tylerdurden Posted December 17, 2015 Share Posted December 17, 2015 I don't know whether any of you guys follow the LME warehouse positions on Zinc but it is going down. There are significant inventory out of the LME warehouse as well but I bet that's also winding down slowly. I see Zinc commodity different than iron ore, copper, coal etc. There is really a strong argument you can make for this commodity at least for 2016/2017 with all the mine closures and product curtailments. My bet we'll see some spike in the price by end of January when we begin to hear the Q4 production figures from Glencore, Nyrastar etc. and see whether the curtailments were actually delivered. At that point the warehouse inventory would be lower with this gradual improvement so that timeframe could be a turning point for the commodity price. Of course that would support the price of the ZINC company as well. Another thing that could change course for the share price is the December update for Mooresboro. If I am a short on this, I'd be really careful on these two potential developments. Perhaps it is wishful thinking, perhaps not. I guess we'll see coming soon... Link to comment Share on other sites More sharing options...
SnarkyPuppy Posted December 17, 2015 Share Posted December 17, 2015 I mean it's pretty simple at this point. Basically comes down to whether management can finally hold true to their statement of 60-70% utilization in Q1. If not, looks pretty bad. Zinc commodity prices eventually will go up at some point - but they are less important in determining the future existence of this company. In my opinion, the biggest impact the commodity price has on the existence of the company is the short term volatility in share price caused by changes in commodity price, which then impacts their ability to sell equity at attractive prices. Pretty much a waiting game now. Wish I waited until now to buy. Link to comment Share on other sites More sharing options...
SnarkyPuppy Posted December 17, 2015 Share Posted December 17, 2015 My biggest concern as an equity holder is that someone buys out the entire company while it's cheap. Would totally screw the existing shareholders by removing the asymmetrical upside that we are taking on risk for Link to comment Share on other sites More sharing options...
tylerdurden Posted December 17, 2015 Share Posted December 17, 2015 I mean it's pretty simple at this point. Basically comes down to whether management can finally hold true to their statement of 60-70% utilization in Q1. If not, looks pretty bad. Zinc commodity prices eventually will go up at some point - but they are less important in determining the future existence of this company. In my opinion, the biggest impact the commodity price has on the existence of the company is the short term volatility in share price caused by changes in commodity price, which then impacts their ability to sell equity at attractive prices. Pretty much a waiting game now. Wish I waited until now to buy. Yeah, I agree final outcome depends on the plant's utilization levels but commodity prices could give them additional options/time, which can help them to actually finally figure out how to increase the utilization at the plant. I don't see two issues separate. They are interrelated. I guess this is value investing really. Ability to take pain. I am sure Pabrai shares your thoughts in terms of timing but I don't think good timing is a pre-requisite of successful results in investing... Link to comment Share on other sites More sharing options...
tylerdurden Posted December 17, 2015 Share Posted December 17, 2015 My biggest concern as an equity holder is that someone buys out the entire company while it's cheap. Would totally screw the existing shareholders by removing the asymmetrical upside that we are taking on risk for That's a concern to me as well but any potential investor wouldn't buy this thing w/o seeing any success at the plant I think. That means they will have to pay higher if there is success at the plant. Also having Pabrai invested in this is an additional defense. He would fight against (go active or something) that kind of development unless of course he is the one who would cut that special deal. That might not be very ideal for the other investors... Link to comment Share on other sites More sharing options...
