Consolidated comments and response June 25
Lots to talk about. Mainly it seems useless to look for an understandable relationship to the news, which for the most part was within guidance
We have seen substantial negative reaction to CLQ's BFS; the ARL PFS; and the AUZ take-off.
If one had known the content in advance, it would have been reasonable to suppose an increase in the stock price as a result on all of these announcements. It is especially incongruous given the state of the DRC and the mining stocks there.
This just reinforces my opinion that short-term price action is driven by things other than fundamentals, be it sentiment, program trading, bots, what have you.
It is hard to separate one's opinion of the company from its stock price. But they are different.
and I can say is that the BFS does not much at all to negatively impact my opinion of the company or its prospects; and even less so, the price action. IMO there is not much one can fault CLQ management for.
If one wants to search the details of the BFS for a "reason", what stands out are:
C1 CO-PRODUCT COSTS...they went up. But they told us before the capex would be higher, and anyone with a calculator should have known negative by-product C1 costs on nickel were likely.
PRICE ASSUMPTIONS...I thought the cobalt assumption was a little aggressive, but the nickel seems reasonable and they scandium underplayed.
UNCERTAINTY ON PROCESS METHOD...the capex was the issue for the delay in the BFS to begin with and it is not resolved, however the figures given were from the existing SNC Alliance proposal. So we are looking at worst case. As I have stated I suspect CITIC is fighting tooth and nail for the business and may prevail on account of their take-off and banking interests. In any case the situation is not resolved.
DELAY IN FID AND CONSTRUCTION...three months on account of process/EPC issues
CAPEX FIGURE...don't know why there would be such a reaction. They have said all along it was going to be high. One should remember that a big portion of it is already in sunk equity, all the money they have been spending for the last year and a half is included in capex.
FINANCING...HAC30 declared "the economics are not just not there for financing", this was an absurd pronouncement. I can understand one saying that the figures are disappointing, but to make such a statement as he did is almost too silly to bother rebutting. I did it by pointing out that the banking consortium is still in place; and there are plenty of other statements in place that can contradict the statement that "the economics are just not there for financing."
Also, CLQ does not need a high stock price to finance the project. It helps, but is not essential.
They indicated that an equity raise would be to a strategic partner; but that the majority of any raise will be in bank debt. So this is positive.
IRR...this could also be interpreted as disappointing, though it is post-tax. To me, IRR is not as important as the other assumptions that go into the BFS. It is a theoretical construct that I do not put a lot of faith in...other than a higher one is better than a lower one. Also consider that the return is also calculated on the owner's equity, which is already in the project.
Not many projects have such a high amount of owner's sunk equity already in them.
I think it is retrospective rationalizing to look at these factors as the real causes for the price action. These stocks have no sales or income, and small caps. They can get pushed around by big money pretty easily. As long as I believe in the long-term, I will put up with it.
RESPONSES TO VARIOUS POSTS
CONFERENCE CALL...I listened but did not participate by asking any questions. I was surprised by how few questions there were. Riggall basically went over the bullet points in the announcement, without a lot of elaboration. The takeaway for me was that their priorities are
take-off (promised "in the coming months"), resolution of the EPC/construction, and finance.
BLACKEYED...good call-out that all the expenses are in the BFS for expanded production,
but income is not. They are tentatively putting forth the scandium; but the platinum is missing.
6131...It is best that I avoid comparisons to CLQ and Korean Mines R Us. It usually leads to
acrimonious conflict that is not constructive and detrimental to rational debate.
And anyway I maintain that it is useless and misleading to compare CLQ as a company to any other spec miner. CLQ is a technology company with a ni-co project. Sunrise should be a profitable nickel-cobalt-scandium-platinum mine, but it is also important as the first large scale production model of CLQ technology. CLQ has a lot going for it besides Sunrise.
However, since you asked:
As stocks, both SKI Mines and CLQ have upside. As deposits, one might like Sconi and Flemington better. CLQ management is superior...no shame in that, I think they are superior to the vast majority of companies I have investigated. And as companies, CLQ has potential that is unmatched by any other spec miner.
LATERITES-SULPHIDES...Flippa explained it clearly, and touched on my opinion concerning the laterite-sulphide issue: the sulphide deposits are nice, but try and find one.
Lower capex but higher opex. The C1 comparisons are nicely presented in the CLQ ann, both by deposit type and geography. Sunrise is over on the left, next to Norilsk.
IONIC INDUSTRIES...while I expect a JV to be formed between Ionic and CLQ, I do not think the announcement will be catalytic to CLQ's stock price. It should do more for Ionic than CLQ. What the announcement would do, is give confidence that CLQ will be in a better position to get a diverse range of water contracts. It will also add to CLQ's breadth in future battery and energy applications...Graphene has applications in supercapacitors, and RF has a major interest in a quality graphite deposit.
Best wishes to all.
Remember that you make money in the stock market, when everyone agrees with you.
But they agree with you, LATER.
Expand
(20min delay)