Member Info for Zarro

Mullard

This is the position that I am working to in my notes (but please do your own checks)

• Financing (as at Q3 2019)

Notes due May 2022 $650 7.25%
BEE Loan $112 JIBAR + 6.5%
BEE Receivable $79 ?
Cash $97 ?
(Undrawn) Bank Headroom $104

• Mar 19 (Q3) financial position

Net Debt $553
Net Debt for Cov $581 (I.e. including Net BEE debt)

Well that has narrowed the £xxxm valuation gap by about £10m. Only (£xxxm - £10m to go!)

Good time for AntHarry to give this another tickle?

Bang goes my theory....or hopefully, at least!

Wish I knew. I presume by dribbling out timely sales but I am no expert. Perhaps you or someone else who is familiar with trading can opine from the trade patterns......

Someone is deliberately keeping this to a max of 27.5p..........

Shaz - quite possibly because a major player from the Middle Kingdom has no interest in seeing the share price higher......for a little while longer yet.

I (we?) never got asked......This is where I assume that Citi need to earn their fees and I assume that PS and the BOD are only executing to their advice.

That is my suspicion/fear. What says The Chinese aren't happy for it to go even lower in order to ensure they buy the next slug of the project company at an even greater steal. With 97m BCN shares contracted at 25p they have an awful lot of firepower to borrow shares - dribble them out for the next 1-2 months and then repay the stock back to to the lender when they complete the BCN investment. Their goal is more likely to be the project company more than a minority share in BCN (unless they are really interested in Zinnwald as well) In which case they would presumably trigger a bid for the whole group (officially I believe that they cannot acquire any more BCN - officially at least - without doing so). This feels like a potentially messy and uncomfortable time at least until we get past the end of June.

Question for the experts on this Board:

What chance someone about 5,000 miles east of here wants to see the share price held between 25p and, say, 27.5p until the DD is finished and decision to invest in another 22.5% of the Project Company or not is determined?

Also, I did not follow (understand the implications of) the earlier posts between Dallas, Tomcat and Observer about the project company / toll-mining / toll treatment. Any clarification would be welcome.....

Seems to be playing out just as Col D figured it. I'm impressed.

I guess it is not important given share price development today but one thing I don't get with the shorting strategy is how two the firms were able to buy back THE WHOLE 12m shares to close their position (assuming that has happened) at such a favourable low price (and presumably at or below the aggregate of what they sold into the market for originally to drive the price down)? ......Or is that somehow part of the negotiated trade with a third party / market makers?

Excuse me if this is illiterate but my limited talents are more on the fundamental corporate financial analysis and valuation than trading technicalities (where I have posted before and IMO consider a reasonable valuation range to be between 45p and 75p over the next 18-24 months barring any material developments to the upside or downside.)

Agree. Thx to Col D. Very helpful insights into a world I know next to nothing about......

Wolfi - I don't understand the Bloomberg statement. Q2 (ie. interims) were released in Feb 19. the next update should be Q3 update (i.e. to 31 Mar 19). What we do know is that the equivalent 2018 Q3 update was in this week last year.

And, I agree - its as clear as mud. I have no idea why PS states/infers that a shareholder has become responsible for provision of a portion of the funding as if that were some sort of automatic obligation of a new shareholder. If a separate funding arrangement has been reached with Ganfeng why has that not been explicitly spelt out? Ganfeng are not a lender. They may well have liquid resources themselves or, no doubt, will have access to lenders whom they could bring in but (a) how, on what terms and from whom funding will be provided and (b) how it would fit in alongside the existing Red Kite finance and (c) exactly what numbers are needed [+/- capital cost savings]....all remain a critical mystery.....until then it is not possible to close off the dilution question mark.

Fuku - Thx. Agreed.

To my knowledge there has been no explicit statement around how Ganfeng will fund the project or under what arrangement / agreement / structure / terms etc. Additionally, it will have to fit in with Red Kite (by way of subordinated shareholder loans / inter creditor arrangement) and vice versa.

Long way to go to understand the detail. Also only 2 weeks ago Zinnwald news was to be by mid June. Now it is end of June. PS is very loose with his comms.

Aside the continuing vagueness / execution risk on funding - I like the rest of the recent news.

Well we learnt very little new and he (deliberately?) gave no clarity on the funding structure / status etc. I still do not understand where / how / why the new 29.99% (company level) and 22.5% (subsidiary level) shareholder has committed to provide 50%(?) of the financing.

My e-mail alert says 11.00 BST.

BBN - agreed but should we use post tax NPV of $800m x up to 50% i.e $400m = $2 per share.......potential value is still compelling whatever.

Observer842 - I have to assume that you are right on the treatment of capital costs / debt issue....although, on the other hand I think I should have used the Post tax NPV as the starting point which is $800m.

(What I don't get from the FS is that in section 1.14 it says the (gross) $1.25bn NPV valuation is based on 100% equity funding)

Its tough to judge on the content of the RNS. At face value giving up 45% of Sonora (i.e. existing shareholders end of with 70% of 77.5%) for £21m looks a disaster. BUT dilution is a lot lower than it might have been. My quick and still uninformed read is that there will be 192m shares with a 77.5% interest in a project with an NPV of $1.25bn (say £900m+). Less total finance to be raised and repaid of say $450m (£350m) leaves £550m - £600m for equity of which 77.5% is £450m. That values each share at potentially >£2.25 + Zinnwald.

What I don't like is (a) still no idea about finance (b) option for further massive dilution in the project (c) no idea about Hanwa (d) new DD / timeline re capex at Sonora (e) lots of ongoing uncertainty.