Picasso Posted December 18, 2015 Share Posted December 18, 2015 ~If~ I were to buy ZINC, and I'm still not seeing the edge here, I'd just wait until they throw out a hail mary equity raise. At that point the upside for any long above $3 will be wiped out and you'll see some level of capitulation. Probably half the owners on this board would put their shares in some special "guess it's going to my grandchildren's grandchildren" account or dump them in disgust. You don't have any real free cash flow to support any real valuation when there's this much debt choking out the equity. For all intents and purposes the equity is a zero here. A lot of investors were upset when they raised equity at $12 ("why are they doing it with the stock so low?") so it's a nice lesson of dealing with any kind of risky project. There's a right mix of equity/debt and you fund it when the market lets you do it, even if it looks sucky to be giving up equity assuming you own it pre capital raise. I still think Pabrai should follow in the footsteps of his role model and do some kind of shitty version of WEB's Goldman preferred deal (or prem's BBRY debt deal). Some 15% preferred for $50 million could get the stock back up to $3-4 and let ZINC raise some equity capital for the difference and hopefully get through the downturn that shows no sign of reversing. Otherwise he's just admitting defeat with this investment and took way too long to realize the macro and micro changes that turned this into a really bad situation. Link to comment Share on other sites More sharing options...
tylerdurden Posted December 18, 2015 Share Posted December 18, 2015 For all intents and purposes the equity is a zero here. I don't think anyone thinks ZINC is worth much if Mooresboro fails permanently. The question is what if they figure out the plant and increase utilization significantly (above break even) in 2016. Do you still think equity would be zero? It could be hard to assign any probability to that outcome vs the others so many investors would just pass this but no one should write off that as if it is 0% chance... Link to comment Share on other sites More sharing options...
Guest roark33 Posted December 18, 2015 Share Posted December 18, 2015 wondering if anyone has heard anything from mohnish pabrai regarding ZINC. from what i remember, this was once a 22% (ballpark) position. wondering if anyone knows if he is still in it or has any recent thoughts? thanks in advance. Pabrai would have to disclose immediately if he bought or sold any shares immediately...so I don't think he has done either. Not that his activity should have any impact on your investment thesis, just fyi. Link to comment Share on other sites More sharing options...
AzCactus Posted December 18, 2015 Share Posted December 18, 2015 Based on the share price movement over the last few months there's almost no way that this can be a 22% position unless his AUM has shrunk significantly. Link to comment Share on other sites More sharing options...
racemize Posted December 18, 2015 Share Posted December 18, 2015 Based on the share price movement over the last few months there's almost no way that this can be a 22% position unless his AUM has shrunk significantly. Well, that would have been measured at a different market cap for ZINC. Now it is much less, but just because ZINC dropped. Moreover, I'm not sure it was actually 22%, but might have been 22% of his 13-F, which does not include quite a few investments. e.g., it might have been in the high teens, when he was showing significant gains over his cost basis. Link to comment Share on other sites More sharing options...
hobbit Posted December 18, 2015 Share Posted December 18, 2015 ~If~ I were to buy ZINC, and I'm still not seeing the edge here, I'd just wait until they throw out a hail mary equity raise. At that point the upside for any long above $3 will be wiped out and you'll see some level of capitulation. Probably half the owners on this board would put their shares in some special "guess it's going to my grandchildren's grandchildren" account or dump them in disgust. You don't have any real free cash flow to support any real valuation when there's this much debt choking out the equity. For all intents and purposes the equity is a zero here. A lot of investors were upset when they raised equity at $12 ("why are they doing it with the stock so low?") so it's a nice lesson of dealing with any kind of risky project. There's a right mix of equity/debt and you fund it when the market lets you do it, even if it looks sucky to be giving up equity assuming you own it pre capital raise. I still think Pabrai should follow in the footsteps of his role model and do some kind of shitty version of WEB's Goldman preferred deal (or prem's BBRY debt deal). Some 15% preferred for $50 million could get the stock back up to $3-4 and let ZINC raise some equity capital for the difference and hopefully get through the downturn that shows no sign of reversing. Otherwise he's just admitting defeat with this investment and took way too long to realize the macro and micro changes that turned this into a really bad situation. ZINC is facing an engineering challenge which everyone( Hatch,management etc) is unanimously saying can be addressed in a limited time frame. They are not reinventing the wheel here...this technology is successful in two different places around the world. And I think therein in lies the problem. People are not being able to differentiate that the uncertainty around ZINC is not whether their next product will have enough customers(e.g BBRY) or whether they can retain their current customers( Walmart,JCP etc) but that how soon they can they address the engineering challenges. I have an hons. degree in the subject and in my opinion their challenges are rudimentary in nature. There is no way that they can't be addressed in a limited timespan. Like think of it , with all the current technology available , they can't install better filters to fix organic impurities? The problem is that the management is trying to find the most efficient/cheapest solution which is lengthening the time line. And since their challenges are engineering (rudimentary) based in nature...the risk is low and uncertainty is high. lets see.... Link to comment Share on other sites More sharing options...
