Regardless of what the CR 6 months ago was for in the end it was needed so it is what it is. Now that is behind us, I see many are starting to show enthusiasm towards fast tracking production expansion through almost any means possible, I'm definitely in that boat too.
I'm not sure how viable some suggestions like can't we just go to 400kt/pa or 800kt/pa expansions straight off instead, obviously we know next planned expansion is for 200kt/pa @ Kurnool with an est. capex of $2m(AUD) that we are fully funded for, but the next two planned expansions after that are for 2 x greenfield plants with an est. capex of $10m(AUD) each, so not sure if deviating of the current model by just throwing around an extra 200kt/pa here and there is a viable option?
Would be interested to hear some feedback on my ideal outcome on what I'd love to see, and that's just to go bang! and go straight into the 200kt/pa expansion as well as the 1st 1mt/pa greenfield expansion which would have a total est. capex of $12m(AUD) baring in mind the current 200kt/pa plant equipment alone made up the majority of the costs and had a cost of $1.37m(AUD at today's exchange rates..it was $1.054USD) of which Huate allowed us to order whilst only paying 25% upfront?(that's an average of $343K per 200kt/pa). So say the total Huate costs for a 1.2mt/pa upgrade(200kt/pa + 1mt/pa) is $8.22m(1.2m÷200k=6, so $1.37m x 6=$8.22m) but only requires a 25% upfront cost of $2.058m($343K x 6=$2.058m), taking Huate costs($8.22m) from the overall capex of $12m that leaves $3.68m($12m-$8.22m=$3.68m) in capex required for those 2 expansions, making a total needed upfront of only $5.738m and we have circa $4m in the kitty right now which leaves $1.738m needed to get started and $6.162m still owed to Huate(hopefully once again involving a 6 stage payment term), so depending on the size and frequency structure of out 'initial' PO/'s and other ongoing costs we might just be in a position to need no(or very little) finance or CR for this 1.2mt/pa upgrade, considering that I'd expect roughly a 6 month turnaround from order of equipment to cash flow on this upgrade now management know exactly what they're doing which would put us in a position to well and truly keep up with the Huate repayments. The goAP has agreed to fast track NSL production, well get crack'n on cut'n the red tape for that fella's.
Excuse the ramblings there, feel free to shoot me down in flames, it's possible I've screwed something up, but a similar scenario does seem somewhat viable atm, and an ann. like that would put a rocket up the SP's ar$e.
That would be 1.4mt/pa in roughly 6 months time(rough guestimate, only took Huate around 15 weeks from contract order to site delivery last time, most delays thus far have been in commissioning which we are bound to reduce substantially next time around).
Knowing the market is forward thinking, an ann. stating we'll be hitting 1.4mt/pa this year would be factored into the SP almost immediately, giving us a profit of $42m/pa (@ the base $30 profit p/t) to $52.8m/pa (@ upper levels of $44 profit p/t).
Let's put a PE on that of say 10(which is conservative considering FMG's PE of 13) and you've got a MC of $42m(lower level profit p/t) to $528(upper level profit p/t). Which would in turn give a SP of 17 - 22cents, and 23 - 28.7 cents with a PE equal to FMG, throw in any news of our steel ventures advancing and you could probably say goodbye to the sub 30 cents levels this year, even equating in a smallish CR needed or finance along the way I believe either of these would provide minimal resistance for the SP and only very ST if at all.
No matter how you look at this, even if we stick to current schedule, the NSL chart in a year or two will be one of those charts non-holders look back on and say ah gee's if only I'd dropped a sheetload into that around these prices.
Now fire away, interested to here some other opinions on the above scenario or similar, someone else may want to also add/crunch some steel numbers @ $44-52 profit p/t for some fun
