Ann: Jervois Annual Report 2022, page-6

Cash (31 Dec 2022) = US$152.6m
Cobalt inventories 2,540mt. Value? US$84m (at US$15 l/b) and US$112m (at US$20 l/b).

Cash & cobalt = US$236.6m

Debt: Nordic bond = US$101m
Mercuria facility = US$115m

Debt = US$216m

Cash and cobalt inventory roughly equivalent to debt.

But, I hear the naysayers cry “cash will need to be drawn down across 2023”. Of course, how else do you expect to bring two operational assets online? You need capital to bring assets online. And once ALL three are online and generating cash, a more comprehensive cash flow analysis can be calculated and commented on. It is disingenuous to assess the business with only one asset generating income at this point in time. Some need to understand that Jervois has been an operating entity for 18 months. Funds are needed in the near-term for their growth pipeline.

Punters make a point of them having debt or issuing equity. How else does a company access capital to bring assets online? Why are some punters holding development plays requiring significant capex, but are staying mum on how these companies will manage to raise these funds (and in the current environment)?Furthermore, some people have it in their heads that “debt is bad” & “capital raisings are bad” - and don’t seem to put them into context. I don’t get it.

FMG carried monstrous amounts of debt early doors and many punters wrote them off and said they were gunna go under before they were even firing on all cylinders. Yet - 20 years on - they are still an operating company capped at A$68 billion.

Context is everything.
Understand what a manageable debt level is.
Understand what a balanced funding strategy actually means.
Understand what it means when the MD says that they are still well-supported by their major partners like Mercuria in terms of their biz strategy and also being able to access debt and equity. Unlike all those pretenders out there, access to capital is critical in this game. And at this point in time, they have that.

What are the expected outlays?

SMP final acquisition payment: R$62.5 million (US$12.1m as at 09/03/23 exchange rates). To be paid in June 2023.
SMP capex - US$65m.
ICO capex overrun = ~US$26.88m
Accruals = US$17.9m
Lease liabilities $14.82m
ICO cash op loss = $27.45m (see below).
* Cobalt inventory wind down to cover Mercuria facility.


Total: US$164.15m in outlays (2023).
Total cash: US$152.6m (31/12/22).


* Miningnut - you included the senior bond twice in your cals (in your cash op loss cals and also as a separate standalone figure).

Cobalt 1,200mt (midpoint between guidance of 1,100 - 1,300 mt).
Copper 3,100 mt (midpoint between guidance of 3,000 - 3,200 mt).

Average Co price across 2023 = US$20 l/b (current price seen in China based on today’s exchange rate. I think it will be higher across 2023, however, will use this conservative figure).
* Miningnut - Co prices will not be fixed in perpetuity at $15.3 l/b for the entirety of 2023.
Average Cu price across 2023 = $4 l/b

Co Rev = 2,646,000 lbs @ 90.7% recovery = 2,399,922 lbs Co x US$20 l/b = US$47,998,440
Cu Rev = 6,835,500 lbs @ 96.2% recovery = 6,575,751 lbs Cu x US$4 l/b = US$26,303,004
Au Rev = 5,094 ozs x US$1,832 oz = US$9,332,208

US$83.6m total revenue before payability

- $12m cobalt smelter payability
- $5.2m copper smelter payability
- $2.8m gold smelter payability

US$63.6m Net Rev post-payability

- US$52.5m operating costs x 9 months.
- US$0.9m royalties + property taxes

US$10.2m EBITDA

* Miningnut (and for the 3rd time) Mine life to be extended to ~10 years. Depreciation & amortisation are balance sheet intangibles and probably shouldn’t be added to the above. Jervois has indicated the desire to expand - so once this occurs - these can be spread out over a longer life anyway. And the financing costs can be similarly spread out across the entire group (not just the ICO).

