"The test of a first-rate intelligence is the ability to hold two opposed ideas in mind at the same time and still retain the ability to function"
I'm reminded of the above quote when reading this report, becuase I am both dissapointed, and pleased...
I'm dissapointed because (and please correct me if my understanding of any one of these situations is incorrec0t):
- guidance was not provided, leaving uncertainty
- production was down (thanks to avoidable pond and inventory errors we're all aware of)
- production costs were up up (same as above)
- Borax is a money pit that seems to be getting worse (they were very blunt in their summary)
- Phase 2 is pegged to nameplate + progress to nameplate has stalled = progress to Phase 2 is stalled
- Project plans in Japan seem hardly to have progressed - they are still working out quotes and that makes me question their timeline for commissioning.
On the other hand, I am pleased because:
- The pond rebalancing is apparently going well and is on track
- The company indicated they expect fairly significant improvements in production starting in the final Q of this year.
- we had plenty of warning about pond (and to a lesser extent inventory) issues and so the impacts could have been expected, and to an extent proves the growth in knowledge and expertise that is critical to long-term success when markets aren't as favourable - best to get all these growing pains over with while we can afford it.
- sale prices are increasing, allowing Ore to maintain 60% margin despite higher production costs
- continued price inreases are expected + improved output through to FY 2018 = higher margins and revenue
- The communication style of the company has imo, changed for the better in the following ways:
- More frequent updates and communications
- More frank and transparent reporting of issues and risks
- More cautious approach when making promises
Have I missed anything? For what it's worth, I Ore to test low $3s or therabouts, trade sideways till August, then react favourably to certainty on an increased guidance announcement. So medium term patience, or short term sell and rebuy - I'm currently favouring the latter but have an open mind to any other points of view. Thoughts?
ORE Price at posting:
$3.34 Sentiment: Sell Disclosure: Held
