- This topic has 18 replies, 1 voice, and was last updated March 25, 2024 at 10:05 am by
Nick Hargrave.
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July 5, 2022 at 11:39 am #2601
Nick Hargrave
KeymasterA third idea for research – I never intended to highlight so many pre-memo ideas and this is likely the last one for a while as I focus on additional memos as Mr Market offers up more compelling opportunities. However, with the announcement this morning of the Definitive Feasibility Study (“DFS”), I wanted to put Mkango Resources on your radar screens (Canada based but with a UK listing) until clarity on some of the issues noted below allow a full memo to be published
This really is a very early stage, pre revenue, pre mine construction idea and so is right up there on the high risk, small investment meter. Rare earth metals are key elements in ‘green’ technology and national defence technology. Most of the rare earths capacity globally is currently based in China, so this is potentially a highly strategic asset for the UK, Europe and the US with one of just a small number of rare earth mines that is construction ready worldwide.
The key risks remain around confirmation of the Mining Development Agreement with the Government of Malawi and the mine construction financing package (US$277m capex requirement), either of which will stop the mine development if they aren’t concluded satisfactorily. The company is also finalising the Pulawy separation plant feasibility study which could have significant valuation impact. Additionally, the market is concerned about a potentially large and dilutive equity raise as part of the financing, for a project that won’t start generating revenues until 2025
However, some key points as a case for review:
– The DFS highlights a mine post-tax NPV of US$559m vs. a current market cap of c.£45m, excluding upside from the separation plant to be constructed in Pulawy in Poland
– Announced a new CFO last week with highly relevant experience to lead the financing effort. During the week of 27th June 2022, the company hosted site visits for a number of major commercial and development banks
– Holds a minority stake in HyProMag, which is a UK based business leading the development of rare earth magnet recycling
– Recently announced funding at 27p via a convertible loan (a 29% premium to the current price) from CoTec Holdings Corp. (“CoTec”), an ESG-focused company investing in innovative technologies, securing £2m that should see the company through to securing project financing
– Owns further exploration assets for rutile, uranium and other metals
– Given the strategic nature of the asset, there’s a reasonable probability that the Songwe asset or the company will simply be acquired-
This topic was modified 2 years, 7 months ago by
Nick Hargrave.
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This topic was modified 2 years, 5 months ago by
Nick Hargrave.
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This topic was modified 2 years, 7 months ago by
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March 25, 2024 at 10:05 am #6060
Nick Hargrave
KeymasterA 5p placing is obviously not a fantastic price but at least the amount has been limited and they have addressed the cost base. it is clear that they aren’t able to close on the Songwe mining licence and it is good to see that they are now reviewing options to release the asset to someone who can and hopefully deliver some value. It would be good for them to update on the value of all their assets, including potential uranium deposits. The recycling business looks attractive and continues to develop
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March 11, 2024 at 7:28 am #6050
Nick Hargrave
KeymasterContinuing progress on the US recycling plants as news on the mining licence continues to be elusive
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December 12, 2023 at 8:03 am #5814
Nick Hargrave
KeymasterExcellent news for MKA representing a major milestone in their recycling technology to reach commercial scale production. They also note a potentially significant uplift in future production targets from 100 tpa to up to 1,000 tpa
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October 10, 2023 at 8:00 am #5643
Nick Hargrave
KeymasterWork on the US expansion continues positively. There remains limited interest in the shares while the wait for the Malawi MDA goes on
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September 14, 2023 at 7:57 am #5513
Nick Hargrave
KeymasterThe anticipated US JV with COTEC now formally announced with some initial details. As previously announced, the JV is to be funded by COTEC with MKA subsidiaries providing the IP. Momentum starting to build in the recycling business but the market remains focused on the Songwe MDA for now
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July 15, 2023 at 12:06 pm #5030
Nick Hargrave
Keymasterhttps://www.bigmarker.com/share-talk/Mkango-Corporate-update?bmid=2807324d180d&bmid_type=member
Management provided a video update and Q&A to shareholders. The key takeaway was that issuance of the MDA in Malawi appears to be close with engagement from all the relevant ministries with just a few points remaining to agree. They noted that this is the single largest commercial investment in Malawi in over a decade, highlighting the incentive of all parties to get the MDA over the line so that engineering and financing can be progressed.
