Ann: Director Resignation, page-87

I have done a fair bit of research on Mozambique as things have it, after my character, motivation and knowledge was trashed on another company thread. Small world funny enough, a friend who saw my HC min sand postings asked me to review Mozmin's Inhumbane project when it was being shopped around for an IPO as a favour. So I also have an opinion on Inhumbane although doubt many on here want to hear it, but seeing you asked...

First concern was that the HVY vendors (Mozmin Mauritius) overpaid with a shit deal to the Inhumbane owners in 2016 from the get go. Owners (Galilei Limitada) get free carried for 30% up to "a decision to mine". Very generous considering the time and money it can cost to get to FID, which took SFX close to 10 years and $100M for example. A decision to mine can only be made after the requisite equity funding and residual finance is locked down... you know, the very expensive and difficult final hurdles! The project was picked up originally in 2012 with no material work done by 2016 that I can see, yet this is the deal Mozmin stumped up for and is stuck with.

Second concern was that the 2016 deal required US1.5M spent as part of an onerous 5 part, 5 year hurdle to retain 70% ownership in the tenement as below from HVY prospectus (via the holding company +258 Limitada). At IPO A$600k had been spent, let's say another A$400k spent for updated MRE and met work so another $1M expenditure commitment remaining by April 2023 (tenement delays and covid force majeure gained a 2 year extension to April 2019 deadline).



Even if HVY pull their finger out and manage to spend A$1M be Apr'23 they obviously won't complete any feasibility study (requirement 2). Bottom line for mine, it's a shit deal that needs to be re-negotiated before sinking more money into if they wanted and are allowed to continue. In that respect, I'm not surprised there's chatter about bringing the entire ownership in house into more commercially viable ownership. However, the original owners will obviously be wanting a big chunk of HVY to walk away from the strong JV position they currently have.

Personally, I wouldn't pay a lot just because the original deal was way generous. Original owners did nothing, Mozmin did one drill program southern corner along strike from RIO 2016, so the ML application probably risks getting knocked back if nothing further is done in a hurry and the EL is resumed to the government. Not sure Galilei have a strong hand in this market after screwing the pooch for a decade other than that one small drill program by HVY (Mozmin). Then again, I'm not under pressure to retain or obtain another project outside Port Greggory to generate interest and raise capital on the back to keep paying the bills.

Second reason I wouldn;t pay a lot for Galilei's 30% is that the drilling and MRE to date look uneconomic this side of the second coming of Christ. A few holes hit decent grade beach strands at depth, but too deep and too few HG tonnes at this stage to be material. RIO's Mutamba deposit has 4.4Bt @ 3.9% from surface to the south in a 'worlds class' deposit that still looks marginal except under rather heroic pricing assumptions. HVY's 90Mt MRE @ 3.0% is a lot of low grade averaged up by a small amount of high grade with a strip ratio ~2:1 at scale. Savannah (RIO ex JV partner) completed a scoping study in 2017 that required cutting the Mutamba's 4.4Bt down to the best 450Mt @ 6% THM to look feasible (from surface). Best HVY section shown below.


If RIO invest enough capital into in a big enough operation the lower grade will start to make sense, except the IRR gets blown to smithereens and well below RIO's modest IRR hurdles. The problem with the Mozabique sand plain north of the Limpopo River is the assemblage is high trash, low valuable HM and contaminated with chromite that requires additional roasting expense with lower recoveries. Assemblage gets better the further north of Limpopo, and HVY's Ihumbane assemblage looks higher zircon which is a good thing, but nowhere near enough to make up for the low grade, high strip and need for roasting.

That said, it's still an exploration play and as much as I might not like it, never know what they might find, and you can't kill it until you drill it. If 30% owners Galilei want to stay in the game and have any chance of monetising this project, they should forget greed and be happy someone is willing to stump up exploration risk money for even a small percentage ownership. It's a long shot and money talks imo, by all means bring that 30% into HVY with script, just recognise that raising and spending risk money is the hard part. Especially hard doing the rounds with brokers trying to raise money on a long shot you only get 70% of after years of expenditure... only if you get lucky enough to eventually become a mine. Don't overpay imho...