Ironveld Share Discussion Threads

[ladeside] 21/7/2024 19:06

We also weren't notified of the situation / failure of the following which had been previously RNS'd,

The Generators being installed ?

The solar power plant ?

The DMS Magnetite JV ?

Burnstar Hydrogen plant ?

The completion of the third smelter refurbishment ?

The third party smelting contract ?


Lots of stuff which was supposedly taking place but no updates at all.

As it stands right now we've "officially" been told very little / next to nothing but given our serious funding situation it would seem that everything above has either failed or been shelved but given that we've had no RNS to confirm, how the Hell are investors / shareholders supposed to have any real confidence here ??

In reality it would seem that everything we'd previously been told can be treated with a rather large pinch of salt....

[tommygriff] 21/7/2024 14:00

Basically back to where we were at the point of the 'strategic review' about 5 year ago just more shares in issue and tonnes of £'s blown

[al101uk] 15/7/2024 16:37

Still.. it keeps me occupied.

[al101uk] 15/7/2024 16:35

BS Accounting - Yep, we disagree on the technicals, but I'm quite happy to call it out as BS.

Smelter not yet changed hands - Yep, think that's where I fell initially. They do talk about "contingent debt obligations", which would support that assumption... along with the lack of an RNS of course.

The smelter not having changed hands making capitalizing any further Smelter investment stupid - Yep agreed. I'm guessing the reason they got to capitalize the smelter maintenance costs was because they convinced the Auditors to let them add the contingent debt obligation and the smelter as an asset.

Can't afford the £666K completion costs - Yep.

"...they don't officially own the smelter they have spent a lot of money refurbishing!"

And again.... Yep :-)

Not sure I agree with your interpretation on Exp & Eval and the consequences of currency translation. There's a comment in the last full accounts that shows a 17% difference in conversion rate over 12 months. It's f'ing volatile. It's also done at the subsidiary level so I don't think Consolidated accounts would have transparency there... other than a note (which we don't get in interims).

As usual we agree on about 99% of it and argue for pages about the other 1% which as you say is mostly guess work ;-)

[rec0very stock] 15/7/2024 15:53

The bottom line is that neither of us can make full sense of the figures in the interims because they are BS, so we make different assumptions to try to figure out what really has gone on.

The question is does producing BS in your interims enhance or detract from the likelihood that someone will give you a loan once they have done full DD?

[rec0very stock] 15/7/2024 15:50

"You're saying the 24,061 to 27,676 in intangible assets is the company capitalizing work on the smelter."

No that is not what I am saying. I am saying the accounts show £2.8m was capitalised for exploration / evaluation, which should have been expensed in the P&L, not that it should have been capitalised against the smelter, as I don't believe anything like that further amount was spent on increasing the value of the smelter.

In the year to 30 Jun £2.337m was correctly capitalised as refurbishment of the smelter. In the 6 months to 31 Dec the cash flow shows nothing spent on property / equipment, but the asset value of it increased by £200k despite being depreciated by £13k. Foreign exchange differences amounted to £21k, which is about the maximum amount that should be expected (Forex for year to Jun 23 was £1k).

What I am saying is a lot of money got spent in the 6 months to 31 Dec and because there is BS accounting in the unaudited interims we cannot be sure what it was spent on, only that it was spent when they did not have it, which is why payables in current liabilities went through the roof in that 6 month period. Look at the cash flow in the interims it claims £1.608m was generated by operations - that is a symptom of the accounting BS and nothing to do with currency fluctuations.

I assumed the accounting treatment of the smelter was because it had completed between Jun 23 and when the accounts came out in Dec 23. However re reading what the auditor said

"We examined the context of the transactions to purchase FCF and in relation to the smelter. We also considered the related deferred and contingent debt obligations. After appropriate consultation we formed the judgement that the related deferred and contingent debt obligations were liabilities of the Group and should be recognized in the financial statements and as part of the cost of the smelter asset."

An alternative explanation is possible, ie the transaction had not completed (and still has not completed) but they assumed it would before 30 Jun 24 and as £666k was due on completion that was included in current liabilities payables with the rest in non current payables. The alternative accounting treatment would have been to remove the smelter as an asset and a liability and expense what had been spent on refurbishment.

If this alternative is correct (it comes down to whether you assume something has happened but they did not bother to RNS or that no RNS means it has not happened. All we know for sure is they don't and did not during the period have the money to pay the completion amount of £666k or 16m Rand) then they don't officially own the smelter they have spent a lot of money refurbishing!

[al101uk] 15/7/2024 14:30

Net assets increased by £1 million at interims vs full year. That HAS to be currency related because the company hasn't generated any income.

[al101uk] 15/7/2024 14:28

I understand where we crossed wires now.