The other quote to note was the CEO’s view that the value of US recycling JV is worth more on its own than the current market cap of the group, which also includes the UK and German recycling operations, the Pulawy separation plant development and the Songwe Hill mine
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May 16, 2023 at 6:30 am #4731
Nick Hargrave
KeymasterThere has always been some expectation that MKA would increase its holding in Maginito, but to move straight to 100%at this stage is a strong signal of the value that the company see in this business. The structure of the deal looks good with earn outs (with cash / share mix at company’s discretion), though we are obviously frustrated that shares are being issued at a time when the market is attributing such a low value to them. However, such opportunities come along rarely we trust that management have seized the moment to capture additional value for shareholders
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May 2, 2023 at 7:59 am #4611
Nick Hargrave
KeymasterFY 22 result released this morning. Nothing of particular note by way of update. The protracted negotiations on the Songwe Hill mining agreement continue and the share price frustratingly continues to be weighed down pending resolution, despite progress on the recycling side
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March 16, 2023 at 10:47 am #4362
Nick Hargrave
KeymasterCoTec investment in Maginito completed as expected
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March 13, 2023 at 12:54 pm #4350
Nick Hargrave
KeymasterValuation assumptions: We assume that if Songwe is sold to another operator to develop we might achieve a valuation of 15% of the $559m NPV. We then add the value of the company’s 90% stake in Maginito implied by CoTec’s recent investment of £1.5m for 10%. In the risk scenario, we assume just 5% of the Songwe NPV.
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February 13, 2023 at 8:08 am #4224
Nick Hargrave
KeymasterUnfortunately the Songwe MDA negotiations have dragged on for so long that a that this raise has frustratingly happened before its announcement and lead to greater dilution that I had expected. While the MDA negotiations do appear to be reaching a conclusion and the investment case remains in tact, this is a greater permanent hit to per share valuation than hoped
https://www.londonstockexchange.com/news-article/MKA/mkango-raises-ps3-5m-c-5-7m/15833834
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February 1, 2023 at 12:34 pm #4134
Nick Hargrave
KeymasterMKA have done staggeringly well to close this financing agreement with COTEC and maintain the conversion price of 27p in any market, let alone this one. Suggestive of the confidence COTEC has in the value of the business and, in particular, Hypromag.
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January 26, 2023 at 7:18 am #4111
Nick Hargrave
KeymasterGreat news for MKA receiving the environmental licence, paving the way for the issue of the mining licence in the coming weeks ahead of finalising finance for the project
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December 29, 2022 at 8:36 am #3888
Nick Hargrave
KeymasterCOTEC continue to provide funding at a 27p conversion price level while the wait for the MDA goes on. The current price disconnect remains somewhat baffling
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November 23, 2022 at 8:29 am #3778
Nick Hargrave
KeymasterPositive news with €3.7m of grant funding for the German Hypromag project
https://www.londonstockexchange.com/news-article/MKA/grant-funded-hypromag-project/15726546
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October 28, 2022 at 1:17 pm #3669
Nick Hargrave
KeymasterThis suggests that the funding is being provided and will be concluded in the form convertible notes with a 27p (2.5x current price). This would be hugely positive if it remains in this form, with just the MDA uncertainty needing resolution with ministerial approval to unlock the share price
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September 7, 2022 at 7:12 am #3438
Nick Hargrave
KeymasterThe company allaying some of the near term funding concern that has been driving the price down in recent weeks
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July 8, 2022 at 3:19 pm #2644
Nick Hargrave
KeymasterI took part in MKA’s conference call re the DFS this afternoon. 3 key points / quotes:
Expecting the mining development agreement to be signed with the government “in the very near future”
Had been planning to finance Songwe and Pulawy as a combined project, but seeing enough financing demand that they are exploring financing Songwe on a standalone basis
Current high costs of reagents and transport included the DFS NPV which they hope to improve on in the future. Lots of additional upside from Pulawy to capture additional processing margin
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