Running discussion on SP, page-45321

I probably wouldn't mind contributing to this discussion, and my comments essentially follow the below in italics in a post I did the other day to Bombers.

"""""Bombers, Personally, I never expected much of a revision in the MRE from a 'wedge' program. The program was simply aimed at moving 'Inferred' resources in the pit to either the Measured or Indicated category. Granted it looks like they revised the "measured' estimate downwards slightly, but not really a big deal. i personally think SHs may have had an undue expectation around the MRE revision itself, not helped by the fact it took too long IMO to reissue for a few drills btw. I have also been on record here saying that I think mining won't happen here to 2024 btw as well, from some time back, and also stated if AVZ wanted to get to mining by 1st half 2023 (their timeline) that they would need FID/funding done and dusted soon, with construction commencing around September 2021. If anything IMO the current SP is probably based on a market expectation that mining will not happen in 2023 IMO, so up to AVZ to prove otherwise. Setting aggressive timelines has IMO always been an issue with AVZ. certainly, IMO and through my previous posts I see a market entry opportunity for AVZ this side of 2025 when discussing what a growth rate to 3TWh by 2030 means for greenfields hopefuls. AVZ must take up that opportunity, as opportunities can disappear if you don't take your opportunity when your time comes.

Returning to the revised MRE, the purpose was to improve the DFS. Why - in the DFS the immediate resource in the pit, been the first area mined, was "Inferred' meaning it was waste. Moving that to Indicated means it is mow viewed as mineable, therefore on assumption of no other changes to previous DFS this would act to increase the NPV and IRR, because of 'cost reductions'. I have posted about this aspect previously.

For others, what will move the SP is FID and funding, noting FID also means or your mine plans have also been approved."""""""

For the record, this debate is worth having, in the sense I believe AVZ's timelines have often been too aggressive and divorced from the demand/supply scenario. And by that I mean when can AVZ enter the market? When will a demand/supply gap open up to facilitate that entry, noting existing brownfields projects will be the first ones to expand production?

The road to 3TWh is an exponential road, where demand is forecast to increase 10 fold from 2020 levels by 2030. I have stated here often I think 2024 is the likely entry point, as per above - post on 3 TWh Post #: 50575024

IMO AVZ's current SP (when say you compare it to LTR) is not fully attributed to sovereign risk like many posters over there think. Whilst sovereign risk is things people look at in terms of the DRC, management and management hitting targets is also a fundamental aspect of market confidence in a stock. AVZ has missed way too many timelines, and IMO the main reason why it misses them is because they are probably not reading the market on when they can actually enter it. The Offtakes themselves don't appear to have a "çommencement of supply date" written in them btw.

If you look at LTR they generally set less aggressive timelines and meet those deadlines. I note they have also now moved their production start date to 2024 which in itself is an interesting development and in itself and obviously we can debate the pros and cons of LTR but that isn't the point of my comments. But you also look at the LTR BOD - they have bought a number of shares on market especially Goyder (as against have their predominant share holding 'gifted' by way of performance shares), and obviously this has helped its SP. Rather than do a CR, when the market thought a CR was about to occur there, surprises can also happen when management (in the early days) converted options much earlier than there expiry date (which limited a need for CR funding from recollection).

My point is management actions are a key as well to market confidence is my point. Meeting timelines is a key to market confidence. Setting realistic timelines is a key to market confidence. Continually missing timelines dents market confidence, especially if you are located in a sovereign risk country - why the market sonetimes thinks the delay is sovereign risk based to substantiate their own hypothesis as well, when infact the actual root of the problem is aggressive timelines been put in place by management that are unlikely to be met.

AVZ has set a timeline to production of first half 2023. I will be pleasantly surprised if it achieves it, but fingers crossed. Given IMO construction needs to start end 3rd quarter this year, this means FID/funding/mining approvals all have to be done in the next few months (which is now a very tight timeline). Failing the timeline, which I suspect the market is currently pricing in hence the drop in SP last month or so, again reduces the market's confidence in the running of the company. Based on a previous timeline posted, if I recall FID is due end June (but obviously has now shifted out).

At the end of the day the timelines were set by management. They are paid to set realistic timelines. I will leave it at that.

AVZ's resource is fanatstic, potnetially has a short payback period if DFS variables come in which helps to reduce the perception of sovereign risk, but ultimately market confidence also relies on management delivering on their targets. Targets can be missed and the market will initially forgive, but continually missing targets becomes a market perception issue (given also before NF became CEO AVZ had the shenanigans of the KE era to contend with). Personally I feel NF has done well in certain areas, but in setting timelines and meeting timelines has let himself down IMO. Whilst we wont know the specifics of why those timelines have been missed, at the back of my mind I go back to the key question - when can AVZ conceivably enter the market with what type of supply gap arising that allows its entry? When I ask myself that question I keep thinking before 2025, but not earlier than 2024.

Some may not appreciate this post but this is provided IMO and my viewpoints. Others can agree or disagree, but hopefully this post provides balance to the debate.

Ultimately, the key for AVZ is also Europe and the USA getting their acts together.

Bomber - for yourself this post explains why IMO sulphate pricing will be 50% of the LCE price - Post #: 52558735

All IMO IMO IMO