Ironveld Share Discussion Threads

[ladeside] 21/12/2023 15:22

Funding transaction with South African financial institution

As of the approval of yesterday’s FY2022/23 Financial Statements, Ironveld had not signed definitive documents,but the Board has expressed reasonable expectations that a significant funding transaction with a South African financial institution, which has been in process for a number of months, will be concluded early in 2024.

The size of this facility, which is likely to be based on competitive interest rates/repayment terms, has not been disclosed, but is likely to be sufficient to cover all planned capital expenditure (including new equipment to produce HPIP)
and other costs/facilitation associated with the ramp-up, together with a modest reserve to cope with any further unexpected events.

This funding is expected to be sufficient to transition the Group’s substantial, shallow magnetite ore resource (56.4million tonnes of grading 1.12% V205 which is approximately twice the grade of other Vanadium resources currently being mined/processed within the highly productive Bushveld Complex) and Rustenburg smelter facility, into one capable of producing high volumes of value-added metal products, specifically high purity iron (‘HPI’), high purity iron powders (‘HPIP’), vanadium slag and titanium slag. With established infrastructure and globally recognised offtake partners/sales agreements for all products already in place.

Ironveld is expected to become cash generative within its first year of volume production. Recognising the opportunity for significant future expansion, the Board
has already agreed a three-phase expansion plan that utilises free cash flow to fund development of a materially expanded smelter operation. In the short-to-medium-term, this could include complementing the existing 7.5MW capacity FCF smelter complex (whose c.20,000tpa capacity is expected to provide a platform for organic growth via demonstration of initial production and sales) with a 15MW (or larger) unit located next to the mine site as a means to effectively treble output.

Beyond this, the Group’s longer-term objective, which would be supported by a full DFS,is to add as many as four 75 MW smelters also on the mine site, which could enable it to become one of the world’s larger international HPI/HPIP producers, in competition with existing market leaders that include Hoeganas, GKN, Kobelco, RTMP and JFE Steel.

[ladeside] 21/12/2023 15:16

Operational highlights

• Rustenburg smelter refurbished and mining activities commenced during
the period, marking Ironveld’s first steps from development to production;
• Initial production achieved at smelter, but operational challenges and
modifications delayed anticipated post period ramp up late in 2023.

Financial highlights

• FY2022/23 produced Ironveld’s first modest revenues of £103k, which
delivered a gross profit of £74k (implying an exceptional 72% gross
margin);
• Administrative expenses for the period spike to £1.3m (FY2021/22: £0.8m);
• Full year net loss of £459k ((FY2021/22: £811k) including tax credit of £711k
(FY2021/22: nil);
• Group borrowings eliminated during period (FY2021/22: £499k);
• Subject to it securing the proposed direct institutional funding early in
2024, Ironveld should have a forward cash runway of around 12 months.

[ladeside] 21/12/2023 15:14

TPI retains its £30.7m DCF valuation for Ironveld

October’s successful £1m (gross) fundraising, along with the Group’s existing Working Capital Facility, are expected
to provide sufficient resource to meet ongoing operating costs while negotiations to secure the direct institutional
funding continue. This will then facilitate planning to rapidly scale up volume throughput, leading to significant
cash generation. With strong customer interest in Rustenburg’s output, Turner Pope expects Ironveld to finalise its
initial HPI (and prospectively an even higher margin HPIP) sales contracts on advantageous terms early in the New
Year. Meanwhile, having been impacted by extended delivery times for critical electrical components, the Group’s
Ipace DMS Magnetite joint venture is now progressing once again, with first production expected to be shipped and
sold by late-January 2024.
Having surmounted all major technical challenges at Rustenburg, with on-site feedstock stockpiling underway and
sale prices guaranteed through existing offtake agreements amid firm markets for the Group’s range of metal
products, it is reasonable to believe that the proposed funding arrangement will be transformative for the Group.
Today’s Financial Statements not only lend additional support to the expectation that Ironveld can become cash
generative within its first full year of production, but also continue to build credibility into the Board’s ambitious
medium to longer-term vision of building a much larger, scaled-up production facility. Having reflected on the
teething problems encountered to date and the Board’s plans to quickly resolve all such issues followed by
expectation of escalating medium-to-longer term throughput, TPI will not, at this time, be revising its existing
prudent financial model for the overall project, although it recognises there may be opportunity to move it upward
once the plant has been fully commissioned and its financial benefits demonstrated. In the meantime, based solely
on the smelter’s first phase of proposed commercial expansion and utilisation only of existing wholly owned plant,
TPI derives a £30.7m DCF valuation for Ironveld, which remains around four times the Group’s current market
capitalisation.

