Ironveld Share Discussion Threads

[al101uk] 31/10/2016 14:23

Clearing the SVS Securities stock?

Much like what happened with KENV would be my guess.

[bigwavedave] 31/10/2016 14:12

There seems to be a significant amount of buying. No movement in price though.

[al101uk] 28/10/2016 11:51

taudelta1,

I hadn't realised that the original plan was based on pig iron production, that makes complete sense and is obvious when you think about it.

I agree, I suspect expansion plans will resurface once we're up and running.

South Africa imports all of its HPI, I doubt our little smelter will put a dent in that market, plenty to play for :-)

I say we/our despite not owning any shares in the company at the moment.

[taudelta1] 28/10/2016 11:08

al .. yes, been around for a long time and remember the plans for the big smelters .. wish I had copied the stuff from the website before it disappeared ... wonder if a more modest plan could materialise in due course, i.e. simply a doubling of smelting capacity by installing a second identical to the first ... that could be financed from cash flow once the principal on the main loan is repaid, which shouldn't be too far down the road if all goes according to plan. I'm assuming that a second small smelter would produce for HPI, think the HPI market is sizeable enough ... whereas the original large smelter plans were for pig ("pre HPI"), i.e. when pig prices were high ...

[al101uk] 28/10/2016 09:23

Answered decisively

The clauses below apply to this recommendation:
1. SVS Securities Plc (SVS) is acting as broker, market maker or placing agent.
2. SVS has previously acted for the Company as broker, market maker or placing agent within the last 12 months.
3. SVS holds 0.5% or more of the Company’s total issued share capital.
4. SVS holds 5% or more of the Company’s total issued share capital.
5. SVS and or its affiliates, holds options or warrants in the Company which on conversion would represent 0.5% or more of the
Company’s total issued share capital.
6. The authoring analyst or any associate of the authoring analyst has a long or short position in the Company’s securities held
directly, or through derivatives.
7. A director, officer, employee or agent of SVS Securities Plc is an officer, director, partner, employee or agent of the Company

[al101uk] 28/10/2016 09:14

Hmmmm... the next three companies I looked at on their list all had recent placings:

hxxps://svsxo.com/research/reports/edenville-energy
hxxps://svsxo.com/research/reports/noricum-gold-2
hxxps://svsxo.com/research/reports/kennedy-ventures

As do the next four, it seems my guess is at least reasonable. It seems they are GC's broker of choice, KENV and IRON on there.

[al101uk] 28/10/2016 08:56

Flipping from the placing?

The RNS said Institutional Investors "and others".

Don't look like flippers but I have done no research, other than to see their website:

hxxps://svsxo.com/research/reports/ironveld

[annie38] 27/10/2016 20:05

Possible explanation:

"I just bought in here today through SVS Securities. They have been getting a lot of people involved in this one. May be a factor in the high amount of buys."

[annie38] 27/10/2016 15:46

Great to see such an increase in volume, but why on earth the sudden surge in activity today after months in the doldrums ? There must however be a large sale lurking in the background. Perhaps we could we be off to the races once it has cleared.

[taudelta1] 26/10/2016 17:18

Thanks al, interesting ... I arrive at a similar figure using estimate of cash flow over a 20 year horizon, using a discount rate of 20% (very high because of the various risks, including the HPI price!). Ignores any potential from further smelters, given they have way too much mineral deposit for the one ...

[al101uk] 26/10/2016 14:51

Yep, modelling in Rand.

It's still a stab in the dark to be honest, but at least it's an informed stab in the dark ;-)

It's also not my preferred way to do a valuation, in fact I've compromised in pretty much every part of it.

But for what it's worth, if everything comes good as expected with no more hiccups I forecast fair value at around 15p at the start of production.

The biggest problem with that price is that it assumes an HPI price I'm not entirely comfortable with given the length of time they took making the deal and the fact that they ended up with the same company they are already doing business with for one of the other offtake agreements. Feels like they thought they could do better and had to go back cap in hand when they couldn't (my narrative).

Edit - Let me clarify, this isn't a valuation, I've priced Ironveld at 15p (if you want to know the difference Youtube Aswath Damodaran.

[taudelta1] 26/10/2016 14:35

al, if you are modelling in rands, then yes 15%, but if in $ or £, think that would be high ... reason ZAR interest rates are so high is that it's a chronically weak currency .. so looked at in $, the 15% rand rate would be effectively reduced by potential currency gains on the principal repayments owing to prospective decline of ZAR vs $. GL

[al101uk] 26/10/2016 13:58

Interesting:

From the RNS

"At the time of the acquisition of the assets of the Ironveld Project from the Sylvania Group in July 2012, the Company entered into a loan facility of R15 million with Sylvania Metals Pty Limited ("Sylvania"). Under the terms of the Loan Facility the Company undertook to grant Sylvania warrants as a guarantee. The Loan Facility, which now bears interest at 4% above the South African prime rate."

From Google...

"Bank Lending Rate in South Africa remained unchanged at 10.50 percent"

Think I'm going to put 15% in to my model for interest on debt and 4.5p as the fund raising price. That replaces a previous assumption of 10% and 5p.

[paleje] 26/10/2016 13:58

Bit annoying that they're still a way off finalising. No use listening to their words they have no concept of normal peoples' time. They wouldn't have needed this mini raise if they were that close. The good thing is Clarke and Harrison are partaking so buying now seems safer than it has for ages.

