Member Info for wasarunner

People who bought after the last finance round 85-90p will be doing well! Long may the rise continue....

Bwana - I think the total of Helicon interest is 8% but shares are around half. So the swap is only 4% if I am reading it right.

Buffett bought Coca Cola for income. Generally when a company generates income it is worth investing in. So I would like to keep at least half my portfolio in income generating commodity stocks but the problem with the juniors is the decent ones will get snapped up sharp when the cycle properly kicks in so you'll end up with cash I expect.

And potentially beyond for the following reasons:
- graphite key for the commodity cycle which should at least last the next decade
- there is a chance Armadale stay independent. I say there is a chance because in the commodity bull run every junior will have its price but we may just be small enough to stay independent

When I worked it out back on a *** packet there is 66p of distributable income over 15 years here. Why not hang around for that? I'm not saying I would keep my whole current holding in - too risky as it is far too big a portion of my portfolio, but once we're producing run with say half. The mine expansion is well worth waiting for as well as it will double production.

My goals are to retire and live on dividends, you can do that on FTSE shares or you can do it on commodity miners you picked up in the dark days before the bull run which will earn you $$$ when the commodity prices are flying.

It is an excellent article I read it this morning. If you take only two things away from it:

"Benchmark sees demand for graphite over the next decade growing at an annual compound rate of 10.5% but supply will lag, expanding at only 5.7% per annum, despite a trend of supply diversification, particularly new mining projects coming in stream in Africa. "

a. CAGR of 10.5% is amazing (and the widening deficit of course)
b. The gap fill will come from Africa which means in other jurisdictions presumably the easily viable mining is already under production

Like almost everything in my portfolio it's set to be big in the second half of this decade then hopefully really big 2030+ -> which suits me absolutely fine. GLA

Tardis yes I guess the fears are two fold - recession - can US and China avoid it - that probably weighs on commodities sentiment and secondly - financial markets what is the sentiment like for funding. As I said on my other post if funding is super tight (again example from company I follow - horizonte - still no debt draw down a year aftdr agreeing terms with banks) - these are the kinds of fears which drive valuations lower - how many juniors survive the bear market to the commodity bull run. Where do thry get their money from to a. Survive and b. Fund their project when thry generate no revenue and market is risk off.

One of the reasons I like companies with little or no debt (armadale & goldstone are thr ones I am invested in) is they can weather this kind of cycle. But it doesn't get your mine financed so we need to see how that plays out as financial markets ease and the fear or global recession diminishes.

SJ two big factors I think - juniors are highly geared to market cycles. Market falls -> juniors fall much more than FTSE. That makes sense - juniors need cash (generally) to function, and the market doesn't like to give them cash when it is risk off hence things like funding problems etc. So risk on/risk off makes a much bigger difference.

I've learnt a lot also - jurisdiction, management, resource, financing climate, not necessarily in that order are really important. Track record, skin in the game, etc.etc. Patience is key. I see a lot to like about Armadale (and off topic - Horizonte - a year from first production is really a steal at this level).

I guess the biggest questionmark here remains, and it is a valid one - do we have a management team who can deliver it (it being, a working mine, not a DFS, and not a finance deal). Tanzania is favourable - it wants to deal with China. And Blackrock have indicated that western cos are also happy to deal with Tanzanian graphite. The mine economics are stand out (as in, ACP) so as others have said, if any mines get financed, ours should get financed. And once financed it is meant to be an easy mine build.

You have to be prepared to ride out the rough periods in the market if you believe the company can deliver, and sometimes that means waiting for the right financing environment. Armadale don't have the $50m to build the mine so they have to wait till the iron is hot to strike. That should hopefully come with the graphite deficit. GLA

Oh yeah about the trading - yes there's an awful lot of +10% profit taking going on - so if your strategy is investing I think you have to ignore it and wait for production. Accepting that at production you are at multiples of pre production then that's good enough and timing news is always really hard - traders can get caught offside in both directions.

>>That should get most on here back to level then
That might be but
a. whatever the news is will be a further de-risk step on the road (be it offtake, licence, finance news, updated DFS, govt agreement whatever) and
b. by then hopefully Blackrock have funding and have started building (our) railway sidings, paved roads, and hydro dam

So you may at that point be at 'break even' (as many are on Horizonte right now) but you're that much closer to the jam which comes from production. GLA

in case my first post seems negative - it isn't, it is the machinations of the market that amuse me. I am positive on Armadale, of course, $500m-$1bn resource which can be developed for $40m-50m, otherwise I wouldn't have bought 4.5% of the company and wouldn't sit comfortably at 50% paper loss.... the world keeps turning, graphite will have its day etc. GLA. Good to see a change in sentiment, both here and wider markets.