[al101uk] 21/12/2023 14:47

Ladeside,

That's a brave prediction, but as RS says wouldn't that run foul of takeover rules at 50%?

Maybe debt or the sale of a share in some assets might be the solution... so the funders get x% in the mining rights for example.

[ladeside] 21/12/2023 11:35

AIM made the rod for it's own back with a string of high profile deceptions which were nothing other than criminal, as a result many PI's have just lost complete interest and are instead investing in the safe haven blue chips for the dividend returns and who can blame them.

There's virtually no regulation and there's certainly no repercussions for those who lie and cheat their way to riches at the expense of the PI. Forward sold placings at mates rates, insider dealing, and lying boards all add to why people have lost faith. Companies simply aren't being valued correctly and the market has now become a hindrance as opposed to a positive way of raising money and profile.

For what it's worth I can see a cash injection of £5 Million at around 0.25 which would give the "funder" a 50% stake and put our shares in issue up to 6 Billion.

It would still be a poor deal for shareholders but as we stand right now it would be a 33% premium to current share price and of course we all know that we NEED the HPI powder otherwise we're struggling to break even at current costing and margins.

If 0.25 or higher cannot be achieved from the outside agency then I'd rather the company looked internally to raise the cash required at 0.20 from the existing shareholders as I reckon this could easily be achieved.

[rec0very stock] 21/12/2023 06:41

Al,

You are right - as usual the company uses woolly terminology so nobody knows what is really going on. I assumed a loan with security over all the assets (Grosvenor, who supposedly introduced the funders, were looking for a loan). Under takeover rules anyone taking more than 30% would have to make an offer for all the share capital. Putting money in as equity would leave the investor just as vulnerable as other shareholders if it still does not get to cash generative at PLC level production (there are no guarantees with HPIP pricing as there is no organised market)

The only thing we do know for sure is the company is and will continue to burn cash whilst only producing HPI (it is not even doing that at the moment - putting the smelter on care and maintenance basically tells you it burns significant cash at the gross level and getting cheaper electricity won't suddenly make it cash generative at PLC level).

It is good the JW is trying to get a grip of costs, but fairly abysmal that the company never had a decent handle on its costs - even I could see that it was just going to burn cash ad infinitum until they could raise the CAPEX and working capital to get to HPIP. As the company will go to 0p eventually without the full funding needed, however much that is, I agree whatever it takes to get full funding rather than doing keep the lights on placing will be the best option for current shareholders, who don't just sell like I did 2 years ago at over 4 times current SP

[al101uk] 21/12/2023 00:26

Anyone looking in on Kazera? If you think it's a bit mad here, it's absolutely insane over there!

Some company just bought 26% of the shares in the company for 1.5p each and the share price went down from 0.55p to 0.53p :-/

Meanwhile the company sold Aftan for $13 million, have recieved $2.3 million of it and will end up either keeping the money and the asset or receiving the balance at some stage, yet they have a market cap of under £5 million.

They also have a business that looks at least as close as Ironveld to production with their Heavy Mineral Sands.

And it should all come together in 2024.

Obviously no one believes a word of it.

AIM is a crazy place!

Not invested and not a recomendation.

[al101uk] 21/12/2023 00:08

RS,

They don't actually say directly what the financing arrangements are, I assumed that a "direct institutional funding transaction" would be a placing, could be wrong.

