Ann: Commissioning Under Way At Beyondie SOP Project, page-55

In response to your questions Kimu:
KLL had a debt to equity ratio fo 37.3% in Jun 2020.

As of 31 Dec our debt to equity is 92.5%.


When plant is completed, assuming the undrawn debt is used:
In AUD terms, 8.4 + 19.06 + 7.14 (EUR = 1.56 AUD) + 10.56 (USD = 1.29) = 46.16 million in undrawn debt.
Now the company will use this remaining debt to finish construction so debt will likely rise by 46 million and assets should rise by 46 million. This would mean our borrowings would equate to 171.998 million which would give us 126.9% debt to equity ratio. Normally a 1:1 debt to equity ratio is considered acceptable. You don't want to little debt as than you couldn't take advantages of tax shields from interest repayments, and you don't want too much debt as than interest would eat too much into cashflows and stricter financial and capital management controls would be required. KLL's debt to equity would not be ideal but we have to also consider the lending conditions of each of the specific lenders and the fact that extensive banking feasability reports were done before the money was lent.

In terms of profitability, once production hits go KLL will likely transition into a phase of rapid expansion which would classify the stock as a growth stock under radar.



In this case, valuation models for the company would be concerned not with net profit, but rather the revenue growth of the company and NOPAT (net operating profit after tax). This is due to the fact that net income itself is not very useful in this stage as actual operating performance is clouded out by financing costs. Analysts will be more concerned with NOPAT and operating margins they will show if the company can really turn out profits from selling SOP, other cost inefficiences can be smoothed out later. As such, key metrics will really be the price of production per tonne of SOP and hopefully KLL delievers due to the brine and solar evaporation method.

So price to sales would be more important than price to earnings which is typical of a growth stock. Personally, I wouldn't expect the company to declare a net profit until next year as there are bound to be one off expenses and hiccups along the way which is why I suspect the company has a $15 million working capital facility in place from Westpac.

Note, go read the key risks section of the annual report as well.