Hi all NTU contributors, with the SPP closing in a week I’d like to get some discussion going on the pros & cons of participating in the SPP and the more general outlook for NTU. I’ll kick off with my pros & cons list;
PROs:
NTU are one of the very few ex-Chinese companies with the capacity to actually produce HRRE conc’s at this time.
NTU has sunk costs of A$200m+ to develop the project to a pilot plant stage producing a HREE carbonate concentrate, the capital costs of which do not appear to be reflected in the balance sheet.
HRRE’s are possibly now the most strategic of all minerals & elements, short of plutonium! AUS via the FIRB have effectively blocked Chinese interests from further investment, but are the AUS/US governments really going to let one of the very few western RRE producers go down the gurgler for want of a few $10’s of mills investment? They could easily divert one of the COVID 19 money helicopters to dump on NTU under the guise of regional development/ defence strategic planning. What is another A$30m on top of the projected federal deficits, rounding error?
The offtake agreement with the very credible thyssenkrupp was announced a week after the offtake agreement with the Chinese was canned. Convenient timing or strategic positioning?
It looks like somebody in power has been leaning on the ATO via AusIndustry to reverse the R&D tax offset knockback.
Continued exploration and resource definition success e.g. Dazzler.
CONs:
Terrible financials, negative cashflows, horrible balance sheet, constant capital raisings and shareholder dilution.
Absurd executive remuneration give the above.
Future financing uncertainty. Major Chinese shareholders unlikely to be allowed increase holdings or provide structured funding.
Pilot plant running way under nameplate capacity. (However it is a research plant and it will be generating lots of data on optimal processing of the Browns Range HRRE ores, is this IP being reflected as intangibles in the balance sheet?)
Chinese may well do a ‘Lynas’ and try to kill the baby by predatory pricing/dumping of HRRE’s. (Japanese interests kept LYC on life support for a long time to ensure this did not happen…)
Missed out on contributing to the US –DoD Phase 1 HRRE separation project.
My view is that given the strategic importance of the Browns Range HRRE project to the ’West’ it is highly unlikely that the ‘Powers That Be’ will allow it to fail, however will it be under the control of NTU’s current shareholders?
Attached is a link to an oldish research paper from Hallgarten & Co; (http://hallgartenco.com/pdf/RareEarths/NTU_June2019_compressed.pdf) If anyone has some more recent research please share. I do note from their latest portfolio update that Hallgarten are still holding their position in NTU, despite a substantial haircut todate, with a target price of 8cps.
(20min delay)