Member Info for wasarunner

The main risk here I see is not intent (Glencore want to own it, La Mancha want to own it, they want it cheap as chips, they want to profit from a distressed situation etc.etc.) it's actually economics. IF the mine can't be financed in a way that provides a return that stakeholders are happy with (so for example, $300m is needed, and ferronickel nickel price forecast is falling - and I say IF because I don't know either of these parameters) is there enough fat left on the turkey once it is basted in the juices to warrant cooking it. That has to be a complicated equation but it has to be an equation the banks are happy with as well as the cornerstones because if not, they won't put in the extra $$$ and we're in big trouble.

The rest of the market (i.e. us) not having any true sense of the $ shortfall is a big problem for valuing it at the moment IMO. They obviously have a number they know internally, it seems to be kept top secret, while all parties go away and do their DD to make sure it is accurate to within their own risk tolerance.

Just to provide balance, it can go either way and current equity/shareholders/PIs could get wiped out, but I personally think that scenario unlikely for many reasons I've detailed in the past. So here's a question. Irrespective of the former shareprice people bought (and in new money I bought everything from 35p up to 170p) why aren't more people buying.

So for the institutions this is obvious - there is existential risk and if they buy shares right now they know neither the terms of the deal (indeed, if any) or La Mancha/Glencore/Orion intentions for the same. They could buy a stake and La Mancha can decide they don't want to put any more in and it's curtains. That's why institutions aren't buying.

But PIs? As our gambler friend, the pubbarman points out often enough, it's all a punt. So here we sit at £20-25m mcap with $400m+ invested in the mine and $bn NPV to come. If you were a non investor looking for a high risk, high return play, you couldn't ask for better IMO. Still sucks for those of us who invested 4,5,6,7 figures at higher prices but for new entrants, it's a buy, if like me, you believe it will exist in its current form come Q3 Q4.

But institutions won't touch it with a bargepole until there is a deal and also, the current institutions (the top 6 at least on the register) are not selling because they couldn't even if they wanted to. GLA

Yes it was meant somewhat ironically/sarcastically.

As somebody who held shares when they were previously 7p pre consolidation, those shares are now worth 7.7p (so nearly 7p) except I have 0.05x as many. And they're worth a lot less than I paid for them pre consolidation, as a total :)

The announcement today was a positive but it pushes a real deal back to Q2 which won't suit the traders so they'll take their money out here and go play elsewhere for a bit then come back nearer Q2 I expect. Is tuan buying yet :)

7p. Maybe they like the symmetry of raising at that price, it's a 10% discount on current price. Then we can do a 20:1 consolidation to get us back to 140p where we belong.

Good news on the whole. The doodoo is big, we knew that, and so it's going to take time to sort, we knew that too. Expect that mezzanine/bridging finance in January to get us through to funding solution. GLA

Tuan dipping his toe in I expect. First buy of a large potential position. If I had the funds I'd join him at this price sadly my 800k shares cost a lot more than £74k - I could buy around 3.5% of the company at the moment with what I've spent, which would put me above Condire and azValor. Oh to be a fly on the wall in that war room. GLA.....

Greg Entwistle

He was appointed recently and will be delivering a mine imminently (ducks for cover)

Rover nearly agree but don't forget 3 other institutions also own 15% odd and I'm sure they are being consulted. It also seems like those 3 didn't sell and it was mainly Fidelity (of the signifcant holders) who dumped.

wrt to PIs indeed, we are the bottom of the food chain, the plankton as it were. Ever was it thus. Take the biggest risk, get the biggest reward or the biggest shafting.....

Tuan 'big holder' is risk averse, we know that. Pre consolidation the shares were 1.7p then eventually they got to 10p. 'Big holder' wasn't buying at 1.7p, but I was, and I sold some for 6 figure profits.

So I have no problem with the fact that institutions aren't buying because they need an indication that the company in current form is a going concern and that the finance package will happen. That's what Mr Nasr has to provide. But once (and f) he does, the shareprice will be higher. If he doesn't - > were going to 0p. Are you buying or selling yet?

Hi Theorist - not diagreeing with you and should have caveated it with 'in due time!' Shareprices don't rise quickly after raises we saw the same it took an awful long time for it to go from 90p -> 150p after the last one.

But once the mine is actually built/close to built, commissioned, and producing something, the rerate should be along the lines of 40p at built/commissioning and 80p at steady state production (ignoring drop in NPV from the debt).

I think if La Mancha want equity done higher, to protect more of their pre-existing investment (especially if they want to offer it to third parties) Mr Nasr is going to have to earn his bread.

By the way I'm not saying the above will happen/not happen as I have no idea if 3:1 is going to be the number or 20p. I'm just saying that if it was, then that's what I would expect to play out (eventually).

Future NPV is very hard to calculate so I disagree with posters here on that who urge downside. Sure, that's here and now. Indonesia can keep mining out their nickel to lower and lower grade using coal but we have secured long term hydro and long term nickel price will be up, not down. If you don't think nickel price will be strong in the future don't invest in a nickel miner it's really that simple. I do, and so I did.

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