Pensana Share Discussion Threads

[mikethebike4] 31/10/2024 09:16

Lets hope the Annual Report gives positive info. about financing !

[mikethebike4] 21/10/2024 09:47

all very impressive - except Finance

still, would be much more nervous invested in Lithium production

[mikethebike4] 18/10/2024 16:19

bit of trading going on ?

[mikethebike4] 17/10/2024 10:31

come on Paul - where's this financing ?

are we within days, weeks, months ?

[barefootballerina] 04/10/2024 23:06

Rns Monday?

[wiseacre] 04/10/2024 10:16

The recent price action is encouraging

[mikethebike4] 26/9/2024 11:18

all seems good - financial and construction sides of things moving in investors direction at long last

- however there is many a slip twixt cup and lip !

[umik1] 25/9/2024 13:59

https://www.whyafrica.co.za/afc-signs-lobito-agreement/

[sirmark] 25/9/2024 11:53

Looking better now of the 13p lows.

[lawson27] 25/9/2024 10:55

70% up in 5 days, expecting a stutter in the 30's GLA

[umik1] 25/9/2024 10:43

https://www.linkedin.com/posts/rvy-ltd_rareearths-energytransition-sustainability-activity-7244270381350494208-Zei9?Interesting and positive comments by Leon Louw, editor of Whyafrica, who has travelled the length and breadth of the African continent visiting many mining sites.

[aberloon2] 25/9/2024 08:52

Momentum starting to build...

[lawson27] 19/9/2024 09:50

Added a few more on the breakout from recent trading here, GLA

[wiseacre] 09/9/2024 08:52

The near 10% rise in share price on today's announcement suggests the worst is now over and with completion of the financing likely quite soon we should get accelerated lift off.

[mumble1311] 08/9/2024 13:28

Here are a few thoughts I've put together on Pensana, specifically, and rare earth project economics generally. Its long winded and detailed. Go and get a coffee!!

Developments in the Rare Earth sector and how it impacts the Pensana Longonjo Project
Recent Rare Earth pricing (September 2024)

The economics of the Longonjo project and most other Rare Earth projects have been marginal over the last year due to a depressed NdPr market price. The spot price for NdPr on the SMM platform languished under $50,000 / MT until six weeks ago when it started increasing. SMM (Shanghai Metals market) printed $61,357 / MT (including VAT) yesterday, September 6th.

The SMM platform is the only publication where Rare Earth prices are publicly available. The prices published are spot prices that apply to the Chinese market based on the point of delivery in China. Liquidity is such that prices are arbitrary if price discovery is used, as the price can be based on only 1 or 2 daily transactions. This isn't a criticism of SMM. The nature of the Rare Earth market is minimal compared to other extracted minerals. The price paid by buyers external to China is much higher than the published Chinese prices, but the actual prices achieved are opaque and not publicly available.

In China, None-spot prices for forward delivery are determined by the two biggest producers of NdPr oxide, which are the China Rare Earth Group and the China Northern Rare Earth Group. The Chinese government consolidated these companies from 6 smaller companies in the last few years. Prices for delivery of NdPr Oxide in September increased by 4.4% compared to August, after being flat the previous three months and declining dramatically the month before. SMM Spot prices have increased by almost 25% in the same period as producers restrained supplies and held to their prices despite resistance from end users.

The Pensana Ozango MREC project, Longonjo - Economics
The Ozango facility at Longonjo will not produce NdPr. It will make an MREC, i.e. a Mixed rare earth carbonate. The initial design, which had a capacity of 42,000 MTs p.a., has been modified to be completed in two phases to reduce the initial capex, making financing more manageable. Phase 1 will produce 22,000 MTs of MREC annually. Phase 2 will increase the capacity to the original 42,000 MT, with much of the infrastructure required for stage 2 being incorporated into Phase 1 design and engineering to reduce future costs and lead time.

The SMM platform publishes prices for many metals; those relevant to Pensana are the MREC price and NdPr Oxide price due to how SMM arrives at the prices published for MREC. SMM advises a specification for MREC, which contains a rare earth oxide content of 42.0 to 45%. The reality is that the published MREC price is calculated as 8.1% of the published NdPr oxide prices and has been fixed at this level for several years. It isn't based on a specific price discovery process. Consequently, the printed price is precisely aligned with the NdPr price. Discounts and premiums are applied by suppliers/buyers to agree on prices that depend on the actual NdPr content of the product being offered.

