Ironveld Share Discussion Threads

[rec0very stock] 11/10/2022 20:31

Time will tell. We ride the waves as we see them and take the consequences of our own investing decisions - my decisions to sell when I did seem to have worked out very well for me so far, even though I took a very small loss.

We are now approaching 6 weeks from when we were told the DPA would be done in 2-4 weeks.

There is a £6m funding black hole to fill somehow, if the DPA does happen.

I remain very happy with my tiny shareholding and am not tempted at all to average down as that is a fairly sure way to end up taking a much bigger loss, because you only lose if you sell is a lie and there is not reverse Newtonian law that what goes down must go up.

[al101uk] 11/10/2022 20:03

If you base your assumptions on the note from a while ago, but factor in a placing for working capital you can get an idea of a basic valuation.

I'd use a placing price of around the current share price, that means an additional 1.56 billion shares. I'd use the notes estimations for their discounted cashflow at around a 10% discount (I've used something between 8 and 10 for simple numbers and rounded at 1p per share on current share count).

That means with an increased sharecount of 4.46 billion shares in issue the discounted cashflow can be re-adjusted to 0.65p per share.

I'd say this is the central case.

Obviously worst case is the smelter deal doesn't complete and on that basis I'd value the company at a million quid, but to be fair writing off your capital at that point is probably not unreasonable as substantial further capital investment is likely... I'll use 0p because it's easier and it's close enough.

Best case is probably a placing at something above 0.25p, if we assume the price doubles on sentiment when/if the smelter deal is done, we get half the dilution and a valuation based on that of 0.78p per share.

...and now arbitary percentage chances:

Lower Case: 25%
Central Case: 50%
Upper Case: 25%

So on a risk weighted basis that gives a current valuation of 0.5p per share.

On RS's metrics, I reckon he'd come in at 0.03p per share or lower (5% chance of mid case) which is a market cap of £500K.

I reckon Ladeside will have a scenario better than the ones I show, but probably comes in mostly on the upper end at 0.78p.

Remember this is a risk adjusted valuation, it's not where you expect the share price to be, the situation changes, Ironveld likely won't stand still once the deal is done and will be looking at ways to increase capacity further... they may do some other financing deal to get the working capital... but these seem like small percentage chances at this point in time and are not things the company has hinted at or that are mentioned in the note.

Also, just because I've put a valuation of 0.5p on the share doesn't make it a buy. You have to factor in volatility, risk and management history. This is just a base case from which to work using only the fundamentals of the business. Personally I wouldn't buy the company until I know they are fully funded to profitability, but that doesn't make it worth nothing.

edit - I didn't even really think much about my percentages, so I wouldn't assume them as my view, more an illustration.

Looking back I'd probably use a higher discount rate than 10% in the current environment.

[al101uk] 11/10/2022 17:33

Ladeside,

"Let's look back a few months when we were trading at 1.25 and the story was less complete than it is now"

I didn't pick £44 million market cap from nowhere :-)

Bit weird that you have a £44 million explicit target while RS has a £200 million implicit target. Not sure why you don't get along.

[ladeside] 11/10/2022 11:01

Al, we can only hope that our board and Management are competent and are going to produce what ultimately is part of their basic job description / responsibilities and as such the share price will take care of itself.

I'm in no rush and I've already encountered the dilution and subsequent share price crash, so as I've said often before, I've now re-based my expectations and averaged down accordingly, it may not be the result that I had once hoped / dreamed of, however at current prices given the fact that we have no debt and have over £4 Million of funding already in place, then I see significant value on any purchases made around this lowly share price

Price targets are pointless as the story unfolds both positive and negative and any assumptions made right now can look bloody stupid 6 months in the future, however I maintain that there is much value to be had at the current share price and I'll leave the crazy price targets to those with the outrageous thoughts and sinister agendas ......

[ladeside] 10/10/2022 20:06

I have been.

[rec0very stock] 10/10/2022 18:30

"we have £4.5 Million in cash" No you don't the net proceed would be around £4.25m and just over 2 months of expenses have occurred since then.

Every day that passes cash gets less and less. Yes if they just spend it in the way they have been for the last 8 years it might last 3-4 years. If the DPA and therefore the smelter fall through, then the best hope for shareholders is for GC and ME to go, someone else to come in and reverse in some worthwhile assests that might be able to use what is left to reach cashflow positive at PLC level. If the DPA does go through then the £6m funding blackhole needs to be addressed. Relying on Grosvenor or some other white knight to do that without massive dilution is just fantasy. But please continue to think in bull market insanity terms and kid yourself it will all be ok because GC is a business genius / wizard. Why isn't everyone averaging down at these crazy prices? You only lose if you sell and what ges down must go up.

[ladeside] 10/10/2022 17:55

There's so much wrong with these arguments that I don't even know where to start.