Also being an illiquid share - when Armadale announces it's own news that indicates we are going to build the mine, this will rapidly rerate to the former levels 4-5p area+. It can do easily a 50% rise on a day because there will be a few profit takers but being illiquid shares just won't be available. That news will come one day, it is why we are invested. It's why I don't particularly sweat the shareprice at a given point in time (except to add more). GLA

Sentiment

Shareprice is falling, no news, a seller quite keen to exit at whatever price. Little buying, why buy when the shareprice is falling you can probably buy later right.

Shareprice starts rising, murmurings of Chinese supply shutdown for winter graphite shortage looming Xi meets president of Tanzania, positive articles surface re. Blackrock. Seller has either exited or is on fumes. Or decided maybe it is worthwhile investment after all.

And, being an illiquid share, these factors drive a 30% increase in SP in what,? Less than 2 weeks?

Nothing has changed about Armadale, it is still the company it was. The resource is the resource, the mgt team is the mgt team, we already knew the deficit was coming, and we had plenty of evidence that Blackrock were progressing, not least because of the big financial commitment Urbix were prepared to put up recently (and they will have done plenty of DD).

So I stand by my earlier comment that 1.5p area was the buying opportunity. Sadly I didn't have funds at that level but as things progress this is still cheap here and I will be adding when funds land around February (unless we have massively rerated by then).

But the market, sentiment etc. never ceases to amaze. People will be feeling more positive because we're 2p rather than 1.5p, I think the other way, I wish it stayed at 1.5p till I had more funds because I am very positive on the investment opportunity overall. GLA

Fair point the capex does indeed total capex including from cashflow. So maybe we are close to the $100m.

The original DFS included infrastructure (but for example, relied on diesel for stage 1 whereas now we might get hydro depending on timings). I think the 'hope' is that the infrastructure costs which BKT have kindly agreed to fund for us would net off against the inflation figure so our DFS may come in at the original numbers.

The advantage of course of having a high IRR mine (80%+ / 100%+) is additional capex, although unwelcome, can be accommodated and still the mine retains a high return.

Aplogies talking carp.

From the updated DFS RNS:
"Stage 2 expansion is expected to be funded from cashflow."

So even with inflation in capex we should be well under $100m threshold.

It was circa $40m from the original DFS (for stage 1). Stage 2 was additional. I guess with inflation Stage 1 + Stage 2 if taken together may tip over the $100m - I don't know if you have to 'licence' for stage 2 at the outset but it would seem to make sense if you want to build it 3-4 years later not to have to re-licence?

OTH - of course, it's so profitable (100%+ IRR?) that profit tends to revenue anyway :) I did the numbers a while back and they are very very good indeed and I didn't even assume a graphite price we are likely to be getting in years to come.

Makes you realise the gearing we have to nickel price also. OK my calc ignored tax but £10m upside per line per $800/t upside in nickel price is really really significant. An addition $2.5k/t on the nickel price is worth 20p YOY (on 2 lines) which is 1/5th of the current mcap.

30% of $2410/t saved is give or take $800/t. Doesn't sound a lot until you multiply it by the annual tonnage when it becomes $11.6m or a cool £10m gbp/yr saved from Line 1 only. That's another 3p or (3% at current sp) yield on those dividends year on year....I'm not complaining!

https://dailynews.co.tz/govt-to-earn-8-4tri-from-graphite-mine/

I didn't read it as Danger_Mouse posting that as it being a fantasy just short term of course it seems a long way off. 3x is normally not easy but in a year where we effectively complete the mine build (12 months or so if we're on schedule?) and possibly receive a Vermelho DFS (I am really hoping this lands Q4 2023 or Q1 2024) it could be doable next year with a bit of luck.

I'd love closer to £6 of course - I think when Orion and La Mancha first invested at 7p/£1.40 they would have been eyeing a minimum 3x return (~21p in old money) but since we've had the extra dilution (40%) they may have revised the expected return down somewhat. I'd be happy with £3 even more happy with £6 and if the £3 can be seen by the end of 2023, better still (but happy to wait longer).

£7m is distributable. On an mcap of £25m that's like 3.5x net earnings. That's way too low - the company could give you just under 1/3 of its mcap out in earnings every year. So 1.5p dividend on a 5p share price or 30% yield....