You're saying the 24,061 to 27,676 in intangible assets is the company capitalizing work on the smelter. I dismissed that because the smelter is an asset and any spend on it should be capitalized as property plant & equipment or entered in to the P&L as an operational expense. Which one of them is correct is up for debate.

I then assumed the move in exploration assets was at least partially down to currency conversion because that was the only other rationale I could come up with. Surely they wouldn't spend on further exploration?

We come at this from different philosophies, I assume the company is acting legally and you assume the opposite :-)

If I were to accept your version of the accounting then I would also have to agree with your assessment of the situation. I think the note you pointed to from the auditors backs up my theory as it says the smelter and costs associated with the work on it should be categorized as an asset with the debt a corresponding liability and it was capitalized as Property Plant and Equipment.

Again, on the legal thing around default, even if you're 100% correct, you still have the added complexity of subsidiary companies, like the one that holds the smelter. These could protect Ironveld and are potentially incorporated in SA.

The Group Structure can be found here:

hxxps://ironveld.com/ironveld-group/group-structure/

Again, all I am saying is that it's probably best not to jump to "the company are breaking the law". That doesn't mean I think what Ironveld are/have done is right or morale.

[rec0very stock] 15/7/2024 12:16

See page 17 of the annual report - £2m of smelter refurbishment cost was capitalised correctly. There can be a debate over whether fixing the already refurbished smelter when it breaks should be capitalised or expensed. The key question is whether it enhanced the value or just enabled it to keep its value. I would suggest the sort of failures that were admitted to in RNSs were just restoring value not enhancing it. There was a small addition to property value in the interims plus a small depreciation charge.



The fact of the matter is that £2.861m was capitalised in the interims when it should have been expensed. I suspect JW wanted to hide just how cash burning the operations were, though anyone doing even the lightest touch DD would see straight through that.

To be solvent you need to have a reasonable expectation of paying bills when due, which is different to can you convince your creditors to give you more time to pay.

With a termsheet, which was expected to lead to a loan in H1 sufficient to pay off all creditors and fund the company's forward activities to cash generative stage, it is easy to argue that there is a reasonable expectation of being able to pay and to convince creditors to give more time to pay.

Now it is clear that at best the loan will be delayed and significantly reduced if it ever comes at all, there is no longer that reasonable expectation. Every day the black hole becomes deeper, which is why directors have a fiduciary duty under the Companies Act 2006 to protect creditors by calling in insolvency practitioners early rather than waiting for a creditor to take them to court with a winding up order. The reality is that most creditors are unsecured and will get nothing from a liquidation. Only the smelter can be repossessed, but even in its refurbished state does anyone want to buy it when the electricity supply problem makes it unlikely it can be run economically - most probably why it was repossessed from its original owners in the first place.

The law on trading whilst insolvent is very poorly enforced, especially in advance, though liquidators may report directors after the company has gone bust. Whether anything then gets done is another matter as so many directors seem to be able to walk away from their train smashes and start all over again. However it has been well over a month since the last RNS and if the Nomad was doing its job they should have been tapping JW on the shoulder. But again Nomads very rarely do their job properly.

[al101uk] 15/7/2024 11:37

Yep...

"The capitalized repair and maintenance must be classified as the assets or part of the fixed asset in the balance sheet. The balance of capitalized repair must be depreciated over the assets remaining useful life."

hxxps://accountinguide.com/accounting-for-repair-and-maintenance/

[al101uk] 15/7/2024 11:37

I'm not an accountant, but if I bought a smelter and spent money on refurbishing that smelter, presumably adding value to it, then that value should be reflected in "property, plant and equipment" not in intangibles and certainly not in exploration & evaluation.

The smelter is a tangible asset and any investment in additional equipment, refurbing equipment etc is more tangible value that all should be accounted for at cost. That would look (relatively) good on Ironvelds accounts, so I don't understand why they would chose to add on a load of intangibles instead.

In any case, we agree on the core of the matter, it don't look good for Ironveld and if there is zero chance of asset based funding before the creditors swoop in then they are trading while insolvent. BUT if the creditors keep extending, which they must have done at least once, then maybe technically they are not. Maybe Ironveld just have the "realistic" expectation that the creditors will extend for a further 12 months?

I'm genuinely not arguing your points on how bad it looks, just the legal threshold to trading while insolvent, maybe because I think JW has a little more integrity that GC.

Maybe I'm wrong, maybe someone will be prosecuted, but I doubt it.

[rec0very stock] 15/7/2024 11:04

I don't think £2m in current liabilities is the smelter at all - the non current would have reduced by the same amount - it has increased presumably due to interest.