SnarkyPuppy Posted December 18, 2015 Share Posted December 18, 2015 ~If~ I were to buy ZINC, and I'm still not seeing the edge here, I'd just wait until they throw out a hail mary equity raise. At that point the upside for any long above $3 will be wiped out and you'll see some level of capitulation. Probably half the owners on this board would put their shares in some special "guess it's going to my grandchildren's grandchildren" account or dump them in disgust. You don't have any real free cash flow to support any real valuation when there's this much debt choking out the equity. For all intents and purposes the equity is a zero here. A lot of investors were upset when they raised equity at $12 ("why are they doing it with the stock so low?") so it's a nice lesson of dealing with any kind of risky project. There's a right mix of equity/debt and you fund it when the market lets you do it, even if it looks sucky to be giving up equity assuming you own it pre capital raise. I still think Pabrai should follow in the footsteps of his role model and do some kind of shitty version of WEB's Goldman preferred deal (or prem's BBRY debt deal). Some 15% preferred for $50 million could get the stock back up to $3-4 and let ZINC raise some equity capital for the difference and hopefully get through the downturn that shows no sign of reversing. Otherwise he's just admitting defeat with this investment and took way too long to realize the macro and micro changes that turned this into a really bad situation. ZINC is facing an engineering challenge which everyone( Hatch,management etc) is unanimously saying can be addressed in a limited time frame. They are not reinventing the wheel here...this technology is successful in two different places around the world. And I think therein in lies the problem. People are not being able to differentiate that the uncertainty around ZINC is not whether their next product will have enough customers(e.g BBRY) or whether they can retain their current customers( Walmart,JCP etc) but that how soon they can they address the engineering challenges. I have an hons. degree in the subject and in my opinion their challenges are rudimentary in nature. There is no way that they can't be addressed in a limited timespan. Like think of it , with all the current technology available , they can't install better filters to fix organic impurities? The problem is that the management is trying to find the most efficient/cheapest solution which is lengthening the time line. And since their challenges are engineering (rudimentary) based in nature...the risk is low and uncertainty is high. lets see.... Doesn't Pabrai have an engineering degree as well? While he may not have enough capital to loan them money, why is he not accumulating shares at current prices if that's the case? If management is so sure that this will work out / the problems are rudimentary, then why are they not taking significant amounts of their net worth and buying shares? I'm long because I think the upside is very high and am willing to lose $, but wouldn't be surprised if I lost a substantial amount of capital. Link to comment Share on other sites More sharing options...
