Ironveld Share Discussion Threads

[rec0very stock] 01/7/2024 12:52

We don't know the exact terms of the smelter debt repayments nor the default terms. What we do know from note 18 of the annual report is:

"Other payables includes £4,829,000 (R116,000,000) in respect of the proposed Rustenburg smelter acquisition which was unconditional at the year end but which remained subject to contract. On completion, £4,163,000 (R100,000,000) will be due after 12 months with the remainder [16m Rand / £666k] anticipated to be due within 12 months."

How long are they going to wait before the smelter is repossessed?

It is reasonable to expect that you can raise a proportion of MCap to pay bills. It is not reasonable to expect that you can raise double your MCap to pay bills. With no revenue and no hope of revenue it is not reasonable to expect MCap to go significantly higher such that more could be raised. The only argument for continuing as a going concern was the loan, which at best is going to be significantly delayed and significantly reduced if it comes at all. There is no realistic alternative scheme which would raise the money to pay the overdue bills, including what is owed on the smelter.

It is interesting though that IRON's nearest neighbour can't make mining in the area pay either!

[ladeside] 01/7/2024 12:25

Are the liabilities on the smelter not payable over a 10 year period though ?

As for MCAP, That's merely a snapshot in time, so while it's easy to say the company is only worth £1.5m, it was worth £12 Million not so long ago before the smelter had even been refurbished or any cash raised.

Looking at BMN as an example, their Debt to MCAP is on a different level entirely and has been for a while, yet they continue to trade without any issue, similar to many on AIM.

[rec0very stock] 01/7/2024 11:04

Trading whilst insolvent is against the law. The definition of being insolvent has some get out clauses as you say, but the expectations have to be realistic and they aren't.

£4m of overdue unpaid bills is an estimate based on how much was in trade payables on 31 Dec (normally 90 days is the term) and how much was there on 30 Jun 23. There can be no doubt that overdue bills dwarf IRON's realistic ability to pay them. Whilst they had termsheet for a loan amount sufficient to pay the bills and develop expected in H1 that was a realistic expectation. They now know that there will be no loan in the near future and it will be significantly reduced, therefore they no longer have realistic expectations.

The point of the Corporations Act is that directors need to be proactive about putting the company into administration to protect creditors and not wait to be taken to court with a winding up order.

Completely out of the blue, the directors of one of my major holdings, which I had expected to have its most positive cash generative at PLC level quarter ever has just appointed administrators.

[al101uk] 01/7/2024 10:56

The only bit I take issue with is the "breaking the law" part of what you are saying.

From the gov.co.uk:

A company is insolvent when it can’t pay its debts. This could mean either:
it can’t pay bills when they become due
it has more liabilities than assets on its balance sheet

Short term liabilities are payments due within 12 months, those payments are not yet due and could be deferred or paid via a loan, sale of assets, share placing etc. Until a payment is demanded and Ironveld can not pay it, they are not legally insolvent

Again, I don't disagree that the most likely outcome now is administration and that the financial situation is likely untenable, I just don't think they are breaking the law.

And I guess, while they are still trading, shareholders can cling to a sliver of hope.

[rec0very stock] 01/7/2024 10:18

Al, about £660k of current liabilities are the smelter - the bulk of non current liabilities are the smelter.

Solvency is about being able to pay all bills when due. IRON can't, we only have figures from 6 months ago, but in all likelihood there are over £4m of outstanding due bills and nothing to pay them with - you can't pay with intangible assets, which is what most of NAV is made up of.

The point about MCap is the way companies that run out of cash pay their bills is by issuing shares either directly or in placings. When the bills you have to pay are double your MCap, that cannot be considered as a realistic option.

My point is that IRON has been in this situation for a long time. They had a termsheet, which had it turned into a loan in the timeframes anticipated and for the amount anticipated, that would have made them solvent again. The fact is it has not and it won't. How much longer should the company be allowed to continue breaking the law by trading whilst insolvent?

[rec0very stock] 28/6/2024 10:43

95% of AIM companies most certainly don't have net current liabilities that are over twice their current MCap. The usual excuse AIM companies make for being able to justify continuing as a going concern is they can always do a placing. IRON has used that excuse many times and then done placings, which temporarily restore a positive net current asset or solvent status.

The problem for anyone putting money in here in any form (placing, convertible loan or loan) is that it just goes into the pre-existing massive black hole and does nothing for future development. If JW does see a future for the assets, then he is better off pre packing them out into a different company than he is continuing to pour money into the black hole.

[ladeside] 28/6/2024 09:03

95% of Aim either are or have been in a similar situation, I could rhyme off a load of companies who have been trading as insolvent for years / decades.

[rec0very stock] 28/6/2024 08:35

With potentially about £4m of overdue bills to pay here, £900k would be a drop in the ocean. I am a bit surprised the Nomad have allowed them this long to "In light of these developments, the Company and its management are evaluating the impacts and are assessing options to address the situation". Last time I checked trading whilst insolvent, which IRON clearly are, is illegal.

