The latest Investing Matters Podcast with Jean Roche, Co-Manager of Schroder UK Mid Cap Investment Trust has just been released. Listen here.
The WoWo RNS - there is nothing in there to suggest there is a shareholding in the Singapore company or a Singapore JV and there is no future royalty mentioned. It appears to simply be a sale of 100% of WoWo for US$0.5mill now, US$0.9 maybe (if not renegotiated) and other money on a conditional/never-never/only out of profits in up to ten years time sort of plan. Simply regard it as $0.5 mill in the bank which presumably will be more productive in the oil & gas area as that is where the company seems to now be heading.
Mcfcnige it is a bit like the peakers, you can't buy something for £1 and fully expect it to be worth £2 one year later, so don't expect a valuation much higher in the short term. Next question is how much has Corcel actually spent on improving the assets this past year, not on legals or admin or maintaining, but improving ? Based on the accounts probably only biscuit money, so another reason for no value lift. Last, given the outcome on the peakers, investors will be shy. The announced Singapore deal tells you what the nickel assets have been sold for today usd$2.8 mill or £2.3 mill. Corcel shares are say £1.8 mill and debt about the same so company valued at say £3.6 mill which seems to have some premium there.
The word we hear is PNG mining ministry is swamped with trying to approve some mega projects supported by the PM that have been waiting for years and in the queue ahead of Mambare. In addition a few months ago PM has flagged non processing projects might be cancelled. If all this is correct then dont expect any concrete news from PNG for a long time. This is all pubic and no doubt the shareholders have been told of The downgraded peospects.
In the mining game, as projects get more advanced they require more money to move them along. It would be very hard to make real progress on any serious project for less then US$1mill p.a. Multiples of that is normal. If it is not geowork then it is legal, etc chewing up the cash. If Corcel has been spending most of its cash on the peakers and admin costs then not much cash will have gone to PNG projects so don’t expect much real news out of PNG.
There is no way in heaven that Mambare could be in production in months. Anyone suggesting that does not understand the project. This is really simple - both projects like most mining projects will probably want to use trucks to carry a 50tonne load and Mambare has two rivers to cross and each look about 30 to 60 metres wide. Think about it, those are not small bridges and in the UK this would take at least two plus years to plan and build. On top of that there is unlikely to be much building during the Monsoon season in PNG - London gets about 550mm rain a year and Popondetta near where these two projects are gets London's entire annual rainfall in January alone. So any builder, engineer or council worker would laugh at the idea of two large river bridges being completed in a month or two. On the positive side Wowo if it does not have large rivers to cross might be able to manage with small bridges which are so much easier. A 10 metre bridge is easy as it is just supported at each end and can be quick so this could be a plus for the Wowo project. The board has total control of the Wowo project and in media have said they will be advancing to a Mining Lease, potentially upgrading resource to reserves and more, so that will be interesting to watch and see if all that is fast tracked.
As a mining guy and knowing the processes, unfortunately there is no way a final mining licence is going to be granted "any time soon". Mcfcnige is spot on there. At very best, as the PNG government is in election caretaker mode, the matter might be next considered by Ministers by September and then the paperwork and remaining negotiations mean a final lease might be early 2023. It could be slower. I have no knowledge of the Korea meeting but moving from a non-binding mou to a binding mou is not a major shift. It does not detract from your comments there is value in the mining projects there definitely is, but don't expect it to be "any time soon" - much more patience is required.
Hi -as some of you have asked is this a correct number and why has the share price not jumped. My view is either not correct or not relevant as to share price - as a mining guy let me explain with a furniture analogy.
You might see a chair nicely produced in French antique style and say wow - the price per kg that timber is getting is USD $800 per kg. But that does not tell you what the guy who had the timber resource in the forest is getting – a pittance in comparison. Same with fruit farmers - compare what they sell for to contract buyers versus what Harrods sell their fruit for - miles apart and there is no processing in between for fruit. The difference is even more acute with nickel as the processing plants required in between cost usd $1.5billiion.
We are now told WoWo now has approx. 110 mill dry tonnes or Ore containing 891,000 tonnes of Ni (contained metal as the industry calls it) - note this is now 72% of the previously reported figure.
Each of these dry tonnes of ore on average contain 8.1 kgs of Ni (0.81%). Now 0.81% grade ore has frankly a very low value - maybe $25+ ish a tonne in raw state. So now we are talking 100 mill tonnes x $25 so $250 mill theoretical life of project revenue to the resource holder. Unfortunately it might cost $25 per tonne to produce so the inherent value of the resource might then be zero if all you can ship is 0.81% grade.