First off, I don't for one minute believe that Grosvenor will invest in anything above 0.40, however I DO still believe that something will happen in this regard and knowing GC he'll no doubt announce the DPA ALONG with something else which will be seen as left field.

Next off, we have £4.5 Million in cash IF worst case scenario the deal doesn't complete so we certainly wouldn't be going Bankrupt / ceasing trading any time soon, that's for sure.

As for being doomed and unable to raise any more cash if required, again I'd say that was utter nonsense as the current investors are obviously happy enough with the story and if required would be both willing and able to participate in another placing for 0.25 to 0.30, I know I would.

The other big issue I have with the "calculations" is that everything is being calculated on current mcap and current sentiment when the reality is that both of these things will undoubtedly change in the future as they do in every company.

Let's look back a few months when we were trading at 1.25 and the story was less complete than it is now, I can't remember any of our resident doomsters telling us all that we'd be worth 0.20 or going out of business at that point ??

Basically a share price is only a snapshot in time and only reflects the current sentiment and the newsflow at that point, so if anyone believes that this is it and we'll never see another upwards spike then I really think that sharedealing isn't the game for them.....

[purchaseatthetop] 10/10/2022 07:27

It’s not quite so simple Malcolmmm. They have the money to do maybe 40% of what they need to do. The cost of absolutely everything they need has doubled in the last 18 months and the availability of funding has collapsed with the world going into a deep recession. Nothing is going to happen except Directors will get paid.

[malcolmmm] 10/10/2022 07:05

They have a he money,the deposits,the licences,the smelter so why don't they dig the stuff up???????

[malcolmmm] 09/10/2022 19:48

Mark Twain said a gold mine is a hole in the ground with a liar sitting on top

[purchaseatthetop] 09/10/2022 19:02

Mark Twaine described a mine as a hole in the ground and it’s owner is a liar. IRON does not even have the hole in the ground. It is not a matter of wondering why this share might go to 0p. It is trying to work out any way that it will not go to 0p.

[al101uk] 09/10/2022 11:21

Easier way,

You say 20% discount to cash... lets say that's £2 milion for the sake of argument (I've tried to pick a number on the lower end).

Let's assume an almost certain bankruptcy, 99% chance of failure.

So 99% chance of 0p, with a 1% chance of success means that your estimation of success is an average of a £200 million market cap before you apply any kind of expected return discount.

That seems generous and I've probably underestimated your cash value and your chance of failure... both of which would push your potential upside further.

[al101uk] 09/10/2022 11:04

I'm going to just cede your point on rule 15 RTO's, I spent literally 30 seconds googling and I don't think it's worth any more of my time, particularly when you've come up with a number that isn't 0p. You could easily be right, it's not something I've looked at recently.

"I would put it at a 20% discount to the remaining cash"

I think your valution is generous given what you say above. That might be beacuse there is no narative behind it and no chance of success.

"There are several routes to 0p, it's just a matter of how long it takes"

I don't agree, but then neither do you?

"It will happen if there is no positive cash generation"

I agree.

"There is a funding black hole"

I agree.

"Relying on Grosvenor is a bad idea"

I agree

You also imply that your narative for 0p is based on Ironvelds inability to get funding. That chance is subjective so you don't want to offer that as part of your view because other people should make their own mind up. On that basis you shouldn't be offering any subjective view on the company at all or it should be an adendum to things that you consider less subjective.

You've made the step of giving Ironveld a positive value, weirdly it's an absolute based on no future projections and no discount other than an arbitary 20%... but it's not 0p.

Maybe it would be better if I showed what I mean... I'll be back.

[rec0very stock] 07/10/2022 17:46

Al,

Catena was never an AIM Rule 15 Shell - what happens when an AIM company either sells all its assets or simply closes them down. Your statement was "In fact we can discount 0p entirely because a debt free AIM shell has value." and I asked "Can you provide an example of an AIM Rule 15 shell sucessfully RTOing in the last 2 and a half years ie since COVID?"

There are no certainties in any of this. There are a number of routes to 0p for IRON it is just a matter of how long it takes (could easily be 4 or 5 years away but it will happen if there is no positive cash generation at PLC level), but once suspended (which can happen much sooner) investors can no longer make their own investing decisions - they are trapped. There may be other routes to cash generation, but all require the £6m funding black hole to be filled and filled very soon. The auditors won't be able to ignore it when they sign off the annual report in Dec and despite whatever bluster GC / ME comes out with in their going concern statement, the auditors will need to make their own emphasis of matter. The impact on the share price of that would be immense. In a bear market trying to raise more than your own MCap in a placing? Trying to get proper loans without a DFS? Relying on Grosvenor coming up with the dosh? I have a strong sense of deja vu from a year ago. The truth about the dire funding situation may well come out before the annual report if the DPA does not happen soon - the company is already in breach of AIM Rule 11 yet again and rule breaches and time and cost overruns do matter a lot.