What I am saying is £666k was in current liabilities for the smelter at 30 Jun 23 and is still there at 31 Dec 2023 and is still there right now, as they never had the money to pay for it. How much longer are they going to have before the smelter is repossessed?

What has happened is that unpaid bills for mining, transport, smelting (including electricity) and repairing the smelter went up by £2m from Jun to Dec! None of this could or should have been capitalised, but it was as exploration / evaluation and added to intangible non current asset value. I suspect if we ever see audited full year accounts this will be reversed

The company did not just hit the brick wall, yet again, of running out of cash this time, it dug itself a massive cash black hole to climb out of too. It is on that basis that I believe they started trading whilst insolvent as soon as the loan they had a non binding termsheet for was delayed and significantly reduced. There is no realistic option for raising the cash to pay all these overdue bills, if there were then it would have been announced if not actually done by now.

One way or another this latest calamity has happened on JW's watch.

[al101uk] 13/7/2024 13:45

OK, trying to work my way through this, you're right, there is a note in the 2023 annual report that states:

"Other payables include £4,829,000 (R116,000,000) in respect of the proposed Rustenburg smelter acquisition which was unconditional at the year end"

At that time £1.8 million of their liabilities were current, which left £4.162 million of non-current liabilities, a difference of about £600k

At interims those non-current liabilites don't budge, in fact they are up to £4.29 million.

Meanwhile current liabilities balloon to £3.8 million, up £2 million from last interims. The smelter doesn't account for a £2 million uptick in current liabilities nad moving £2 million from non-current to current would surely of caused a down tick in non-current.

On the assets side, the company trades in Rand and converts for the accounts so there is currency movement and it is volatile. I think that's in a note in the annual results, but it's difficult to work out what's going at interims without any notes.

I think in this case I'm more bearish than you, you say the £2 million is a smelter payment that is due, I'm saying it's a black cloud and we have no idea what it is, but there is no dent in the smelter debt.

Look at it another way, total liabilities over 18 months:

Interims: £5 million
Annual: 9 million (they bought the smelter, fair enough)
Interims: £12 million (WTF? Where did £3 million go?)

If it was spent on the smelter to refurb it, then it should show up under "property, plant and equipment surely?

[rec0very stock] 13/7/2024 10:58

Al

"So £4.16 million should appear as a non-current liability at the point the smelter deal is actually signed off and there has been no RNS to say that the deal has been completed yet. Got to admit the wording in the results is terrible."

Agree lack of clarity, but we are used to that. However if you look at the payables under non current liabilities to 30 Jun 23 they are £4.162m, so the £666k was in current liabilities at that point - ie definitely overdue now. I think proper completion actually occurred between 30 Jun and when results were published in Dec 23 but as the payment was due on completion, it was put in current liabilities in the full year results.

As payables in non current liabilities increased in the interims to £4290 I am assuming that is interest accruing on the smelter loan.

It is also worth noting that £2.861m of expenses were capitalised in the interims as "exploration and evaluation assets" we know this is BS and therefore the intangible non current assets have been artificially inflated (how many times has that happened in the past?). This, alongside the failure to pay bills (current liabilities payables went from £1.862m to £3.818m and as discussed above the smelter payment was already in the £1.862m) leads to the laughable situation of claiming cash generated from operations of £1.608m on a gross profit of £286k.

None of this is going to look good when looking for further finance.

[citys2874] 10/7/2024 10:11

blakesmith up 18 percent now ....this is moving on up and the party just started ....lol

[citys2874] 10/7/2024 10:10

5.00 taken out

[citys2874] 10/7/2024 10:09

moving up strong now breaking out

[citys2874] 09/7/2024 10:39

MMS READY AND PRIMED TO TICK UP

[citys2874] 09/7/2024 10:17

In the top 60 gainers on the leaderboard now moving up

[citys2874] 09/7/2024 10:09

full ask being paid

[citys2874] 09/7/2024 10:01

buying pressure building up

[ladeside] 03/7/2024 15:11

Yes Al, It's all very sketchy and pretty difficult to ascertain what is actually going on.

Despite my long term "Bullish" stance, I completely agree that things are looking grim and can see no reason why we'd suddenly receive life saving funding when we're looking down and out, as opposed to when everything was supposedly looking good ?

In a nutshell it looks like ME / GC completely overstated and then totally under delivered and we're now left in a situation where the whole project looks doomed as it appears to be uneconomical on any terms, that is, unless someone who can see a benefit comes in and buys it out for a pittance.

Either way, long termers are screwed and I suppose the toss of the coin is whether folk buying in now double / triple their cash or lose the lot.....

[citys2874] 02/7/2024 15:33

mms looking to tick up expect this week this to see a major breakout up

[citys2874] 02/7/2024 08:18

up 3 percent