Zanaga Iron Ore Share Discussion Threads

[the stinger] 08/11/2013 17:47

Saikat - wait for 12pish,, then back in...placing at around the 15p mark is my guess. Funds are required here which they will get.

[saikat] 08/11/2013 16:49

Any of you think that Glenstrata, in principle, will ever agree to raise finance from the debt market jointly with Zioc for Zanaga?

[saikat] 08/11/2013 13:33

It is `show me the money' deflationary market BPC10. Announce a finance raise, price will stabilize soon enough and soon go higher. Don't announce a finance raise and price will grind down worrying about 9m cash levels in 14 months.

[bpc10] 08/11/2013 13:11

Looks like we have a big seller out today - views?

[bpc10] 08/11/2013 11:24

The chart doesn't look pretty here IMO

[saikat] 08/11/2013 05:45

Shaun, sorry for sounding condescending - promise it was unintentional.

I have not checked on the cash burn and expense figures, but yours should be correct. Does it not worry you that 9m cash is all that is going to be left 14 months away with similar drags for the next 14 months? There is no cash flow and only large expenses in a multibillion dollar project.

There may or may not be a spike to help raise finance in the rest of this year. But there has already been a spike - it hasn't been used properly so far.

[shaunstar] 07/11/2013 22:17

Saikat, please spare your condescension, its unkind.

Figures from RNS's.

Cash flow
2011 (4,461)
2012 (6,311)
2013 H1 (3,163)

ZIOC had 35m cash at June 2013 (half yr). So...
-17m for costs contributed up til end of 2014.
-3m for burn up til end of this year
-6m for 2014 cash burn
Leaves 9m cash at the end of next year.

Why have a placing now? Correct me if i'm wrong but companies do it either
A. when they are desperate and at any share price.
B. After a big rise to take advantage of possibility to raise a greater sum (because they are out of cash in the next year and aren't confident in share price remaining high.)

ZIOC are comfortable, not desperate and have every expectation of a higher share price between now and the end of next year at which to make a placing. Even if they don't they'll still have plenty cash left.

[richscotsman] 07/11/2013 19:05

Debt and equity being sought... Waiting for the single figures before I buy in...

[saikat] 07/11/2013 19:03

Beautiful reply Shaun - lot of belief and conviction in your post. Wish you very well.

[shaunstar] 07/11/2013 18:50

Thanks for taking the time to make your case Saikat. I really don't see the cash position as ngatively - before the share price doubled they had their market cap in cash.... the cash position is far from weak.

I read it all more positively. Glencore Xstrata are canning development and capital expenditure all over the place, project after project. Their CEO publicly communicates an anti greenfield stance - this is fundamental to their whole corporate strategy. BUT.... the one greenfield project, out of many, that GX have chosen to progress is this one! That's just how attractive an asset this mining licence is. Its truly world class. ZIOC may be small but she's the prettiest girl at the dance!

On top of this they are partnered with GX who of course decided to take the project forward. But they cant go forward without ZIOC. It's in their interests to help ZIOC. GX and ZIOC wont be off separately doing their own deals, id imagine GX would be introducing some serious bods to ZIOC and including them in discussions.

Personally i hold, am in profit and am happy to add if the price falls. I am in long term. I also fully believe the price could spike on rumours (and/or confirmation) of discussions between ZIOC/GX and interested parties.

IMHO
Shaun

[saikat] 07/11/2013 16:37

No longer sure about this sentence from my last post - `It will work out to be much cheaper than being held up by the clause on development expenses.'

[saikat] 07/11/2013 11:57

I think you are right kinbasket - as long as they have some meaningful cash, chances are they should do okay from here - may take some time. However, forget about NPV based calculations.

One bargaining context intrigues me a lot - it has do with the antidilution clauses. Previously, there was clear closed form structure to this antidilution clause. I don't know how it has changed after the contract amendments. Hypothetically, if 83 is to 17 (assuming this to be a split of DFS expenses) is an approximation of the antidilution strength, and the clause is set in stone (cannot be weakened by GS), GS may buy out Zioc's stake even if the Chinese hesitate or don't show up. It will work out to be much cheaper than being held up by the clause on development expenses.

[kinbasket] 07/11/2013 10:11

I don't agree it's a weak bargaining position. It's not a powerful one either. They will probably get a fair price for their share of asset. It's lower than most people would like but that's the mining industry. It should be well north of here though so shareholders ought to make a bit of cash.

