You too mate, appreciate always appreciate the effort and very rationalized insights you deliver to threads on HC.
Just to touch on a few points and maybe counter a few. Btw I can completely understand the reward SHP offers and the limited downside it presents.
"my assumption is that if this gets the go ahead, best case production in 2024, you have to assume that Germany has largely addressed it's supply chain issues then."
let's say we take the very end of 2024. December 21st as a scenario for when SHP starts production.
I have since looked at the TC report on HFRs website and they are looking at a 2.5 year construction period.
As mineralisation starts at a similar depth this would leave 2.5 years for finding out where the power will come from, fairly complicated if they are looking at renewables, feasibility studies, off takes, permitting, financing, construction contracts AND having the build done.
In other words they would realistically have to have started construction at the start of this month, to have any hope of producing by the end of 2024.
Could possibly be 3 years from finance considering the 2.5 year time frame includes HFR only having to hook up to the grid across the road and no need to build road or railway to port as it already exists by the mine site. Also it is stated there will be no need to construct an accommodation camp for employees given the location.
I know the Germans are fantastic engineers but I would say this is an unfeasible timeline for SHP.
I believe SHP will have a similar sized project or atleast commit to a staged approached similar to HFR. Eg 500,000tpa of MOP stage one vs 100,000,000 tpa stage 2. A capex for stage one of 380 million Euros + €40m working capital will be easier to finance then a capex of over €600m and increased construction period.
The saving grace is that gas prices should have eased but then on the flipside I believe sanctions on Belarus and Russia probably will have eased also as well as supply starting to be exported again from China.
SHPs resource is deeper but only slightly.. Mineralization starts at 350m compared to 400m for SHP. Keep in mind HFR has one of the lowest capital intensive projects for a potash mine. But I suspect SHP could be the same. HFR have opted to build ramps and say there is no need to build a shaft that would be alot more capital intensive and also more complex. SHP hopefully can do the same.
Not sure if SHP has aquifers above the deposit? I have tried looking but can't find any info on this. As both will be supplying a salt by product this is important.
"Importantly there are no aquifers overlying the mineralisation – water inflows can be disastrous for salt mining as they can dissolve and wash away the target commodity. As such lined shafts (which can result in higher cost operations) are generally required for access if there are aquifers above the mineralisation as they can seal off the water inflows.
Likewise, the margins of faults (particularly major ones) can be the sites of dissolution, and hence loss of resources, due to the structures channelling groundwater flows."
"Also... food is more important than powering high gas usage industry, or even warmth... therefore depends on the government priority of local fertiliser production"
Agree with you there, in a recent interview I watched discussions and Europe have involved talking about European countries having a higher dependence on Potash then they do on gas.
Delays - I must admit I don't remember the Q1 mention, perhaps it was after I came onboard 12 months ago, but that was never my understanding. Since then, yes, delays in assays have cost us, and comms around that could have been enhanced. Chris G is no longer with us, perhaps it was a part of the reason (although tiny if so)As for the investor presentations, you're referring to Chris G again who's been moved on. Yes, no clear detail as to why. It could have been conflict of interest, could have been a conflict of strategic direction with the board, we don't know. I believe in the team now in place, but we need an MD with the right skillset for what comes next... before we can get that, we need a clear strategy (JV, acquisition, go it alone, etc)
if you Google scoping study or drilling there is an article stating scoping study Q1. It was published in December. I'm willing to let that argument go as a new CEO can be transformational in how a company progresses and I'm sure it is a positive sign. Not thanking him for his service could be because the board thought he wasn't the right man for the job.
"I don't believe HFR will get anywhere near that in the next couple of years, and carries the interest rate funding risk you mention. Still, definitely more progressed than SHP, and therefore with respect to becoming a producer, also far lower risk....But I'm investing not necessarily to back a producer, but to make money. I think the downside risk here is far smaller than what it could be with HFR."
The downside risk is there more so for HFR then it is for SHP I agree, but mainly because this is the riskiest time for any project at the current stage. But after listening to the HFR CEO in a recent interview it looks like they have the upper hand. With Europe wanting in house supply desperately there may not be the same tailwinds for SHP come the time they seek finance but on the other hand there is plenty of market share and demand available for another producer of potash in Europe so no worry there for SHP.
Being in Europe offtakers are straight away saving $100 per tonne. As this is what suppliers from Canada are charging on top of spot prices for the longer shipping route.
Which is where Europe is currently getting most of their supply from.
"As I mentioned in another post, Alana resources in 2015 sold for 4x SHPs value with only 40% the resource ($200m AUD), however they had a DFS but only $10m in the bank and massive dilution to produce. The reason I pick SHP over HFR is "that any major funding hiccup in HFR could see considerable downside to their market cap..."
I don't see a major hiccup as per my points above.
the last approval they need is being progressed as they are getting approved little pieces at a time so I see no risk of the last approval getting denied.
in a meeting they had with people regarding the final approval are a small group of individuals all wearing very casual clothes, shorts maybe some jeans but definitely no suits.
it's worth noting that HFR basically asked for the terms to be non-binding which is unheard of. The people HFR engaged in finance are top tier groups and as I said earlier they have the upper hand it seems. They will look to bring on a strategic partner (probably offtaker/equity stake) instead of a standard cap raise which is also good for shareholders.
"they're at a similar point to HFR, although they were Africa based but had 2-3x HFRs resource, yet HFR is currently 2x that sales value.Dilution - big risk here, but as per above, it depends on strategy and I believe we're on or very close to a valuation floor at this point."
Definitely. little downside risk for SHP and a surprise take over could see shareholders profit nicely.
"For me personally, I see SHP has higher risk to progress but far lower risk to lose a chunk of my investment. I like chasing multi bags (don't we all) and I see this as a reasonable chance for that.
I see HFR as a chance to potentially 50-100% gain but also potentially lose half my moneyVery happy to hear counters to my points"
it seems unrisked the report agrees with me. Unrisked valuations north of $4. Similar to what i calculated above but with twice the dilution. I satated only 15%. But then i understated working capital requirements of $50m instead of €40.
I see more but I respect the reasons you have invested in SHP and the limited downside SHP possesses as well as the immense upside if it became another domestic European producer in a hungry market.
As I said I earlier I don't own either company but will look to do so soon and will probably allocate some funds to SHP to distribute my risk.
Russia and belarus produces 40% of global production
Half of, and in some years, more than half of Europe's potash comes from these two countries. I suspect they won't want to pay a premium of 100 dollars a tonne to get it from Canada if they can support HFR and SHP and get it from down the road
Hopefully I addressed your points
@HeliosUK my proof reading of my posts is almost non existent so i hope it makes sense.
I agree probably should be in the other thread.
i also hope we don't get modded for no technical analysis or charts.
(20min delay)