I used made up numbers to get away from arguments over the quantum of any funding, Ladeside pulled me up on the 50% share that I used, so I tried to respond with figures that I thought might make sense to him. Honestly it doesn't really matter what number the funding is, there are things that are known that you can use to model and test your own valuation methodology.

Again my point is that using net asset value as a basis for claiming Ironveld is a no brainer is flawed, that's all I was really saying.

If they put £4 million in to the company they would get around £10 million of the net assets, leaving long term holders with £14 million (just under £2.50 of assets for every £1 in current market cap).

It could be argued that even at the level you talk of, if that see's them to full profitable production as they forecast and they can prove up the value of their assets as a result that would STILL be a good result for shareholders.

But that's still too many if's, but's and maybe's to use net asset value as a valution metric for me, because what you say is also true... an asset that doesn't generate any cashflow isn't worth much in a fire sale.

[rec0very stock] 20/12/2023 21:53

Al,

Including working capital to get to profitable HPIP production would require at least £4m.

I cannot see them raising that much in a placing. If the loan does not come through then there may be a few more keep the lights on placings, but with about £5m of debt already on the smelter and despite the cost cutting exercises the expectation that with HPI alone they will continue to burn cash at PLC level, this is on a pathway to an ultimate 0p.

[al101uk] 20/12/2023 19:29

To be very clear, I think a placing with an institution at todays share price that gets them over the line and in to profitable HPIP production would be good for shareholders and the discount on assets isn't worth a damn.

[al101uk] 20/12/2023 19:28

I didn't mean to insinuate that any placing would be at such a discount it was just an example with simple numbers.

Ironveld currently have a market cap of around £5 million and net assets of £20 million at last results. If a placing is done at todays share price the buyer gets a 75% discount on the assets.

I don't think it's unreasonable for Ironveld to raise £2 million which would reduce the assets held by shareholders by nearly 25%.

£7 million market cap, £22 million of assets is £3.14 of assets per £1 spent vs £4 of assets per £1 spent before the placing.

I think valuing a company like Ironveld on it's declared net asset value is a bad idea and there is currently no other way of valuing the assets (or the company for that matter). I'm just trying to explain why I think that.

[ladeside] 20/12/2023 18:25

I don't believe we are in such a distressed state that we need to or are likely to hand the company or half the company away for peanuts.

Things obviously aren't ideal just now but we're certainly not in a COPL type situation where we are backed into a corner and can't service debt.

[al101uk] 20/12/2023 13:40

My opinion:

You wouldn't spend time changing your means of power generation to something cheaper if you planned on replacing it in the next three months. Equally you wouldn't change the means of power generation at this stage if you are producing adaquate free cashflow with the current set up.

The institutional funding is unlikely to be at a price that has any relation to the assets book value. As a result current shareholders will be left with a smaller percentage of the companies assets than they had previously.

ie: I have an asset worth £100, I sell 50% of that asset for £10, there are now total assets of £110, of which I own £55. The bigger you believe the discount to be, the worse the hit.

This can be done (has been done) multiple times potentially wiping out sharehodler value long before any sale.

There are other considerations:

Book value is allocated by means of referring to the capital spent on the project. Revaluations are subjective and at the managements discretion. Anyone think management have any incentive, unless forced to do so, to write off any of their shareholders invested money?

I think the term used when describing if an asset needs to be depreciated is "reasonable".

I'm only countering the point that market cap being less than book value makes this a no brainer.

[ladeside] 20/12/2023 12:48

"Either they will get into production early 2024 or they will get bought out"

Yes, that's it in a nutshell.

There's no doubt that the RNS is very annoying / verging on illegal and they should have told us MUCH sooner that they had effectively mothballed production, however the facts remain that we are debt free (with the exception of the annual payback on the smelter), we are pretty much all geared up for full production, we are signed off as a "going concern", we presumably still have around £1 million sitting from recent raise and our Chairman happily invested at much higher levels when he KNEW EXACTLY what was going on.