[saikat] 07/11/2013 08:43

Yes Kinbasket, we have a very interesting case where (a) Glanstrata does not probably want Zioc as a development partner because they are too small and the strong antidilusive clause protection that Zioc has; (b) a potential new partner will not want Zioc as partner for similar reasons, and (c) as you have argued with reasons, very unlikely that Zioc itself wants to be a producing partner.

So everyone, including Zioc, probably don't want Zioc as a producing partner - it makes it a pretty miserable bargaining position for Zioc for a project this large; they definitely need cash to buy time while they search and negotiate for a partner.
And the cash balance will be halved soon for precommitments with Glenstrata.

[kinbasket] 07/11/2013 08:03

Surely the determining factor in the future of ZIOC is the motivation of the two main shareholders.

Do they want to go mining ?

I think it's more likely they want to cash in, hit the beach and leave the mining to Glencore or someone else.

A sale is much more likely than a fund raising IMHO

[the stinger] 07/11/2013 06:43

Saikat - Pulled my holding away at 26/27p. Cash will be required here at some point and i'll await the cash call figure and see from there. My guess is a call at 12-15p ish.

ELR is my risk/reward bet for 2014, could treble like ZIOC.

Good luck all

[saikat] 07/11/2013 05:19

Shaun, it is an interesting debate - I hope you win it.

Here is my logic why it is a good time to raise some finance.

Firstly, for a moment imagine that no China entity were to come into the project.
This is a hypothetical scenario but can happen with some probability. In this case, it is delusional to think that there would be no dilution - in fact there would be multiple rounds of dilution for a project this large. Since this event has a positive probability, one should be prepared to raise finance, especially when one is in a relative position of strength with some cash.

Secondly - now let us talk about Chinese entry in the story. There are two types of Chinese iron ore players relevant: (a) trading houses like Tewoo who went for the AMI stake' and (b) Chinese miners.

The (a) types are interested in near assured iron ore volumes - Tewoo invests $990m in AMI with reasonably assured offtake amounts upto 10m tonnes annually with offtake price discounts. Just the price discounts and the volumes make it a fantastic business proposition and makes it a pretty low risk business. A player like Tewoo has tried their hands in mining with two large multibillion dollar mines in Australia which have been disasters in time to develop and have gone nowhere. I don't think they will be keen to be miners any more - they don't have the skills. They can take stakes as they have done with AMI, but that will be when they feel that a sensible investment will give an assured large amount of offtake with good discounts. We are very far away from that with Zanaga's resources in terms of time and money. Besides Glasenberg is a direct competitor to this trading house strategy. I don't expect sole Tewoo type Chinese help in many years (if at all because of Glasenberg factor).

That leaves (b) - Chinese state owned miners. Although they have state backing, they are not as cashflow rich as the trading houses. Besides they are notoriously slow because of bureaucracy - they also have not been that successful in bringing overseas mines to fruition. Importantly, they can take months/years of slow negotiations - Zioc has to be cash comfortable to go through these grinding negotiations - bargaining strength will also be better if they have cash. Hence the need to raise cash.

Possible that a consortium including both (a) and (b) type players showing up - that is if Glasenberg allows (a)- he may if he finds that disallowing (a) means he loses out on (b) as well.

So much for debate.

[shaunstar] 06/11/2013 21:56

Saikat - sorry but i don't believe your idea stands up to scrutiny. They are not in a low cash position, they have cash to survive with current burn rate for many years.

They are looking for finance partners to develop a huge world class mining operation - yes. But this int the kind of cash you raise by dilution in the market. They are not looking to raise a few million with a placing - the sum is in the hundreds of millions.

[saikat] 06/11/2013 19:20

Hey Horndean, how are you? If Stigler, Buck, Katy, Greenelf , and a few others also join again, we will have fun like last time. Somehow, I don't expect this to happen, this time.

I am still for cash raising of some form - let us see. If they don't, they will get into trouble pretty soon.

[horndean eagle] 06/11/2013 18:52

Way off the mark on an equity raising.

[saikat] 06/11/2013 17:03

I know that Shaun. But you don't want to raise cash from a low cash position - cost of capital and cost of financing will be very high in today's deflationary markets. In fact if they don't raise cash pretty soon, I will interpret it as bad news - that they are failing to raise good quality cash.

[shaunstar] 06/11/2013 16:58

They have much more than this in cash already Saikat.

[saikat] 06/11/2013 15:54

Looks like placing coming - they should have done it sometime back. They have a commitment of some $17m or so (from memory) to the common cause for DFS expenses - somewhat more than this money has to be raised quickly.

At this stage, a placing is a good thing for the firm.

[hatter2] 06/11/2013 15:50

looking a little ugly now: one for the -ve capital gains me thinks.