Longonjo product is higher in NdPr content than the SMM quotation specification. Consequently, the achievable price for Longonjo MREC, with approximately 11% NdPr, should be 1/3 higher than the SMM printed price. As of September 6th, MREC was published as $4,967 / MTs, compared to $ 4,000 / MT at the end of July, a differential of almost $970 / MT at 11% NdPr content. $970 translates to an increase of $1,290 / MT as it relates to the Longonjo project economics and the published conditions of the advised loan agreement, i.e. a 7-year tenor, a principal sum of $120 million and assuming two years of the seven years is a payment moratorium during construction, a five-year amortisation period. The price increase for Longonjo products over the last six weeks represents over US$ 140 million of additional revenue over the loan's five-year amortisation period. $140 million exceeds the principal sum of the loan by over US$ 20 million. A back calculation of these sums will allow for OPEX costs, with interest rate sensitivities of between 10 and 15% applied, of between $4,200 and $4,500 / MT, and still maintain debt coverage ratio conventions of 150% (interest included) or 200% (interest excluded).

Should the NdPr price increase at the Adamas forecast 8-9% CAGR from today's pricing, Longonjo Phase one revenue increase will be almost double the $140 million that the rise from the last six weeks has made possible. The forecast price increase assumes an NdPr price of approximately $85,000 / MT by 2030. Forecasts from analysis and merchants' banks forecast that the actual cost for NdPr will be more than, in some cases, considerably more than $100,000 / MT. The question is how realistic these forecasts are and whether the prices will be sustained.

Opinion on current and future Rare Earth pricing
The preamble to this note discusses NdPr pricing behaviour over the last few months. It has concentrated on Chinese actions and reactions due to their dominance in the industry and consequent price-setting influence. The discussion on the current viability of the Longonjo project assumes that the NdPr flat price remains flat at the current SMM Spot price of $61,000.

The viability of the Longonjo project and all other rare earth projects depends on the NdPr pricing increasing substantially over the coming years and decades. The probability of this happening depends on the future Chinese policy regarding Rare Earths and critical minerals.

Chinese quota increases and consequent overproduction have impacted market confidence. The overproduction has been brought about by forecasts of Electric vehicle production that have been widely overstated in the short term, with price increases in energy prices resulting from global events such as Covid, the Ukraine and Middle East wars affecting consumer confidence in the transition economy. Sales have been further impacted by the dramatic depreciation of electric cars when they come up for resale, compared to IC engine vehicles, disincentivising buyers from buying new EVs, at least in the short term. Opinions vary, but the most realistic opinion is that initially purchased EVs are now coming onto the used market. At the same time, EV production is being hyped and ramped up by manufacturers. The market for EVs is still in its infancy, and the high total availability of EVs and the still limited demand has created a significant imbalance. Excessive depreciation of EVs can be considered a teething problem, which will be resolved as the market size for EVs increases dramatically and rapidly.

Governments are backpedalling from their initial policy implementation dates, but they are not, nor will they eliminate them.

Unforeseen world events have generated an oversupply/demand imbalance, impacting the current NdPr pricing compared to that forecast. However, the estimates are still based on expected undersupply/demand imbalances being experienced in the future. Forecasts never align with estimated timelines due to unforeseen events that cannot be included in economic models, skewing the estimates away from the expected from the expected timelines. However, what we know strongly supports the idea that the NdPr supply gap will continue to increase unless there is a dramatic increase in the supply. The project economics over the last twelve months have ensured that the supply gap will grow, inevitably leading to higher prices.

The following factors are rarely discussed, but the imbalances will not be caused purely by a general increase of demand over supply but also by individual countries' realisation that their interests are being compromised by the present rare earth pricing, which was brought about either deliberately as a reaction to East/West tensions or inadvertently due to unforeseen market conditions caused by global events.

According to the US Geological Survey, the Earth's estimated rare earth reserves are equal to 110 million tons. Of this, 44 million MTs are estimated to be in China. From 2022 to 2023, global Total Rare-Earth mine production increased by 17% from 300,000 MTs to 350,000 MTs. China accounted for 210,000 MTs of the 300,000 MTs (70%) in 2022 and 240,000 MTs of the 350,000 MTs in 2023, a slightly reduced percentage at 68.5%. The differential is made up by increased supply from Canada, whose production increased from 12,000 MTs to 38,000 MTs in the same period. These numbers show dramatic growth in TREO production, albeit overdone in 2023/24.
This year's pricing lows and the impact they are having on the whole industry, especially Chinese producers, and how this may negatively affect their Chinese strategic interests have been recognised by the Chinese government. Prompted by numerous Chinese entities declaring dramatically reduced profits and, in many cases, huge losses, such as those highlighted in an article in the Nikkei Asia in July this year

“Rising Non-ferrous Metals”, a Shanghai-listed rare earth miner, declared a net loss of 285 million yuan for the first six months of this year. The decline in profits was due to a "drastic slide in sales prices of its major rare-earth products."

