Member Info for wasarunner

there is bound to be some profit taking, but for my money, the smart money is already on/getting on/staying on. The upside potential is enormous, the timescales are shortening to realisation. Market waking up....

interesting that 4p is such a tough nut to crack. Will be good to see if any big trades are declared after hours, then you kind of know it is being kept under 4p to allow for a good loading up..... all I'm saying is, it won't surprise me if we see some big trades going through late.

agreed russkiemole it is beautifully setup and will play out one way or another for sure. I know such things can be 'expedited' for the right price and by the right people probably even more so in Russia, if there is a will to make it happen. Also agreed they can have been talking (and most likely will have been) with several parties now and over months. Pretty exciting stuff. Roll on flanks then lets have some buyers news!

Working on $8k/t profit to keep things simple - $16k/t price $8k/t cost. Ignore tax for now. That's £90m profit a year converted back to £.

I like symmetry in numbers, of course you can always retrofit but there is an irony that todays mcap is half this figure. I like the idea half of that profit would pay down capex and tax and maybe keep a bit aside for phase 2. You have then todays mcap in free cash every year. That's a 3p dividend (or save it up to build phase 2).

So for my money, Araguaia phase 1 (completely ignoring phase 2 or vermelho) makes the current mcap a joke. We could easily be valued at 4x current price, at this stage of development (nothing concrete built) post financing IMHO on Araguaia phase 1 alone if we only had enough resource to produce $14.5kt/yr from a single mine targeting feronickel.

But we have 3.5m tonnes of nickel reserves and 50-60kt/yr capability. Roll on rest of 2020.

yes, again only personal view (don't shoot me down) but negotiations might go on a while. Why? The board have something amazing here and the non exec holds 20%. He is going to max value on his 20%. So I'm thinking this sale doesn't happen quickly but it happens for the right price.

The only thing I don't get my head around is how the mining season plays with that. Does the buyer want to mine it this year? If so, maybe handbrakes off on the deal. But I can see this taking a good while to agree, but happy with that, who wouldn't be for 10x upside from here (and I understand many have had 10x upside to get here already - I haven't, I'm in at around 3.8p)

Really big yacht now, or gigantic yacht in future is his dilemna....

That is always the conundrum and the reality is it matters more what the mgt want than investors, realistically.

If mgt are set on a sale, they have to give away upside to the buyer, so you will never get what you would get if we pulled it out of the ground ourselves. But you get it a lot sooner. So in this respect what Mr Dmitry wants is proably more important.

I@m happy with anything like a 30p-60p sale OR a shedload of future revenue from mining operations, personally. Happy for Mr Dmitry to make the choice!

Years 1-10 'all in sustaining costs' are $7.3k/t Araguaia Phase 1. At nickel price $16-$16.5k/t more than half of production is profit probably even allowing for central management / HQ cost. Production payback 3 years. So the nickel price at production will be very interesting, and seeing that play out over the next 2 years. Anything north of those numbers and Araguaia will be printing money.

short term - next year or two, on the nickel market/pricing front of course Stainless Steel remains the big driver so industry/China and world economic picture are key and also this will continue to affect Araguaia directly as it is targeting ferronickel.

Longer term the EV story will play out but currently nickel pricing is all about steel. It is interesting to note the bank consensus forecast still this year to be >$15k/t and next year >$16k/t which if it plays out is still very supportive for getting Araguaia up and running, and Araguaia makes plenty of money at those prices. In the investor presentation I note $16.4k/t is used which is around the bank consensus for 2021 so might be a realistic price at production. That would be IRR 27% NPV $700m and hopefully around that, or the $16k/t level is what the finance discussions are revolving around right now.

Very decent numbers and Araguaia makes a lot of money at that level. Just patience needed now.

It might be my untrained eye but LME stock seems to be levelling out at around 200kt. Nickel seems to also seems to be consolidating easing back into +ve territory. China announced stimulus on the weekend. Maybe, just maybe, macro starts turning positive now and we've hit the low. That might signal a reverse here too - we sit at the post Orion low again but for how long. Probably not long if macro is supportive....

Consensus bank forecast on nickel was 30kt deficit this year and 70kt deficit next year would bring warehouse back down to 100kt from current level. All pretty good stuff will have to see how it plays out.

my feeling fwiw (and I have only followed the stock since October/November)
- market isn't yet factoring the flanks as belonging to EUA
- market isn't accepting the 15m Oz figure as a given
- there is a kind of gravitational pull back that the share has risen around 10x since the sale intent announcement

the above is just my opinion on why 4p appears to be a barrier. I don't know enough about the 15m oz figure to know what is going to shift that thinking, but obviously final flanks approval should help sentiment/sp particularly if, as suspected, it is a key factor in sale negotiations.

