucks because it's a couple (or more) years to breakeven and I have already forgotten my dream of £3/£4 etc. I am expecting sthg like 200% dilution and anything better than that would be a good result. The company is not in a strong position here and the parties will get the best deal for themselves. So a few nervous weeks to wait till we know.
I've looked back through the RNS' (I can't find Orion's royalty payment but think it was c. $25m and I'm not sure who put in for the Vermelho DFS again perhaps Orion another $25m?)
Anyhoo -> if the above 2 are right, then Orion + La Mancha have put in c. $250m between them already. They don't help fund this, that's toast. The amount required might be similar (or might be less, if they can get debt as well) but Glencore also are at the table and also lose out on both equity and offtake if they don't help fund. The three principals will save this but this is the rub - they won't do it for free. For every share they put in at say 140p they will be looking for a price now which one day will average their holding to a sensible overall return. So we don't expect any gifts. My best guess right now is the 30p-50p ballpark (which is why I've put my worst case and best case estimates at 25p and 50p respectively) and PIs won't get a look-in.
I can't see Orion/La Mancha being overly happy with the situation. Will the mgt team survive. Time will tell. But first the company has to survive. GLA
>>Devils advocate, but what's stopping the banks foreclosing and Glencore buying from the banks?
Almost certainly Orion and La Mancha,
No buyer / no financing deal agreed -> game over. But not going to happen. The reason I don't think it will be a third party buyer (e.g. a Vale) is I don't think Glen/La Mancha/Orion would accept it and if they did, they'd want at least the money back they paid for the most expensive share they bought - £1.40. And probably a lot more. If they can make more money by financing it and holding for production they won't sell. The 3 have enough shares to block any bid - and that's important.
Right now I'd take a £1.40 sale all day long because then risk is gone and I think it will take a long time (production and maybe A2) now to get back to that number anyway. Not ideal as, like Orion, I wanted a multiple too and not my money back but also Orion will be making at that point on whatever price they put in the funding now and I can't put any in. I think people buying 20p now for the long game are getting a bargain. Just my view though.
>>If Orion or La Mancha have been selling…..then game over
Absolutely. They'd be taking a near total loss though given their entry prices (140p and 90p). Much better to stay put, fund it per the rough calcs I've done, and one day see £1-£2.50/sh. Assuming they got the spare $200mil
I think the funding package has to land PDQ (along with cost estimate which the contractor is working in) because you can't be in this situation long. The cornerstones will not be happy with a perilous situation of the covenant breach and there is a risk work on the site stops then you go into a downward spiral of more delay, more cost, and eventually it's unfinanceable. I think this is round the clock work to get sorted but they have to know the funding gap which obviously they didn't know exactly when the RNS was released.
If you've got 3 equity holders who all lose if there isn't a package, it's who blinks first. The company said on the RNS they're supportive - of course they're supportive the banks take it all if they're not. Don't get me wrong I'm not sure any of them want to be in this position, probably the opposite. Fidelity clearly took the hump and exited stage left. If one of the 3 did that now it would be game over.
It's a lot of money that kind of area $200m ish to have to find unexpectedly but I think all 3 have more to lose than to gain (with the possible exception of Glencore) but I think Orion and La Mancha will guard their turf. We know at least La Mancha are here for the long game and expansion to 60ktpa and why risk all that for whatever % of $200m they need to stump up now? I'm hopeful a deal can be done but obviously it's not a given or the market wouldn't have decided 22p is where it's at. Just my thoughts - nobody should buy or sell based on what I think! I've still got around 600k shares, haven't sold any as I usually get trading decisions wrong anyway, and am in for whatever the financing deal brings (or doesn't) and what happens after - but my timelines always were, and remain, several years from now which may not suit every investor. One of my concerns is does the funding package for this deal prohibit development of A2 on any kind of FCF basis because then my investment thesis halved. If that's the case then with the expected dilution it halved and halved again which is relatively unpleasant and leaves a loss overall (for me). GLA
And if it was just Glencore I'd agree with you. But you forget then the amount that Orion and La Mancha put in (which they then lose). 3 cornerstones saves the day here, IMHO. If it were 1, we'd be toast....