I would not want to try to put a probability on the risk of 0p, people need to work it out for themselves, remembering you only lose if you sell is a lie and the reverse Newtonian law does not exist.

As far as current value is concerned I would put it at a 20% discount to the remaining cash - don't know exactly what that is, but it is less than the £4.25m net proceeds from the August placing.

[al101uk] 07/10/2022 14:23

"0p is the ultimate destination for any company that never generates any cash"

Your implied assertion is that Ironveld has a 100% chance of never generating any cash, but then you say to Ladeside

"you seem to be correctly grasping at the only remotely possible straw by which IRON would stand a chance of making it to positive cash generation at PLC level"

Which implies you think the chance of failure is not 100%.

If the chance of failure is not 100%, the company carries no debt and the company has capitlised assets that have value then the valuation of the company is not 0p.

We've established that all of this is true, so the present value of the company is not 0p. We can talk about the likely future outcome until the cows come home, but that just takes us to the "multibagger" vs 0p argument... which is honestly f'kin exhausting.

[rec0very stock] 07/10/2022 12:35

LADESIDE,

I would not be surprised at all if news on DPA came at exactly the same point as news on Grosvenor, if that point is NEVER. However you seem to be correctly grasping at the only remotely possible straw by which IRON would stand a chance of making it to positive cash generation at PLC level, which is why you have convinced yourself that that must be what is about to happen. There would be further massive dilution - I doubt Grosvenor are a charity and their creditors definately would not be.

It is interesting that those who do worry about things like the a company breaching AIM Rules and not following standard industry practice (like producing a proper DFS) and not doing what it says it will in the timescales it says are either not invested or have a very tiny investment. And even more interesting that those that don't care about such things have big holdings which they add to to lower their average believing they only lose if they sell and in the non existent reverse Newtonian law that what goes down must go up.

Al,

From what you get in a firesale you also have to deduct all the admin fees for what happens next - if it is a return of cash to shareholders, the fees seem to soak up a massive amount and it is the same with other routes. I have bought shares for less than net cash in the bank after an asset sale (not a fire sale) and still had a 0p.

As far as shells being worth something, I am not convinced that is true anymore. Can you provide an example of an AIM Rule 15 shell sucessfully RTOing in the last 2 and a half years ie since COVID? I have seen a number of failed RTOs where investors are trapped in an unlisted company that has nowhere to go except 0p eventually.

0p is the ultimate destination for any company that never generates any cash, the debate is only around how long it takes to get there. The ones that take forever to get there after trading has been suspended are even more annoying than those that implode rapidly thereafter, because you can't crystallise the loss to offset against CGT (assuming you have some decent investments to sell, which would push you over the allowance and therefore you have a CGT liability to offset in the first place). The number of companies on AIM has shrunk due to greater outflow than inflow. A big chunk of that outflow is 0p's.

[iceagefarmer] 06/10/2022 20:12

i think Giles will prove the doubters wrong here...expect a 3 bagger within the month

[ladeside] 06/10/2022 17:43

I was expecting an RNS this morning but perhaps tomorrow or early next week now.

I'm an investor and I don't have any serious concerns about the News over run, bizarrely those who have no financial interest here seem to be extremely concerned about this.

Strange you may think ??

Anyway, don't be surprised if there's news on Grosvenor alongside the DPA deal confirmation.....

[al101uk] 06/10/2022 17:34

The question to ask when looking at NAV is what would it be worth in a fire sale.

And the answer is more than 0p or a range that starts at 0p? In fact we can discount 0p entirely because a debt free AIM shell has value.

"I don't like mining companies that capitalise lots of exploration expenditure, it should have been depreciated much more aggressively or simply written down"

Accounting should represent the companies situation as a whole. I'm not sure how writing down the companies assets to 0p is accurately representing the company. How would you tell the difference between a company with a JORC compliant resource and a company that has a spade in the shed if you immediately write down all Capex?

If you want to reprice the companies assets, by all means try, but you need to come up with some other way of doing so objectively.

[al101uk] 06/10/2022 17:14

Still the best out there on valutaion:

[al101uk] 06/10/2022 16:51

purchasethetop,

A CAPM Beta is a volatility measure (sudo measure of risk). It measures company volatility against market volatility. A Beta of 1 would be something that tracks the market perfectly. It's added on to the Risk Free Rate and the Equity Risk Premium.

Not sure how that's affected by balance sheet entries?

[rec0very stock] 06/10/2022 07:47

Yes usual distraction tactics. Where's the DPA? which is now 25% over the maximum length of time we were told it would take.

RNS 31/8/22:

The only condition precedent in the SPA is the signing of a Debt Purchase Agreement between Ironveld Smelting and the sole creditor of FCF for a total of ZAR 115 million (approximately GBP5.75 million) and this condition precedent is expected to be completed in the next two to four weeks.