hardincap Posted December 18, 2015 Share Posted December 18, 2015 ~If~ I were to buy ZINC, and I'm still not seeing the edge here, I'd just wait until they throw out a hail mary equity raise. At that point the upside for any long above $3 will be wiped out and you'll see some level of capitulation. Probably half the owners on this board would put their shares in some special "guess it's going to my grandchildren's grandchildren" account or dump them in disgust. You don't have any real free cash flow to support any real valuation when there's this much debt choking out the equity. For all intents and purposes the equity is a zero here. A lot of investors were upset when they raised equity at $12 ("why are they doing it with the stock so low?") so it's a nice lesson of dealing with any kind of risky project. There's a right mix of equity/debt and you fund it when the market lets you do it, even if it looks sucky to be giving up equity assuming you own it pre capital raise. I still think Pabrai should follow in the footsteps of his role model and do some kind of shitty version of WEB's Goldman preferred deal (or prem's BBRY debt deal). Some 15% preferred for $50 million could get the stock back up to $3-4 and let ZINC raise some equity capital for the difference and hopefully get through the downturn that shows no sign of reversing. Otherwise he's just admitting defeat with this investment and took way too long to realize the macro and micro changes that turned this into a really bad situation. ZINC is facing an engineering challenge which everyone( Hatch,management etc) is unanimously saying can be addressed in a limited time frame. They are not reinventing the wheel here...this technology is successful in two different places around the world. And I think therein in lies the problem. People are not being able to differentiate that the uncertainty around ZINC is not whether their next product will have enough customers(e.g BBRY) or whether they can retain their current customers( Walmart,JCP etc) but that how soon they can they address the engineering challenges. I have an hons. degree in the subject and in my opinion their challenges are rudimentary in nature. There is no way that they can't be addressed in a limited timespan. Like think of it , with all the current technology available , they can't install better filters to fix organic impurities? The problem is that the management is trying to find the most efficient/cheapest solution which is lengthening the time line. And since their challenges are engineering (rudimentary) based in nature...the risk is low and uncertainty is high. lets see.... The ramp has been delayed for almost two years now. If ramping the plant was so rudimentary, why the ridiculous delay? Management cant seem to get correct estimates on anything, and its probably not because they're too dumb to understand rudimentary engineering challenges. Link to comment Share on other sites More sharing options...
SnarkyPuppy Posted December 18, 2015 Share Posted December 18, 2015 ~If~ I were to buy ZINC, and I'm still not seeing the edge here, I'd just wait until they throw out a hail mary equity raise. At that point the upside for any long above $3 will be wiped out and you'll see some level of capitulation. Probably half the owners on this board would put their shares in some special "guess it's going to my grandchildren's grandchildren" account or dump them in disgust. You don't have any real free cash flow to support any real valuation when there's this much debt choking out the equity. For all intents and purposes the equity is a zero here. A lot of investors were upset when they raised equity at $12 ("why are they doing it with the stock so low?") so it's a nice lesson of dealing with any kind of risky project. There's a right mix of equity/debt and you fund it when the market lets you do it, even if it looks sucky to be giving up equity assuming you own it pre capital raise. I still think Pabrai should follow in the footsteps of his role model and do some kind of shitty version of WEB's Goldman preferred deal (or prem's BBRY debt deal). Some 15% preferred for $50 million could get the stock back up to $3-4 and let ZINC raise some equity capital for the difference and hopefully get through the downturn that shows no sign of reversing. Otherwise he's just admitting defeat with this investment and took way too long to realize the macro and micro changes that turned this into a really bad situation. ZINC is facing an engineering challenge which everyone( Hatch,management etc) is unanimously saying can be addressed in a limited time frame. They are not reinventing the wheel here...this technology is successful in two different places around the world. And I think therein in lies the problem. People are not being able to differentiate that the uncertainty around ZINC is not whether their next product will have enough customers(e.g BBRY) or whether they can retain their current customers( Walmart,JCP etc) but that how soon they can they address the engineering challenges. I have an hons. degree in the subject and in my opinion their challenges are rudimentary in nature. There is no way that they can't be addressed in a limited timespan. Like think of it , with all the current technology available , they can't install better filters to fix organic impurities? The problem is that the management is trying to find the most efficient/cheapest solution which is lengthening the time line. And since their challenges are engineering (rudimentary) based in nature...the risk is low and uncertainty is high. lets see.... Also, given your knowledge in the subject, do you mind me asking if you've been purchasing shares/hold a sizable long position? Link to comment Share on other sites More sharing options...
racemize Posted December 18, 2015 Share Posted December 18, 2015 Pabrai already maxed out his position size--he's not adding more due to his own rules; or at least if he does, it will be a deviation from his rules. I'm personally not sure why this thread keeps getting posted to. There is almost no new discussion going on. Either the plant works or it doesn't. Link to comment Share on other sites More sharing options...