The only questions I would have is where does this leave our Enernet global power plant ? as I was under the impression they were the ones who provided the power (as a first stage) of the one we've just ditched ?? Does this mean the entire project has been punted ??

Lots of dodgy goings on, no doubt about that, but it remains that we're very likely to be either taken out or a 50%+ farm out which may not be at the sort of prices long termers (like myself) are hoping for but it WILL be hugely above our current levels.

Personally I can see something like 50% being punted for £6 - £8 Million which will then be sold to shareholders as a "great premium" and also highlighting the fact that it will allow us to immediately proceed with the HPI powder.

What this would do to the share price is anyone's guess in these markets and personally I'm at the stage where I'd even be happy with a full take out at £20 Million+ due to the never ending "jam tomorrow".

All just my own thoughts.....

[kemche] 20/12/2023 12:28

richie666 - 24 Jul 2022 - 18:21:23 - 6677 of 8101 Ironveld plc - IRON
Keep digging your hole. The exact wording was - "we have made crystal clear that we will not be part of any discounted raising below the 1p level and indeed had been prepared to hold our corner north of 1p upto 1.25p as the company correctly states."

And any placing at 0.7p or below was toasting shareholders.

See u on the 12h.

[dbfromgb] 20/12/2023 11:12

Yes indeed, very disappointing. But the reason I have stayed invested here is the market cap relative to the value if the assets. Now trading at a fraction of book value, and whilst book may not reflect actual value they own valuable licences and an almost complete smelter. Either they will get into production early 2024 or they will get bought out.

[aceuk] 20/12/2023 10:16

Relations with the locals are a lot more important than those with shareholders!

[dead duck resources] 20/12/2023 09:42

'The Align research note has never been more relevant'

Brilliant! It's the way you tell'em

[purchaseatthetop] 20/12/2023 08:03

What a horrible RNS

[aceuk] 15/12/2023 09:22

John Wardle was big on community relations in Colombia so he is now in South Africa

[ladeside] 14/12/2023 11:21

This might be 3 years out of date, however it has never been more relevant given where we are at this very moment.

It would seem Phase 1 has now been completed pretty much along the lines quoted in the research note,

hxxps://www.alignresearch.co.uk/wp-content/uploads/2021/01/Ironveld_Initiation_Align_Research_January_2021.pdf

[ladeside] 14/12/2023 10:30

I would bloody well hope that the company intend on giving us an update prior to the festive period shutdown, given that our last partial update was October 26th and last meaningful update was on September 18th.

This is supposed to be our "exciting and transformational period" so keeping shareholders abreast of what is actually happening and what we should be looking at achieving over the next weeks and months should be a major priority of the board.

The share price (an all time low), the lack of trading and the lack of any interest on the chatboards more or less says it all and it's high time they started giving us something tangible rather than half stories and then excuses when proposed targets have been missed.

It shouldn't be left up to people on chatboards to continually "guess" at what's happening and what could / should be happening !!

Those of us who have past experience of John Wardle know that he is a very capable man and Martin Eales used to have a pretty decent reputation as a dealmaker so it's high time that they all started to stand up and prove it I'd say.....

[ladeside] 06/12/2023 17:49

What we're looking for is,

1. Confirmation of sales of our 3x main products and viability of such as regards profit margins.

2. Confirmation of power plant installation or time frames for full installation.

3. Update on HPI powder conversion units funding and how that will likely impact existing shareholders.

4. Confirmation of Burnstar plant installation and what exactly we hope to gain from it and when.

5. Did we ever get the final sign off of Luge tenements??

6. When is the bloody share price going to start moving in a positive direction !!!

[ladeside] 06/12/2023 17:43

It is indeed pretty pointless but obviously just marking time until they can give us a meaty update.

We all know that the main production timelines are between Q4 23 and Q1 24 (assuming no further delays are encountered), however an update on the proposed funding for the HPI powder would be good otherwise it's going to remain a drag on the share price as opposed to anything positive.