China Rare Earths is expecting a net loss of approximately 240 million Yuan, compared to a previous profit of 170 million. The company blames falling prices, which also sapped its inventory values.

Shenge Resource Holdings, backed by the Chinese finance ministry, has embarked on an overseas acquisition spree, acquiring Strandline Resources and 50% of Peak Resources to monopolise Tanzanian Rare Earth resources. However, Shange's interim results show a loss of 50-60 million yuan compared to over 80 million profit a year ago.
Shenge stated that despite increasing sales volumes, the "Substantial decline" of rare earth prices dragged its performance downwards.

Recognising the current situation's danger, the Chinese government have stated that "the state will take control of rare-earth resources to ensure national resource security and industrial security.". Also, it said that "Those who manage rare-earth resources "shall implement the lines, principles, policies, decisions and arrangements of the Party and the State," this directive effectively puts the Chinese Rare Earth industry under state control. This policy will be enforced starting October 1st, 2024.

From the writer's perspective, It doesn't make sense for China to produce 70% of the world's rare earth requirement at uneconomic prices when it only owns 40% of the reserves. The rest of the world will leave their rare earth reserves in the ground, waiting for the Chinese reserves to deplete. As a short-term Geo-political strategy, it may be beneficial to China. If maintained over the long term, China's reserves will deplete when its internal demand grows, eventually becoming a net importer rather than an exporter, a price taker instead of a price maker.

Conclusion
Markets are being markets, but all the evidence points to the demand for NdPr increasing far more than the projected increase current production will accommodate in the short to medium term.

The above provides a strong case for advancing the financing of the Pensana Longonjo project. While previous concerns over depressed NdPr prices may have caused hesitation, the recent 25% price recovery has significantly improved the project's economic outlook. The increase in product pricing over the last six weeks will generate over USD 140 million in additional revenue, exceeding the loan principal of USD 120 million and providing a solid buffer for debt servicing and operational costs.

The project's long-term revenue prospects remain strong, with forecasts pointing to continued minimum NdPr price growth of 8-9% annually. Additionally, China's increasing control over rare earths and the tightening supply further enhance the project's strategic value. Considering these developments, the project's economic foundation appears solid, offering a favourable environment for moving the financing process forward.

Author: Ian Brown
September 2024

[aberloon2] 03/9/2024 10:47

Seems a bit serious for 15p :)...video showing progress at the camp

[aberloon2] 29/8/2024 13:50

There were some interesting trades here yesterday and today is carrying on in the same manner, £15k and £26k just printed...

[aberloon2] 22/8/2024 08:21

This is at a price level that's interesting now, any whiff of financing because of the visit from the UK will see a positive rerate imho..
hxxps://directorstalk.net/longonjo-project-gains-international-support-with-high-level-uk-visit

[mwj1959] 14/8/2024 16:56

New lows...

[mikethebike4] 30/7/2024 09:48

All good publicity

[mwj1959] 29/7/2024 09:10

Of PA's two projects PRE looks in (marginally) better health, due to progress at Longonjo, than ALK, with the latter probably in A&E for now. Both stocks remain call option money in my opinion i.e. you could make a lot of money at some point if (and a very big if) they eventually deliver, but both could end up worthless if they don't.

[mikethebike4] 28/7/2024 11:22

I hope Mr Atherley is further pressing the new Cabinet to get on and organise securer means of supply of rare earths than our current dependence on a hostile China

Faint hope with Starmer & co and their devious ways

[mumble1311] 23/7/2024 11:38

A strategy was announced slightly over 12 months ago. This strategy is still in place except for an additional equity partner (who is also putting up 50% of the loan finance). What is frustrating is the timeline. Previous notes to the market have stated that the loan finance was also contingent on credit risk insurance from the ECIC being finalised and the offtake being confirmed. Both these points have been addressed and are no longer awaiting the loan approval. The ECIC requirement is now a condition subsequent (CS), and the off-taker has been given an acceptable commitment to the lenders. However, both these points are parts of the debt package and do not, on their own, represent material news, as they still need to be signed off pending the loan agreement. The timeline is out of Pensana/Ozango's control and has been for some time. Trying to give news which can only involve timelines (as everything else has stayed the same) without getting concrete statements from those in control has proven counterproductive. As I understand it, the loan is up for credit approval (or otherwise) in the short term. The company has kept progress on Longonjo, updated via the website.