SnarkyPuppy Posted December 18, 2015 Share Posted December 18, 2015 Pabrai already maxed out his position size--he's not adding more due to his own rules; or at least if he does, it will be a deviation from his rules. I'm personally not sure why this thread keeps getting posted to. There is almost no new discussion going on. Either the plant works or it doesn't. I never understood this argument. Doesn't he have like a 40% cost position in FIAT...? Link to comment Share on other sites More sharing options...
str8shot Posted December 18, 2015 Share Posted December 18, 2015 Based on the share price movement over the last few months there's almost no way that this can be a 22% position unless his AUM has shrunk significantly. Well, that would have been measured at a different market cap for ZINC. Now it is much less, but just because ZINC dropped. Moreover, I'm not sure it was actually 22%, but might have been 22% of his 13-F, which does not include quite a few investments. e.g., it might have been in the high teens, when he was showing significant gains over his cost basis. Pabrai owns 8.3m shares of the 58m shares of ZINC outstanding, which is 14.3% of the company. 6.3m shares are held in Pabrai Funds and the other 2m shares are held by Dhandho Holdings (and were purchased in August at around $7.50-8 per share). Since he owns over 10% of the equity shares, any buy/sell he executes gets reported on Form 4 within a couple days of the transaction, hence the public learned of the incremental 2m share purchase shortly after. As for AUM, note that some holdings in Pabrai Funds do not get reported via the 13F because they are foreign holdings, so the total AUM per the 13F alone is understated. Also stock holdings in Dhando are not included on the 13F. Here's a link to an update from Seeking Alpha author John Vincent on Pabrai Funds 13F for Q3 2015 - at that point the HH position was about 5% ($19M) of the $377M in AUM. http://seekingalpha.com/article/3682666-tracking-mohnish-pabrais-portfolio-q3-2015-update Link to comment Share on other sites More sharing options...
str8shot Posted December 18, 2015 Share Posted December 18, 2015 Pabrai already maxed out his position size--he's not adding more due to his own rules; or at least if he does, it will be a deviation from his rules. I'm personally not sure why this thread keeps getting posted to. There is almost no new discussion going on. Either the plant works or it doesn't. I never understood this argument. Doesn't he have like a 40% cost position in FIAT...? My understanding is that at the point he bought Fiat in 2014 (at a cost of $5-6 per share per Guy Spier, who also bought it for his Aquamarine Fund) it had a position size of $70-80M, which would have been no more than 10% of his total AUM (again, some foreign holdings are not included on the 13F so it understates total AUM) at that time. The Fiat position now has a weight of over 40% as a percentage of the 13F because it has more than doubled while similarly large positions at that time have since declined: GM warrants (slightly) and Horsehead (big time). Pabrai has said he's happy to hold an outsized position if it is still well below his intrinsic value target. Link to comment Share on other sites More sharing options...
hobbit Posted December 18, 2015 Share Posted December 18, 2015 ~If~ I were to buy ZINC, and I'm still not seeing the edge here, I'd just wait until they throw out a hail mary equity raise. At that point the upside for any long above $3 will be wiped out and you'll see some level of capitulation. Probably half the owners on this board would put their shares in some special "guess it's going to my grandchildren's grandchildren" account or dump them in disgust. You don't have any real free cash flow to support any real valuation when there's this much debt choking out the equity. For all intents and purposes the equity is a zero here. A lot of investors were upset when they raised equity at $12 ("why are they doing it with the stock so low?") so it's a nice lesson of dealing with any kind of risky project. There's a right mix of equity/debt and you fund it when the market lets you do it, even if it looks sucky to be giving up equity assuming you own it pre capital raise. I still think Pabrai should follow in the footsteps of his role model and do some kind of shitty version of WEB's Goldman preferred deal (or prem's BBRY debt deal). Some 15% preferred for $50 million could get the stock back up to $3-4 and let ZINC raise some equity capital for the difference and hopefully get through the downturn that shows no sign of reversing. Otherwise he's just admitting defeat with this investment and took way too long to realize the macro and micro changes that turned this into a really bad situation. ZINC is facing an engineering challenge which everyone( Hatch,management etc) is unanimously saying can be addressed in a limited time frame. They are not reinventing the wheel here...this technology is successful in two different places around the world. And I think therein in lies the problem. People are not being able to differentiate that the