Mark2036 It is the FY24Q1 performance that is interesting, but...

Mark2036

It is the FY24Q1 performance that is interesting, but it is not easy to get an answer from Management ahead of what WAK tells the market, so I decided to wait until the FY24Q1 Quarterly at the end of October, or earlier. The FY22Q1 Quarterly was published on 31/10/2022, but the FY23Q3 Quarterly was published on 24/04/2023, so it could be a few days earlier than 31/10/2022.

We know WAK had some problems in the past, because Management stated as much without providing detail. I could not find that comment, but I remember it well, particularly its lack of detail. I wanted to avoid concocting an opinion on the reasons why WAK has been so slow to ramp up, and let the metrics and what Management opines do the talking. However, in response to your post, I'll now give some possible reasons.

Disappointing Q3FY23 Ramp-up

Running out of cash that was not collected when the last CR was under subscribed, probably meant delaying hiring staff until the funding gap had been patched up by the sale of the Kwinana property, and the rejigging the debt with Boneyard Investments secured by that property.

The staff hired in Q3 to work the 24-hour operation (number of days unknown, but no more than four – Monday to Thursday) did not work for the full Q3, and the tasks to be performed in the highly automated plant would have been new to those hired, so they would have needed training.

The negative effect of the rainy season seems to have not been factored into Management's plans, and a $1m shed was required to be built to keep ore stocks dry. Wet ore may have slowed things in Q3FY23. The Quarterly stated “During the quarter, a new undercover ore store was completed. This ore store has been designed to reduce drying costs, improve operational efficiency and store a 2–3-week supply of dry ore during the wet season.”

The new bagging plant was belatedly installed in late June, so any orders for 20kg bagging would not have been filled.

Q1FY24 should hence be better, and that is what I want to see in coming weeks, and then comment on them. Also, something novel to discuss, makes it easier to talk to Management, and as I said, the FY2023 Financials had nothing new on the ramp-up pace.

Some thoughts on FY24

On 1 July 2023 Petsy Loo started working for WAK, and in July Andrew Sorensen went to Asia, and China for sure, so although we can expect a better tonnage in Q1FY24 from these two things, results should be even better in the quarters that follow.

WAK has in the past announced it has customers in China who are interested in importing bulk ore, and exploring this interest is ongoing. The cheaper ocean freight charges recently announced may breathe more life into that initiative. WAK would not say anything until it reaches an agreement with a party prepared to order bulk ore.

The war in Ukraine has not abated, so the extra business occasioned by kaolin from Russia and Ukraine being withdrawn from the market remains a positive for WAK. The imperative to keep more supply options open is now more patent, and Australia will become a long-term player in the kaolin trade, war or no war.

The fact that Stanco is kicking in $1m a month until February to take up shares it has committed to at 17c, means WAK can hire people and invest in the wet-delamination initiative it wants to commence in 2024. Stanco has indicated that it is going to take more product than its current off-take agreement commits it to take. Stanco will end up owning 15% of WAK.

Lack of sales is in future does not cause me sleepless nights. I do wonder, however, why a small company like WAK has more than about three directors, and what any of them can contribute beyond what Andrew Sorensen and Alf Baker can contribute. Also, I have no idea what EBT or NPAT can be expected when WAK hits various annual tonnage numbers. Tonnage is a crude yardstick for WAK who can currently produce anything between near-ore to 99,9% K999F, and high-end delaminated kaolin in future.