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Reality Kicking In, page-127

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Andyrooo

1,200 Posts.

3377

10/05/20

09:05

Post #: 44532830
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Originally posted by elphamale: ↑

Dear @Andyrooo,

Had no intention of replying to your first and second versions of the above post, but since you have posted this incredibly naive opinion piece a THIRD time within as many days, thought I should make an effort to respond. But given there is so much that is wrong with your post IMO, it's difficult to know where to begin....

'Its easy to see from this, that in the current climate of oversupply for Lithium raw material, the SP for AVZ should be under 2c. This is why the AVZ BOD sought to have their May options underwritten. You are ostriches with your heads in the sand.'

Firstly, if AVZ's BOD secretly believed that the SP should be or may go under 2c, then do you think that John Clarke (AVZ's new Chairman) would have gone ahead and purchased 1 million shares at 6.3c this week? Furthermore, having the May 2020 options underwritten simply ensures that ALL of the options (still outstanding) are converted, given that some option holders may not have the money on hand to convert or they simply forget (as unlikely as that may seem, I can assure you that stranger things have happened).

Secondly, the 'current climate of oversupply' is having a much greater impact on current producers and their balance sheets, especially those with high operating costs and considerable (if not crippling) debt. The CURRENT spot price of SC6 is doing what it should i.e. slowly bringing the market back into balance by continuing to sort the wheat (low cost Tier 1 projects) from the chaff (high cost & currently uneconomic projects).

And so with that in mind, I would have thought that you'd be focusing on the Lithium stocks that you do hold, rather than taking cheap, nasty and baseless pot shots at FUTURE Tier 1 producer AVZ. IMO your ramblings come across as someone who seems a bit angry, desperate and /or distressed. I sincerely hope that you are ok.

And if I were you Andyrooo (woah that rhymes ), at this point I'd be laser focused on what is going down in your own backyard instead of dissing AVZ (a stock that you don't own and clearly have no intention of holding). Personally, am feeling comfortable in my knowledge & understanding of where AVZ is at in the present moment, and your comment that 'Debt finance is impossible. Only equity participants need apply there' IMO shows that your understanding of the purpose, appropriateness & usefulness of debt instruments (for both parties) in certain situations (especially given the outstanding no.s contained within a conservative DFS IMO) is severely lacking.

In fact, after reading the DFS a third time this week, have to say that I've become even more confident that a larger than typical portion of the required CAPEX could feasibly (pun intended) come from debt funding, should our MD & BOD wish to adopt a higher debt to equity ratio. The payback period (1.5 years pre-tax and 2.25 years post tax) is key here IMO. And the good great news is that potential financiers will already know that the planned infill drilling of the pit floor / wedge (once complete) for example, will decrease this period even further.

Make no mistake, a payback period of between 18 (pre-tax) - 27 (post tax) months is already outstanding, a major de-risking event in itself and an extremely attractive proposition for a financier IMO. But an improved payback period i.e. post DFS enhancements is... well nothing short of a financier's wet dream IMHO.

As far as the equity component is concerned, am confident that AVZ (via its SEZ negotiations with the DRC government) will be able to obtain sufficient additional equity in the Manono project at a reasonable cost to offset further dilution (via project equity investment) to the current scrip.

So, I think AVZ will be fine this year with close to $20m cash in tow. However in the case of PLS for example, if I was a shareholder then I'd be chewing my nails off ATM and on the phone faster than a 'cat lapping chain lightning' and grilling the former pin-up CEO about the company's strategy for the remainder of the year and beyond. Because the fact is, the next few quarters are likely to make or break high cost Lithium producers with considerable debt - not to mention cash-strapped explorers/developers with little chance of funding poor to mediocre quality [non Tier 1] projects.

For me. PLS's immediate concerns (much worse than AVZ's by comparison IMO) are as follows;

1. Although the company was able to preserve cash last quarter by depleting existing stockpiles, investors should take note that this cannot be repeated this quarter.

2. Mined head-grades during last quarter were above the average LOM head grade, meaning that PLS are essentially "high-grading" recoveries (IMO to make them look better than what would normally be the case).

3. Debt principal repayments start in June. IMO this is the worst possible time to be repaying principal loan amounts, as it puts further pressure on cash reserves while SC6 is forecasted to remain well below US$500 for at least the remainder of the year (and possibly well in to 2021).