uncertainty around ZINC is not whether their next product will have enough customers(e.g BBRY) or whether they can retain their current customers( Walmart,JCP etc) but that how soon they can they address the engineering challenges. I have an hons. degree in the subject and in my opinion their challenges are rudimentary in nature. There is no way that they can't be addressed in a limited timespan. Like think of it , with all the current technology available , they can't install better filters to fix organic impurities? The problem is that the management is trying to find the most efficient/cheapest solution which is lengthening the time line. And since their challenges are engineering (rudimentary) based in nature...the risk is low and uncertainty is high. lets see.... Doesn't Pabrai have an engineering degree as well? While he may not have enough capital to loan them money, why is he not accumulating shares at current prices if that's the case? If management is so sure that this will work out / the problems are rudimentary, then why are they not taking significant amounts of their net worth and buying shares? I'm long because I think the upside is very high and am willing to lose $, but wouldn't be surprised if I lost a substantial amount of capital. From my understanding of Mr Pabrai's investment philosophy he has a rule of not investing more than 10% of his portfolio in one holding...he has close to 8 million shares around 7-8$ which i think meets the 10% hurdle. so that might be the reason why he is not buying more.. Also based on insider ownership , I guess you can formulate a strategy based on the behaviour of insider ownership of companies and make money from that.....I don't think it will work though...coz insider ownership increases or decreases for a multitude of reasons and sometimes it might have nothing to do with the future of the company. Also I don't think it is prudent even for the CEO of ZINC to put all his eggs in one basket....like any rational person he would want to diversify his risk as well....Jim and Rob already have a combined ownership of more than 440k shares and that tells me that their fortunes are significantly linked to how ZINC performs Link to comment Share on other sites More sharing options...
hobbit Posted December 18, 2015 Share Posted December 18, 2015 ~If~ I were to buy ZINC, and I'm still not seeing the edge here, I'd just wait until they throw out a hail mary equity raise. At that point the upside for any long above $3 will be wiped out and you'll see some level of capitulation. Probably half the owners on this board would put their shares in some special "guess it's going to my grandchildren's grandchildren" account or dump them in disgust. You don't have any real free cash flow to support any real valuation when there's this much debt choking out the equity. For all intents and purposes the equity is a zero here. A lot of investors were upset when they raised equity at $12 ("why are they doing it with the stock so low?") so it's a nice lesson of dealing with any kind of risky project. There's a right mix of equity/debt and you fund it when the market lets you do it, even if it looks sucky to be giving up equity assuming you own it pre capital raise. I still think Pabrai should follow in the footsteps of his role model and do some kind of shitty version of WEB's Goldman preferred deal (or prem's BBRY debt deal). Some 15% preferred for $50 million could get the stock back up to $3-4 and let ZINC raise some equity capital for the difference and hopefully get through the downturn that shows no sign of reversing. Otherwise he's just admitting defeat with this investment and took way too long to realize the macro and micro changes that turned this into a really bad situation. ZINC is facing an engineering challenge which everyone( Hatch,management etc) is unanimously saying can be addressed in a limited time frame. They are not reinventing the wheel here...this technology is successful in two different places around the world. And I think therein in lies the problem. People are not being able to differentiate that the uncertainty around ZINC is not whether their next product will have enough customers(e.g BBRY) or whether they can retain their current customers( Walmart,JCP etc) but that how soon they can they address the engineering challenges. I have an hons. degree in the subject and in my opinion their challenges are rudimentary in nature. There is no way that they can't be addressed in a limited timespan. Like think of it , with all the current technology available , they can't install better filters to fix organic impurities? The problem is that the management is trying to find the most efficient/cheapest solution which is lengthening the time line. And since their challenges are engineering (rudimentary) based in nature...the risk is low and uncertainty is high. lets see.... Also, given your knowledge in the subject, do you mind me asking if you've been purchasing shares/hold a sizable long position? yes I do with an avg price around 6.50 Link to comment Share on other sites More sharing options...
