Zinnwald Lithium - what to do now? Gary Newman reviews...

Breaking SCANDAL: David Bramhill & Union Jack spunking £500 an hour on the cover-up of it trolling its own shareholders and journalists. Read HERE

Now that the acquisition of Bacanora Lithium (BCN) by Gangfeng has completed, many former shareholders will be wondering whether to keep hold of the shares they were awarded in Zinnwald Lithium (ZNWD) as part of that deal. As regular readers here will know, I was a holder of Bacanora but sold at the cash offer price some time ago as to me the additional upside from the Zinnwald shares wasn’t worth the risk of something going wrong with the deal, and I expect others took a similar strategy as well, especially if they weren’t too bothered about holding shares in Zinnwald. I’m sure there will have been plenty of others though who did hold on until the deal completed and who have now received 0.23589 Zinnwald shares for every Bacanora share that they held. This distribution of the Zinnwald shares that Bacanora held is significant in that it equates to 30.9% (nearly 100 million) of the shares in issue, and so what the majority decide to do with those shares has the potential for an impact on the share price, especially if a large number are looking to cash in and sell those shares as trading in Zinnwald is typically very illiquid. Other than a few days recently, typical trading volume is a few hundred thousand shares per day and less than £100,000 worth. So, if we do see investors trying to sell, then that overhang could cause selling pressure on the share price for a long time to come in the absence of any event which increases liquidity dramatically and gives people a chance to sell easily should they wish to. That means that if you have hung on to receive Zinnwald shares, then trying to sell them straight away probably isn’t going to be the best way to achieve value. Looking at Zinnwald itself, it has a battery grade lithium project in Germany which is 100% owned, following the acquisition of the remaining 50% of Deutsche Lithium GmbH for €8.8 million last June - €1.5 million of cash and the rest via the issue of shares.

EXPLOSIVE: More Insider dealing at ADM Energy on 30 December – AIM Regulation and the FCA now have chapter and verse

That in itself raises some questions for me about how attractive the Zinnwald project actually is, as this 50% was purchased from the administrators of SolarWorld Aktiengesellschaft, who would have been duty bound to get the best price that they could, and suggests that there wasn’t interest from other parties in taking a stake in half of it – although of course it makes sense that they would approach Zinnwald given its existing share of the project. Zinnwald is already at a fairly advanced stage, having completed a definitive feasibility study and the figures of which look reasonable, with a 30 year mine life (that will mine less than half of the mineral resource in place) and an NPV of €428 million, plus an internal rate of return of 27%. In terms of getting the project to the production stage, which could be done in less than two years, the construction costs of €159 million aren’t a prohibitive amount, given the £62 million market cap of Zinnwald, even if it was partly done via equity. The project economics could be further improved as well if the company was successful at its other three exploration licences in the region, as it also would be if it successfully managed to sell the fertiliser by-product that the processing plant would produce. There is also an argument that things are moving in the right direction for the company in terms of German and EU policy, when it comes to securing lithium supply for the battery gigafactories that are planned over the next decade, in addition to the existing ones already operating.

Sosandar – Trading Update Suffers From Adam Reynolds’ Keyboard - it's the cash that matters says Nigel Somerville HERE

The biggest issue for me though with all these types of companies where the resource looks great on paper, including within a DFS, and where they are operating in the right part of the world for that particular resource, is that why, if it really is so great, is it solely owned by a tiny company and larger outfits haven’t already at least snapped up part of the project – being able to buy the remaining half of the project so cheaply isn’t necessarily a good sign. Of course there is also an argument that these companies are still a bit early to the party and in time the project will be in high demand, and that is something that can be seen elsewhere with smaller companies that have actually made it through to production on a significant mining project that no one else seemed to want – Bacanora itself being a very good example of that.

Eurasia Mining adopts formal dividend policy as I lay out bedroom etiquette policy to Cheryl Cole. Read from Tom Winnifrith HERE

So, whilst I wouldn’t be rushing out to buy shares in Zinnwald – if I was to become interested in it then it would be once the route to funding production was clearer - as often these days there seems to be little reward for holding through that phase compared to the risk that you are taking - I also don’t see much reason for ex-Bacanora holders to suddenly dump their shares either (no doubt some will though), especially at a time when there is bound to be an overhang not only from the deal but also, potentially, the £4 million of placing shares that were issued in December at a price of 15.5p. Especially now that the company is funded at least in the shorter term to complete the ongoing work it has planned, as well as for working capital and corporate costs.

Good job Next, but your positive Christmas trading is factored in considers Chris Bailey HERE

Filed under: Zinnwald Lithium, David Bramhill, ADM Energy, Sosandar, Eurasia Mining, Next

2022-01-06 15:37:29

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