Originally posted by Pokerface
From the last quarterly activity report: “There is significant potential for increases in the global resource and reserve inventories ( ie increases on the current 226mt at 1.27% resource), supporting the opportunity to meet customer demand beyond Stage 2 expansion”.
In assessing the value of PLS, the mistake which is constantly being made, in my view, is limiting the medium term opportunity to Stage 1 or Stage 2. Clearly, there will be opportunity for Stage 3 and downstream opportunities.
It’s very difficult to look beyond current market ructions, but I retain a very strong sense that for the patient, this could be a very rewarding long term opportunity.
Interestingly, when I was up at the mine a few weeks ago, there was talk about Dividends, as being the thing which will really attract the Institutional investor. That really surprised me to the upside, and without putting words into anyone’s mouth, it occurred to me that they must think significant cash surpluses could occur quite quickly. Of course, it is my contention that during 2019 it will become obvious that the potential for Dividends is very evident. Imagine the day the maiden dividend is announced! I will have to crack open the Grange!
The first drill hole at the mighty Pilgangoora was about 4 years ago. To have established a fully functioning plant with fantastic offtake Partners and serious cashflow within that period, and of this size, would have to be a record, or close to a record. Who would discount that PLS may set a record for a maiden Dividend of size, from first drill hole!!
I recall a broker report a year ago forecasting PLS 2019 EBITDA of $200m. I reckon with lower prices, $150m would be hopeful at best.
Deduct Interest repayment and Tax would be negligible with accumulated carried forward losses. The NPAT would be largely utilised towards Stage 2 financing.
PLS 2020 EBITDA would hopefully yield $250m and winding Stage 2 up to nameplate by commencement of FY2021. That NPAT being utilised towards debt repayment.
So ... hopefully ... we commence FY2021 with Stage 2 at nameplate and debt free.
Dividends?
I would hope that Cisco drill results would've defined a JORC ore reserve and resource by then. Further, additional Pilgangoora drilling expanding that total resource.
Dividends would be great BUT Pilgangoora Stages 3 and 4 have to be financed and THEN also Mt Cisco's Stages 1 and 2.
The POSCO downstream 30Kt LiOH plant financed by the $80m convertible bond plus a little cashflow from FY2020 NPAT. I would hope that this deal gets expanded to 100Kt eventually AND that POSCO's advanced tech becomes the industry standard. We then have to find finance for that extra 70Kt pa plant investment.
Dividends? That's what its all about for investors. However the history of miners shows that profits are reinvested into resource and plant expansion. Perhaps a token Dividend for FY2021.
.
(20min delay)