hobbit Posted December 19, 2015 Share Posted December 19, 2015 ~If~ I were to buy ZINC, and I'm still not seeing the edge here, I'd just wait until they throw out a hail mary equity raise. At that point the upside for any long above $3 will be wiped out and you'll see some level of capitulation. Probably half the owners on this board would put their shares in some special "guess it's going to my grandchildren's grandchildren" account or dump them in disgust. You don't have any real free cash flow to support any real valuation when there's this much debt choking out the equity. For all intents and purposes the equity is a zero here. A lot of investors were upset when they raised equity at $12 ("why are they doing it with the stock so low?") so it's a nice lesson of dealing with any kind of risky project. There's a right mix of equity/debt and you fund it when the market lets you do it, even if it looks sucky to be giving up equity assuming you own it pre capital raise. I still think Pabrai should follow in the footsteps of his role model and do some kind of shitty version of WEB's Goldman preferred deal (or prem's BBRY debt deal). Some 15% preferred for $50 million could get the stock back up to $3-4 and let ZINC raise some equity capital for the difference and hopefully get through the downturn that shows no sign of reversing. Otherwise he's just admitting defeat with this investment and took way too long to realize the macro and micro changes that turned this into a really bad situation. ZINC is facing an engineering challenge which everyone( Hatch,management etc) is unanimously saying can be addressed in a limited time frame. They are not reinventing the wheel here...this technology is successful in two different places around the world. And I think therein in lies the problem. People are not being able to differentiate that the uncertainty around ZINC is not whether their next product will have enough customers(e.g BBRY) or whether they can retain their current customers( Walmart,JCP etc) but that how soon they can they address the engineering challenges. I have an hons. degree in the subject and in my opinion their challenges are rudimentary in nature. There is no way that they can't be addressed in a limited timespan. Like think of it , with all the current technology available , they can't install better filters to fix organic impurities? The problem is that the management is trying to find the most efficient/cheapest solution which is lengthening the time line. And since their challenges are engineering (rudimentary) based in nature...the risk is low and uncertainty is high. lets see.... The ramp has been delayed for almost two years now. If ramping the plant was so rudimentary, why the ridiculous delay? Management cant seem to get correct estimates on anything, and its probably not because they're too dumb to understand rudimentary engineering challenges. Coz even though the challenges might be rudimentary in nature they are still capital intensive....do you want the management to build the full scale version of bleed treatment plant for 30 million when it can be done at a significantly lesser amount? that is why they designed the a smaller version to see how can they fix this engineering challenge in the most efficient way. and this unfortunately leads to lengthier timelines.... The cooling fan is another example ...due to it the plant was down for 10 days or so...rudimentary again...if you read on the average timelines of plants of this nature they are still close to a normal timeline The challenges are rudimentary ..its the debt maturity that is freaking people out...but that they can change with one positive update Link to comment Share on other sites More sharing options...
kranthi_vic Posted December 19, 2015 Share Posted December 19, 2015 @hobbit, you have a degree in hydrometallurgy and plant design? Can you elaborate what you think will be the turning point in the plant ramp up. Do you have any info reg. the other two plants and their yeilds? Processes can be rudimentary in a lab, but in an industrial setting when the yield req. are demanding..plant design is very important. I have a MSEE degree and am interested to know your thoughts. Link to comment Share on other sites More sharing options...