So miners overcome this by cherry picking the better grade stuff - maybe one third of the ore will command $50 or more per tonne and this will have a decent margin which is profitable to produce. Corcel need to release more info to enable readers to see how much of the ore is higher grade and is actually mineable at reasonable cost.
So the in-situ value number of $20+ billion which Align might use is on the one hand a convenient bit of maths and not incorrect – but it does not reflect the value to the person who holds the resource and their very much lower value which will be achieved.
Mining industry investors understand this value chain and that is why mining investors are not going to get overly excited about an RNS which says the grade has reduced from 1.1% to 0.8% and the quantity has also reduced as well.
This does not detract from the fact that WoWo is a useful asset and has value - but the value of the “if-fully-processed in-situ metal” of $20+ billion bears limited relevance to the value which will be achieved by the resource holder. Of course private investors may not understand these differences and if Align does not explain them maybe private investors will jump in and cause a rise in share price.
Yes I agree with all those positive comments about critical metals for EV battery demand. I dont see the value of the assets is anywhere as high as you hope, based on other nickel stocks, but does not have to be to create significant share value for shareholders who can be patient.
I think the market is digesting the news that there is now funding for energy projects - very good news - but that if half of the energy business can be bought for 0.5mill for strategic reasons, the remaining half is probably worth much less than punters had expected. The nickel news will be slow - everything in PNG is slow. Wowo is expecting to have its exploration rights formally renewed and update its JORC - all good but not market changing and did not even rate any press when Mambare did this three years earlier - and our reading of the scene in PNG is that is all which can expected in the next six months as PNG is now in protracted election mode. We know many key persons in PNG and hear their views on what is happening on each key project and the extreme difficulty of doing business there. So long term patience will required!
Broadly the Mambare approval timing follows this path – which is consistent with other countries.
1. Mining Lease application gets prepared – a substantial task
2. ML application gets submitted to the Mining Resources Authority (MRA) the Govt Dept
we have been told steps 1 & 2 occurred in 2019
3. ML undergoes review by MRA, assessment, questions, more material, etc
4. MRA then determines to support or reject the grant of a mining lease (usually with conditions, a few to do’s, etc still to be determined).
5. MRA if it is supporting it then submits it to Mining Advisory Council for review. This is a body which sits between the Dept & the Minister to, amongst other things, avoid the Minister making wildcard decisions. This happens in many countries as general procedure.
- this step possibly happened midish 2021 based on the MRA website which changed status to MAC matter
6. MAC has it own right to ask questions, etc and only meets maybe four times a year, so usually could take two or more MAC meetings
7. MAC then makes its independent recommendations to the Minister (or for larger or unusual projects to NEC which makes final decision)
8. Minister then is supposed to act on recommendations of MAC and issue Mining lease
9. Somewhere around here the fine print conditions of the Mining Lease need to be finalised
10. Final negotiations with Treasury, different levels of Government also happen at some time
11. The MOA is the mainstay document from this last process
12. Somewhere in this process there is much delay and politics between parliament members, etc
13. By the end all the relevant documents get signed
The Mining Act in PNG is modelled heavily on the New Zealand mining act so the steps above are not unusual and are widely understood in the mining industry.
The only public information is that step 5 occurred around Q3 in 2021. So the project is most likely somewhere between step 6 and step 12 with some of those steps part done. The PNG government is usually very coy about exactly what their internal decisions making is at. So it is quite understandable that Corcel cannot comment with much precision as they may not know. But this helps you understand that it is not a quick process. Absolutely if step 7 has completed and been announced by the Government then the hardest yards are done and the risk is significantly diminished and most industry players would see that as green lighting a project, even though there are more steps to come which can take considerable further time.
Guys whist enthusiasm is always good, I know enough about planning mining projects to say that I disagree - there is simply no way there will be production this year. At the point licences are physically granted then, if the project team has done thorough preparation, the project team can start to call for tenders to construct required roads, bridges, Port facilities and more. In PNG this will most likely require two dry seasons to construct and long lead times on equipment will be another timeline constraint. Things are definitely looking positive but please be realistic about timing expectations!
..well it would be telling for RGM to reveal how much cash is left. Less than 400k seems very likely. But how much less is hard to estimate... maybe heading down towards 200k after paying recent expenses creditors?
..or the MasterCard ads
Anyway even Andrew or his friends would say a clever piece of captioning
That video....
What is that word they use in the Amex ad...?
TDT - I understand it is a marginal deposit but could you elaborate on the issues you see making it unlikely to ever be developed? Happy if you pm me rather than clutter up the forum. Many thanks