- $21.75m D&A (9 months) (US$290m over 10 yr mine life) (* NB: Macquarie’s CY23e D&A = US$24m - so my figure is thereabouts)

- $9.4m financing costs (9 months)
- $1.5m financing costs (reclamation bonds)
- $4m license, fed, state, corp taxes
- $1m capitalised bond costs (written-off)

-$27.45m net loss from ICO ops (9 months from 01/04/23).

“it is unlikely that their Finland smelter will generate any significant operating surpluses this year as the cobalt price keeps bouncing along the bottom”

Speculative. Kokkola is expected to return to +EBITDA in H2 2023 (of course - it depends on the Co price).

“You would have to assume that they'll be another capital raising sometime around early Q3 this year to replenish the coffers”.

As I have shown above, total outlays are roughly equivalent with total cash. Miningnut’s US$58.75m shortfall is wrong. It may be the case that they need to tap equity markets again - but only if the Co price averages in the teens or even $20 l/b throughout 2023. Too early to make such definitive statements. If the Co price moves back into the mid-20s, they'll be fine. They still have US$35m that can be accessed via the Mercuria facility, although I think they would prefer to start paying this down rather than extending it. And similar to the previous raise, I think any future equity raise would be couched in with a value-accretive event.

“they mightn't have the support of their two major shareholders this time around as the penny has probably dropped for them that this is a classic bottomless pit - Perpetual is already selling their holding and we can expect another sell-down notice from them shortly”.

These comments bother me the most. There is simply no evidence to support this suggestion. Bryce has publicly stated that Mercuria continue to support their strategy. Same goes with AussieSuper. He has made the point that they can still access both debt and equity. Yet, we are to believe a random HC poster that they “mightn’t have the support”? Perpetual have sold down a fraction of their overall holding. Work out the total % of their holding that they have sold down to reach a more accurate conclusion on the extent of their support. Institutions taking “some money” outta markets given the increasingly complex macro environment shouldn’t automatically be assumed to mean they no longer support the company in question. It is called risk management. The register hasn’t changed much at all - as far as I can tell. Let’s cool our jets and not unnecessarily catastrophise here.

“they need to get back to basics and that means closing the ICO mine and putting SMP Brazil on hold”. No, they don’t. This is your opinion. Management have a fiduciary duty to shareholders. They are aware of that. And I am backing them in to make the best decisions for us shareholders.

“they haven't convinced the market that this operation will be commercially viable”. You are speaking on behalf of the entire market now? The impudence. I think you’ll find once the Co price moves back into the 20s, the SP will respond accordingly. And with $20 l/b being seen in China right now (and also via forward pricing on the CME) it won’t take long for the LME Fastmarkets MB price to catch up.

Some catalysts to look forward to:

> Updated ICO JORC in Q2 2023.
> Achieve ICO nameplate production end of Q2 2023.
> LOM extension at the ICO (beyond 7 years).
> Expedited permits to increase annual production rate (will impact numbers above).
> Drilling of satellite deposits (Sunshine, etc).
> Potential USG involvement in mine expansion & downstream processing (permits, subbing out Nordic bond with cheaper financing + domestic refinery).
> Off-take deal/s (ICO + SMP).
> Refinery feed for the SMP (primary nickel mine?)
> Drilling at Nico Young.
> BFS Nico Young.
> JV for an equity share in Nico Young.
> Kokkola expansion initiatives.

More I may have forgotten about.


2023 was always going to be a transitional year for Jervois Global. And also a difficult year for markets giving inflation/interest rate rises, etc. I think it is natural to be cautious right now, but the sky hasn't fallen as far as I can tell. It is a challenging environment for many businesses, but being well-capitalised and importantly - having strong relationships with key stakeholders are critical in order to ride out these tough times. The EV/electrification thematic continues to gather pace. Investments are being made and deals are being done behind the scenes. It is difficult to filter out the noise, but I have been adding more down here - such is my LT conviction. Only time will tell whether I was right or not.