hobbit Posted December 19, 2015 Share Posted December 19, 2015 @hobbit, you have a degree in hydrometallurgy and plant design? Can you elaborate what you think will be the turning point in the plant ramp up. Do you have any info reg. the other two plants and their yeilds? Processes can be rudimentary in a lab, but in an industrial setting when the yield req. are demanding..plant design is very important. I have a MSEE degree and am interested to know your thoughts. here ..this might help http://www.mining-technology.com/features/feature-turning-dust-into-a-commodity-zincox-andrew-woollett/ http://www.londonstockexchange.com/exchange/news/market-news/market-news-detail/ZOX/12423875.html "However, the zinc price fell by 7%, consequently zinc revenue increased by only 11%. The Company has demonstrated that the plant is capable of being operated at nameplate capacity on a daily basis but as a result of cut backs in Korean steel production, there has been a reduction in the amount of EAFD generated in Korea which has in turn restricted throughput at KRP and for much of the half year the plant ran at only about 80% of capacity. Notwithstanding this limitation, KRP generated almost US$3 million of EBITDA for the period." Both are essentially in the EAFD recycling industry but KRP uses RHF which is different from ZINC . I think it took them 3.5 years to ramp up fully. you can easily find loads of other stuff as well. My biggest concern is whether they will be able to realize 100 million in incremental EBITA coz I have never quite been able to figure out the math on that. it might be revised to a more conservative estimate Link to comment Share on other sites More sharing options...
tylerdurden Posted December 19, 2015 Share Posted December 19, 2015 Thanks everyone for their comtributions to this discussion, especially folks who have engineering backgrounds provide very valuable insights. I was just reviewing the past calls for seeing management's past views about the ramp up and really it is hard to give them much credibilty at this point after all those overpromises and persistent ongoing problems. Having said that I still believe the problems are solvable and that's why I am long. In terms of similar technologies, Mr B posted a presentation about the Skorpion plant longtime ago on this board. It has the ramp up history of that plant and although it took them 2-2.5 years to get full capacity, from the first quarter they were at 40% capacity so nothing like Mooresboro for sure. I'll repost the link of the presentation again when i have the chance so you can see yourself. It seems ZINC hired one of the engineers who worked at the Skorpion commissioning and ramp up so his experience could be useful for them. For pabrai, I try to understand his timing really with his last purchase. There was nothing different in terms of ramp up around his purchase date, so puzzling for me since he did not continue buying for averaging down either. So why would you buy end of July/August and just stop? Perhaps he wanted to give some positive signal to the market in order to support the price so they can use the equity market later on but failed miserably obviously. That's just a long shot theory of course. Anyways, at this point I want to believe they already figured out this organic impurities issue, otherwise what's the point of replacing all these anodes right? Perhaps they needed more time to find that solution so they are intentionally delaying to replace these anodes (more than original 10 weeks timeframe). Link to comment Share on other sites More sharing options...
hardincap Posted December 19, 2015 Share Posted December 19, 2015 Thanks everyone for their comtributions to this discussion, especially folks who have engineering backgrounds provide very valuable insights. I was just reviewing the past calls for seeing management's past views about the ramp up and really it is hard to give them much credibilty at this point after all those overpromises and persistent ongoing problems. Having said that I still believe the problems are solvable and that's why I am long. In terms of similar technologies, Mr B posted a presentation about the Skorpion plant longtime ago on this board. It has the ramp up history of that plant and although it took them 2-2.5 years to get full capacity, from the first quarter they were at 40% capacity so nothing like Mooresboro for sure. I'll repost the link of the presentation again when i have the chance so you can see yourself. It seems ZINC hired one of the engineers who worked at the Skorpion commissioning and ramp up so his experience could be useful for them. For pabrai, I try to understand his timing really with his last purchase. There was nothing different in terms of ramp up around his purchase date, so puzzling for me since he did not continue buying for averaging down either. So why would you buy end of July/August and just stop? Perhaps he wanted to give some positive signal to the market in order to support the price so they can use the equity market later on but failed miserably obviously. That's just a long shot theory of course. Anyways, at this point I want to believe they already figured out this organic impurities issue, otherwise what's the point of replacing all these anodes right? Perhaps they needed more time to find that solution so they are intentionally delaying to replace these anodes (more than original 10 weeks timeframe). Where did you get the info that "ZINC hired one of the engineers who worked at the Skorpion commissioning and ramp up"? I can't believe Pabrai would buy 10%+ in a company without contracting experts to confirm that the plant is going to work. Seems crazy to put $50m+ into a company where everything hinges on the plant working without thoroughly getting the plant vetted by outside experts Link to comment Share on other sites More sharing options...
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