The cherry and the excitement presently is very much flanks+MT sale, understand that.

Do people have a view on what kind of numbers might come out of WK in future years if EUA hold onto it? I'm trying to understand what an ongoing holding here, post MT sale might look like if that is what the company do. In such a scenario I would expect they might distribute 50-70% of sale through dividend. I'm just curious what kind of ongoing profit can be generated at WK and where that might put a future SP. Thank you all views much appreciated.

worth adding the EBITDA figures are in £ and multiples of 000.
Also, they don't cover the years where income rockets - 2022 and 2023. Wonder what multiple the company is worth in 2023 if generates £1.6bn revenue. Makes a current sale value of £1.5bn look pretty conservative!

yep it's page 11 that caught my eyes also.
Sale or no sale, this is going to make serious $$$

mjb, indeed it is the billion dollar (literally) question.

IMO if we end up with >50% across the two projects, we are on for >10x upside. And I just don't see <50% so I'm all in on that basis. Every way I've done the numbers we make a lot of money. Maybe $10k/t nickel would be a problem but I just don't see it it, not beyond 2023-2025 anyway...

factoring in capex, and cost of production, tax, we might arrive at half this valuation being realistic. I actually think somewhere around $1-2bn, depending on the price of nickel, and depending on what percentage of Vermelho and Araguaia stay in current shareholders hands is realistic. That's 50p-£1p per share (I think). Happy to be corrected!

I've just done a very simple calc - completely ignoring cost of production.

Orion bought 2.25% or production (not 2.5% as I thought) of phase 1 Araguaia for $25m. Extending the calc:

They would have paid 44x this amount for 100% production. That's $1.11bn.
Assuming 4 equal parts - phase 1 Araguaia phase 2 Araguaia phase 1 Vermelho phase 2 Vermelho values Horizonte at 4x this number. That's $4.44bn.

Converting to £ that's £3.5bn.

This is super simplistic as it completely ignores the cost of production, but I actually think it is in the realms of feasibility for a valuation for the total co. at 50-60kt/y production in anything like a decent nickel market.

From the royalty presentation I re-read the terms:

"1Based upon financial modelling by our advisers Endeavour Financial, using a long term price of $14,000/t nickel and the NPV of Araguaia of $400M, a comparable equity issuance price to
generate the same P/NAV effect as the royalty would be 10p per share. Valuation of 3 times current share price considers HZM share price of 3.3p as of closing on AIM 27/08/2019. "

So I think the royalty deal has been equated to a share price equivalent as I suspected using the price of nickel as a parameter. I don't know the calculation but it is interesting stuff. It is pretty clear to me that the total value placed on Horizonte is pretty huge, based on the fact that Orion were prepared to part with $25m for such a relatively small portion of it. All imho....

If Orion had accumulated shares on open market at current price their $25m would have got them just under 50% of the company. Not 2.5% of phase 1 of 2 of mine 1 of 2. Just saying.

Horizonte should use the Orion money for a share buyback at current prices. Don't know how that would work but would be quite amusing. Or at least to soak up RG!

Hi Nthoftheriver, my reasoning is (and I could be completely wrong, I don't really know how the 10p or 12-14p figures are arrived at) is that the royalty is on a proportion of sales (from Araguaia only) and ignores costs. Therefore it ignores Araguaia phase 2 and it ignores Vermelho completely.

I figured the calculation might have something to do with how much the Nickel price in future might above cost. Orion take income from the gross, Horizonte keep only profit from the net. The closer nickel price is to the break even price for production, the more % of profit Orion take. If Nickel is $100k/t Orion will get $2.5k/t and Horizonte will make circa $90k/t (after cost of $7.5k) profit. So maybe an effective dilution calculation has to take that into account.

So maybe revising the effective SP for the royalty takes into account future nickel pricing/profitability/and where phase 2 Araguaia and Vermelho fit into the picture. This is just a guess though, very happy to hear alternative opinion on the above.

I was reflecting yesterday that the current SP is lower than before the Orion announcement. Sure, it had risen ahead of Orion (don't know why, maybe somebody knew something) but it was low to mid 3p on the day before the announcement.

That means currently no attributable value to $25m cash + $1.7bn NPV Vermelho announced since. Technicals or not, that's just wrong imho! The correction will come, once there is something to kick start it, either on the macro or company news front.