4. 25kt-35kt sales estimate for this quarter will likely put further pressure on the balance sheet IMO, particularly if they are unable to drastically improve the true costs of mining and processing lower tonnages this quarter.

In summary, unless there is a miraculous turnaround in operational performance, IMO the above points will very likely lead to further (and possibly rapid) depletion of PLS's cash reserves. Thus the BIG question is, how long can they survive a prolonged low price environment before 'mothballing' and / or a possible re-structure of the company is necessary?

GLTA

Cheers
Elpha

Expand

I don't resort to personal insults or hyperbole to make a point, just facts.

" ... am confident that AVZ ... snip ... will be able to obtain sufficient additional equity in the Manono project at a reasonable cost to offset further dilution ..."So you'll pay the DRC a fraction of what you'll later value for finance purposes?

"So, I think AVZ will be fine this year with close to $20m cash in tow. However in the case of PLS ..." How much of that $A20m will be spent on additional equity?

" ... will very likely lead to further (and possibly rapid) depletion of PLS's cash reserves ($A108m). Thus the BIG question is, how long can they survive ... " Seriously? Refer my post below, especially the refinancing part.

"Had no intention of replying"but you did

"you have posted this incredibly naive opinion piece"sometimes people don't want to hear the truth

"there is so much that is wrong with your post " because it destroys your illusions?

"cheap, nasty and baseless pot shots"Just facts

"your ramblings come across as someone who seems a bit angry, desperate and /or distressed."Me or YOU?????

"shows that your understanding of ... snip ... a conservative DFS IMO) is severely lacking" Too funny

"Make no mistake, ... snip ... is... well nothing short of a financier's wet dream IMHO."No comment

I am only concerned with the truth. Facts don't have feelings. I'm sorry but I never apologise.

Also, resorting to snide, personal insults to make your point, only reveals your defeated exhaustion ... like an immature child, or baby spitting its dummy, or someone best suited to Politics.

The salient point is, no one has effectively refuted my valuation.

No one has answered the question yet: "The DRC Government own 30% of Manono. Another Company has a 10% interest and AVZ has the remaining 60%. So how much of that 60% is an incoming equity participant going to get for their $A1b?"

Will Bolivia be developed? Will Manono be developed?

What was the SC6 price used in the DFS? Every other Lithium asset is being valued at current prices. IMHO, the AVZ DFS is a flight of fancy, a shareholder soothing document to maintain cushy high paid employment. A public statement from a Company with no financial assets is not legally tangible. If the statement came from a BHP or the like, then YES.Yet you refer to it as "nothing short of a financier's wet dream". Hyperbole much?

Given the risks involved, AVZ only has a snowflakes chance in Hell of getting to production. Greenbushes spoke publicly of the difficulties in mining Spodumene in 2017. MIN (Mt Marion), GXY (Mt Cattlin), AJM and PLS can all attest to this. They had Australian engineers working in familiar conditions. Good luck in Africa with EPC, not to mention infrastructure development. Do you really think AVZ will go to production easy peasy? Get real.

How much has the AVZ BOD's budgeted for cost over runs, EPC stuff ups AND working capital? Look at what happened at Nemaska. Tianqi is financially failing even though it owns premium assets like SQM and control of Greenbushes. Yet you think some financier is going to jump at the chance of providing $A1b+ for 50% of Manono???

The Chinese will dilute current AVZ shareholders to oblivion. They have time on their side. The FIRB did not disallow YT's application, YT withdrew it. That's the fact, Jack! IMHO, AVZ is being played, they want you to move offshore. Some of you resorting to paranoid drivel that other Forums' posters petitioned the FIRB to stop YT, is hilarious.

A lot of posters want to discuss PLS for some reason. I suppose its only natural to want to compare yourself to the best. You can get educated here:

https://hotcopper.com.au/threads/good-news-bad-news.4835087/page-5365?post_id=44252316

Note the refinancing at 1Jul20 to alleviate cashflow. Note the last Quarterly Report talked of costs lowering to USD270FOB. Note Stage 1 offtaker General Lithium opens its new LiOH facility later this year. Note all the strategic investors and offtakers who are ... well ... an AVZ shareholders wet dream!

AVZ Price at posting: 6.3¢ Sentiment: Sell Disclosure: Not Held
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