[ladeside] 28/6/2024 08:21

I see Wardle has just provided £900k of funding for Altona this morning.

Not sure what this means for us but it shows he has the money to add here / take out if he really wanted.

[tommygriff] 14/6/2024 11:00

Be better if JW reversed some oil projects in and re named the co

[malcolmmm] 10/6/2024 22:00

Not worth a punt then

[rec0very stock] 10/6/2024 18:30

I would guess JW thought he knew how to unscrew GC's screw ups having done so before. Clearly he is not as smart as he thinks he is. I don't think Jennings ever really saw beyond what looked like a very large resource, which he assumed would always have value regardless of what else happened.

What they should have done was to update the DFS they did in 2014, as that would have told them how much CAPEX and Working Capital they needed (I doubt £6m would have been enough as when you add in all the unpaid bills that have been built up since the first placing they have spent £10m getting nowhere) and what was the realistically achievable margins were - proving that an HPIP of sufficient purity could be produced in the manner they hoped would have been a key element to the study as purity is the key price driver with HPIP. I suspect with the way the electricity situation has gone in SA since 2014 (it was not great back then) a proper DFS would have told them the project was a non starter. I would guess that those who looked at it from various perspectives buck in 18/19 saw that too. That is not a message GC would have wanted to hear though and ME was happy to bury his head in the sand and blunder on blindly until the cash ran out.

[al101uk] 10/6/2024 18:25

Just looking at the results RS and to be fair I'm struggling to make sense of the annual/interim report. I can't track the increase in trade payables at all. It increased from £1.8 million to £3.8 million with no comment as to what the money was spent on. You'd assume it had something to do with the Rusteburg refurbishment, but the non-current liabilities haven't reduced and there is no noticable corresponding inrease in asset value.

The problem seems to be that the company accounts on a cash basis (it doesn't provide a proper P&L statement with currency exchange, depreciation/amortisation etc) and provides notes to fill in the blanks, but at interims you don't get notes. So you get these weird movements in the balance sheet that are impossible to reconcile.

On the face of it a £2 million quid bill appeared from nowhere and is due within 12 months while Rustenburg non-current liabilities remained static and the company made less than £500K in revenues.

There are movements in intangible assets, but I would have assumed that to be currency movements, if it's acutally part of spend then they are actively spending capex on their mining operation which would be f'king suicidal at this point and the Rand has been a very stable currency over the previous 6 months. I haven't checked but that seems unlikely. From 22-23 results currency fluctuations resulted in £4 million worth of movement in intangible assets and that wasn't in the lead up to an election.

I'm at a complete loss as to where the £2 million trade payable comes from given that I assumed the company was being run to conserve cash.

[ladeside] 10/6/2024 17:38

The incompetence is truly staggering if what you all say is True and of course we know for a fact that much of it is.

What I don't get though is how could they possibly "trick" the likes of Wardle and even Jennings since you'd expect they'd have done much more in depth DD than any of us could possibly have done ?

It's also pretty clear that our former CEO was found out pretty quickly when JW decided to take a more "hands on" sort of role but again how did they manage to get away with this for so long ?

I also think back to when we were raising the £4 Million for supposedly the "full refurbishment and to get us into production", WHY did we not try and raise an extra couple of Million at that point and go all out for the HPI powder, given that it was apparently the ONLY thing that was going to see us profitable ?

Could they have got an extra £2 Million ? Yes, I'm pretty sure they could have if they'd told the true story, but again who knows what was, or is, going on !!!

[rec0very stock] 10/6/2024 10:43

Ace,

I think it is more than that with this company (and many other similar companies) that they consistently and deliberately misled the market, mostly by omission.

For example they never said how much (or little) they actually dug up, however we can guess from revenues and inventories that it would have been no more than 2000 tonnes, so even as they were claiming to be ramping up to full production (40,000 tonnes pa), they quite simply weren't. In the meantime a hell of a lot of money was disappearing and it was not being used to pay bills.

The more I reflect on this, I have to admit even I was overly optimistic. I thought they had done a lot more mining, I knew they would run out of cash again, but I did not expect they would also end up with a mountain of unpaid bills.

[aceuk] 09/6/2024 12:47

The last sentence would be covered by general attitude to life nowadays. Everything but everything nowadays is on the never never, everybody is hand to mouth. Nobody considers things might not go according to plan and there will never be a rainy day.

.... financial markets are no different ☹

[rec0very stock] 09/6/2024 12:19

Al,

As outsiders we were always working with incomplete and imperfect information. Even so we were both able to work out in our own ways that:

A. They never had the CAPEX and working capital needed to achieve cash flow positive at PLC level. We argued about how big the black hole was, but never that it existed.

