SO4 vs KLL and KLL vs KLL120 - A Simple Model, page-25

As Promised.
All assumptions same as prior except for Stage 2 Funding and notes below.

• Assume 60M raised at 18c/s. (I suspect SPP will be undersubscribed but be sold off to Instos and hence fully subscribed).
• No reduction in debt
• 45 Million increasing in Mining Properties (for depreciation calcs)
• Adjusted 120ktpa to $270 as per guidance.
• Dollar adjusted to 0.74 just to be conservative.
• CAPEX is sustaining capex, while capex is depreciable value of mining assets.
• As explained last time the reason EBITDA differs from KLL's mooted 70M is they use a misleading LOM Nominal EBITDA average (see above comments for explanation), and small variation in currency and SOP price.

Highlights:

• Roughly 10.6 P/CF, this makes it pretty much fully priced imo at 22c in terms of the present operations, any extra value would be from EcoMag and Carnegie (plus potential of expansion, but this unlikely to happen without heavy dilution so I'll ignore this one).
• I expect when the dust settles in Early-Mid FY22, this will put it's Fair Value at $0.27, down from around the $0.30 i mentioned previously due to the much heavier dilution for the same return (20ktpa).
• How much upside is possible from reduction in freight inflation and cost blowouts remains to be seen, KLL have guided for maximum 5% reduction, which would see cashflow improve but only slightly to 25.8M (10 P/CF)
• Dividends pretty much impossible for the next 5 years atleast imo, unless there's a big spike in Potash prices, or there is a big reduction in OPEX.

My Opinion (not advice):

• As mentioned previously, I feel a bit silly for not selling at 0.275, but hindsight is 20/20. I didn't realise the board would do such a move without allowing any run up after commissioning.
• I do see this was coming though, their repayment plan to NAIF and others was tough with their reduced margins, just so early is a kick in the teeth for investors.
• It's clear KLL don't have NAIF/KfW support for more capital (besides a short term liquidity one) and the lenders rightly feel iffy about expanding their loans seeing the FEED largely has been incorrect for costs and this is our second major blowout. A 45M raise indicates to me this is just a capex/opex blowout disguised as an expansion story. Hopefully, if KLL proceeds with EcoMag or Carnegie, or even a Beyondie 2.0, they can get their lenders back on board.
• Will i be buying in the SPP? Big no, a $50M Placement and $10M SPP is exactly the sort of scheme instos work even harder to screw existing holders.
• Should you buy or sell? I can't advise that, but IMO i think new investors will be well rewarded even though us existing long timers have had our capital destroyed. As Buffett says though, it's buying the business at the right price... Would I sell? Probably not, Ecomag remains a compelling value proposition, as does Carnegie, though with BCI's hands full for the next few years, i doubt we'll see any movement on the latter.