RE: Games?5 Sep 2020 23:39
My estimates here were pessimistic near term:
- I think raising equity at premium (therefore giving away small piece of Vermelho) will land equity here, and Orion can be played against Teck & Glencore for a high price (and any other potential equity partner)
- Vermelho optionality is a big win, for eventual JV / V sale / Co sale but crucially Horizonte won't make this decision and probably won't invest more $ towards a definitive direction for this mine.
I really like this position because it leaves the huge carrot of Vermelho dangling both for partners in the equity round now, and in the future for asset or co sale, and Horizonte only have to get one thing right, which is the finance and build of Araguaia. I believe in time at the right point in the nickel cycle Vermelho (or the company) will attract a valuation which will give shareholders what we are after with or without further development. Horizonte will be in a strong position at this point and do not have to bow to sale on any terms as we will have a fully financed mine ready to build/in build/built and producing.
Definitely my short and medium term predictions are looking light, and crucially I am pretty confident also my longer term prediction too. However if my original longer term prediction plays out in a much shorter timescale that also works and I won't complain.
In terms of investing/confidence/research, my approach here has been to scale position with reesarch but I have had a huge amount of luck:
- our business has done well and generated lots of cash at crucial points when the SP was weak
- whole bunch of II sellers. I would have half the shares, as the price would have been twice or more what it should have been if IIs weren't selling
- For me it has been a 'scaling in' as the story unfolded. I was happy with £300-400k or whatever it was we invested in Orion because it was a long term play. For me Orion was THE de-risking step and the market didn't really treat it as such. So that creates a unique opportunity - continue investing at or around or below your previous investment with a substantially further de-risked investment. How often does that come around? We should have been twice the price post Orion and only the II sellers (then Covid) made it so.
So a lot of luck but I maintain you need 4 things in this game - patience, be smart to make sound decisions, work hard to do your research, and finally luck. But you can't ignore luck which is why I would never suggest the same sequence is always possible. I couldn't make RG sell his shares, but I could profit when he did so. etc.etc.
GLA
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