[bigwavedave] 26/10/2016 13:26

So, there's the placing. At a discount, inevitably. At least GC and NH have bought some. Great to the dreaded word "imminent" included in the RNS...

[al101uk] 25/10/2016 08:58

Must be my PC, I get "onedrive.live.com unexpectedly closed the connection."

Got it on my phone and the numbers are substantially different to the ones in the DFS. Titanium & Vandium are down as 50% of what I had (tonnage mined).

I'd discounted the price of Vanadium because the purity was less than the purity of what I'd seen quoted on the spot price, they have assumed full price (they know far more than I do about such things).

They have a price for Titanium that is not much more than half of what I had, but their Iron price is 20% higher.

The overall result is that revenue on byproducts is only 75% of what I had forecast and the reliance on HPI is far higher. On the plus side revenue gained from selling the HPI (assuming they achieved the price in the presentation) is also far higher.

I've played around with debt equity mix and it does make a difference, but by far the biggest risk here is going to be the price achieved for their HPI. So I guess the best way to look at this is going to be to take your required return and then work out what price our HPI would have to achieve in order to get that required return. The return obviously has to include the risk premium on funding the project while that is still outstanding along with the execution risk on the project.

Thanks for the link!

[callumross] 25/10/2016 08:34

here is the link;

[al101uk] 24/10/2016 23:09

Got the number for ebitda from the DFS RNS. I knew there was a presentation out there, but the link on the website won't work for me, anyone got a good link? To be honest I've probably run these numbers before, but this has been ongoing for so long I've forgotten my investment case ;-) Thanks for the revised numbers, they will certainly make a difference. I'd assumed revenue in Rand, but converted to sterling for ease of reading.

[callumross] 24/10/2016 19:45

Yep - profit before tax forecast as 22-23 million dollars each year for the first 6 years of the project which is also the profit after tax due to tax allowances. In year 3 onwards profits are forecast to ONLY be $16m dollars per annum due to tax starting to be paid. These figures are AFTER interest payments. Of course much can go wrong in execution and obviously we are already running months behind schedule but remember that these figures may be on the low side now due to the exchange rate translation into sterling. Don't know where you get your figures for PBT from Al, but they are a huge underestimate (at least, based on forecasts).

Just a guess but lets assume they raise £15m by the issue of 300m shares at 5p, being equivalent to a 1 for 1 rights and total shares of 628m. The remaining £20m being debt. Then $22m dollars profit would equal approx. £18m divided by the shares in issue comes out around 3p EPS annually. Even a derisory P/E of 5 gives a share price of 15p and don't forget that this is only the preliminary project with a much bigger scale project to come! Lots of assumptions made by me here but it does give an indication of the potential value for equity holders of the project once up and running.

[annie38] 24/10/2016 17:17

Lifted from another thread without authors permission. Sure he/she wont mind !

Al: This may have some bearing on your calculations ?

"I have been advised all material revenues for Ironveld will be in $. Ironveld forecast $24.6 million profit in it's first full year of production (see investor doc Nov 2015 on ironveld.com). That profit would have produced £15.77 million profit based on the then exchange of $1.55 /£. However if you apply the current exchange rate $1.21/£ it will increase profit to £20.33 million which is a 28% increase."

[al101uk] 24/10/2016 16:17

Interested in anyone else's efforts to value this company assuming we get up and running and produce according to whatever you have as latest numbers?

The reason I ask is because I can't make the numbers make sense as a shareholder proposition and I'm trying to work out what I'm missing.

Does anyone have an EBITDA number that is in excess of the DFS from 2 years ago (Just over £8 million)?

If not then what discount would you apply to get to net profit (numbers for Interest, Tax, Depreciation and Amortisation)?

I've assumed 10% interest rate, which seems generous.

Assuming all funding is through debt (which it won't be), I make it:

Project Funding: £49.6 million
BBBEE: £12.4 million
Ironveld: £37.2 million

The 'I' in EBITDA then would be £3.7 million, bringing the 8.1 million (from memory) down to £4.4 million

I suspect tax and royalties will be in excess of 30%, but lets assume 30% and say £3 million after Tax. Amortisation and depreciation we'll set at £0.

328 million shares in issue, giving EPS of 0.9p.

These are VERY broad brush numbers, but no matter how I play with them I can't make a case for buying back unless I increase the prospective EBITDA from the DFS.

If I start using equity the numbers look worse and 0.9p is very much a base case, I'm using what I would consider best case numbers.

What am I missing?

Or are people taking a longer term view?

Maybe a forward PE of 5 given the risk suits people?

Honest question as contractors have taken payment in shares as have the board, so there must be something I'm not seeing.

[underhill2] 24/10/2016 14:06

Annie - 38You need to be very patient here. There could be a rights issue at some stage to be part of the fund raising. The big question is at what price.News is very very slow here which is the norm as with Amerisur.2018 could be the year we see real gains here.This share is not without risks. As they say you have to speculate to accumulate. I'm certainly not adding to my ho!ding until we see news that all the finance is in place

[annie38] 24/10/2016 13:16

Having offloaded some at over 6p recently, hoping to get the opportunity to buy back at nearer 5p. Wont have to wait long by the looks of things !

[paleje] 14/10/2016 08:10

Thanks al, I hadn't seen the mineweb piece.

I hold a bunch of ex specie shares plus a few I added, I'm keeping but not adding until the equity raise.