B. HPI alone would always burn cash so trying to get to full HPI production rather than prioritising HPIP capability was always a doomed strategy.

Because of the combination of these things they were always going to keep running out of cash and be at the mercy of new funding. If we could see this why couldn't the insiders including JW?

My cash modelling, whilst crude, turned out to be pretty spot on wrt predicting when the cash would run out each time. However I did not expect there to be quite such a large current liability in the interims - not only did they burn through the placing but also racked up a lot of unpaid bills to the tune of £4m and barely had any production to show for it. They had a bit of bad luck with the smelter needing maintenance but does that really cover it or has there been something more nefarious going on.

[al101uk] 08/6/2024 22:18

Daft comments and doom mongering aside, does anyone believe this would be remotely possible / realistic ??

Remotely possible? Yes
Realistic? No

We don't really know the potential of the assets if someone were to come in with unlimited cash, but here's what would have to happen for someone to come in and offer shareholders meaningful value:

1. They would have to clearly see an asset that can make large sustainable free cashflow once the project is up and running.

2. There would have to be multiple organisations interested with the means to make an offer like that and fund the companies path to proftability.

It seems to me that if the first one was true, Ironveld would have its funding by now or would have been sold. South African politics at the moment casts doubt on the second even if the first was clearly true.

[al101uk] 08/6/2024 22:06

I'm with RS in that the company is the value of future casflows discounted back to current day. Or as Warren Buffett would say:

"It is the discounted value of the cash that can be taken out of a business during it's remaining life."

That sounds simple, but to work out if the returns meet that criteria, you have to make assumptions. For Ironveld you could assume that all cash can be raised at reasonable cost and that a certain profit margin is achievable, also that all capex weork would come in at or below budget. Using those assumptions you come to a valuation of £x.

It's in the best interests of analysts, brokers and certainly the company to keep the assumptions quite optimistic, but not to the point where those assumptions are unrealistic and could get them in trouble. I've always believed (since Amerisur) that GC treads a very fine line on that point.

The business has failed the first of those assumptions. They also produced a report that draws questions around others and have failed to stick to any of their costings. Raising the cash requires due dilligence and so failing to raise the cash also asks questions of the viablility of the project.

So now a new bunch of people will come in and make new assumptions in order to value the company. Those assumptions will be made by creditors and potential purchasers of the company or it's assets. You can bet those assumptions won't be optimistic and will take in to account all of the things that have happened to damage that original valuation.

Valuation of a pre-profit company is an art not a science and you should ensure you have one hell of a margin of error before investing.

Was it all complete lies? No, it was just "optimism".

[rec0very stock] 08/6/2024 16:51

Ladeside,

If you take the view, as I do, that a company is worth an appropriately risked proportion of the NPV of future cashflows, then the company was as worthless 2 years ago as it is now - look at the analysis done on the mates rates note which showed that the company would still be burning cash at full HPI production and it was only by getting into HPIP, which it never had the funding for, that it stood a chance of generating cash.

As of 31 Dec (so quite a bit higher now) the company had net current liabilities of £3.6m (only some of this is directors loans most is trade payables which includes a £666k payment due on the smelter loan). On top of that is the balance of the smelter loan in the non current period of about £4.3m (I suspect interest has been accruing on this since).

As far as selling off the assets goes, who would want any of them? Many looked at then back in 2018 and all walked away.

[iceagefarmer] 08/6/2024 14:24

south africa is broken...my neighbour had a brother who lived there and the blacks who worked at his garage conspired with some guys who entered his property and murdered him in a very gruesome way..it made the news..savages!

[ladeside] 08/6/2024 12:33

The current MCAP is just over £2 Million, we were being told over and over and over by the company, Brokers, and various commentators that we were "materially undervalued" and "massively undervalued" when we were sitting with a MCAP of £12 Million and of course we were also much further behind where we are today in terms of development.

So was it all complete lies ?

As far as debt is concerned we owe the balance on the smelter complex (approximately £4.2 Million) and also the pay back of the soft Loans to the BOD, but other than that we have minimal liabilities unlike many companies in similar situations to ourselves who continue to trade.

I guess I'd like to know what we could realistically hope to pull in if we were to try and sell the lot off bit by bit ?

Could we hope to raise say £10 Million for a fully refurbished and operational Smelter complex, operational minesite and associated licences ??

If so, that would be more than double today's mcap after all liabilities are fully repaid.


Could a major come in and pick us up cheap but have the financial muscle to make a real go of things ??

Daft comments and doom mongering aside, does anyone believe this would be remotely possible / realistic ??

As I say, I really don't know but the likes of JW who should know more than us clearly thought that there was something we had worth investing in and at hugely higher prices, but again, who knows ?

[rec0very stock] 07/6/2024 09:37

No shareholders have no say and always get shafted, other secured creditors may be able to intervene, but one would presume that the deal would see the smelter go from a company with no chance of paying what is owed to a company that can at least make some payments.