Ann: Pause in trading, page-55

I agree... I'm hoping for $1.2b to $1.5b... would be brilliant if it was getting closer to $1b though...

Here are my updated valuation models using the latest SOI and cash position.

The 1st scenario is based on the numbers in the PFS (I previously had the capex as $903 AUD as I must have misread the $650 capex in the PFS as USD for some reason)... anyway it doesn't make any difference pre-capex dilution which is the relevant part of the valuation I am showing here (i.e. the valuation at the point of PFS & DFS). As you can see the model has QPM slightly undervalued at present (based on the PFS numbers):

Note: All numbers are expressed in AUD. NPV and FCF are post tax.

The 2nd scenario is based on 2x the PFS numbers (for NPV & FCF) in line with a 2.6x increase in PFS output that has previously been mentioned by QPM, along with a lower capex increment (i.e. capex increases to from $650m to $1.2b). The valuation model shows what the increase in SOI looks like at various debt/equity levels and share prices at which the capex is raised, which obviously impacts the resulting share price valuations/targets:


The 3rd is based on 2x the PFS numbers with a higher capex increment (i.e. capex increases to $1.5b). Again, showing what the increases in SOI look like along with the resulting share price targets at various PE multiples, associated with various dilution scenarios:


They definitely need to do a better job of promoting the story we have here avoid further unnecessary dilution (the GM investment should have been done at a higher share price - it's great that it's at a premium (ignoring the options) but the share price should really have been much higher by now (based on the increase in PFS output - which has been communicated but not very well at all in my mind). For example, the PFS financials were really good, yet I've never found a presentation which contains this information (companies do this when the numbers are bad or marginal - but the PFS numbers were fantastic).

Also, the fact that they are aiming at 2.6x the PFS output in the DFS is something that is not expressed very well in the presentations (you really need to be paying attention to work out what is going on here - so much so that I'm still a little confused as to what is really going to be in the DFS). For example, the latest Noosa presentation shows 16,000 ton of Nickel Sulfate as an output whereas the PFS talks about 26,398 tons of Nickel Sulphate. The subtle distinction here is that the Noosa presentation is expressing the Nickel Sulfate output in terms of "contained Nickel" which is 22.2% for Nickel Sulphate. This means you need to divide 16,000 by 0.222 to get the actual Nickel Sulfate volume which is then comparable to the number used in the PFS (i.e. 16,000 / 0.222 = 72,072 tpa, which is 2.73x the value in the PFS). The ore supply feed of 1.5m wet tpa in the presentation is a little easier to compare to the 565,714 tpa in the PFS (which is a 2.65x the value in the PFS). If you have confirmed that you have increased production output 2.6x the PFS you should be shouting it from the roof tops - include the PFS numbers in a presentation and say you expect 2.6x the output.

As a result I think QPM is still being priced based on the PFS metrics which are quite out-of-date now (look at what my valuation targets above are for the PFS metrics 18c to 26c). Although I think the potential increase to the capex (due to macro factors) is well understood. This means we get the bad stuff priced in (i.e. increase in capex) but none (or very little) of the good stuff (i.e. a significant increase in production output).

And then we have Phase 2 which should double output again (I assume). Although, now I'm questioning whether Phase 2 is supposed to present the 2.6x output uplift and that the DFS will be more in-line with the PFS. I don't think so because GM have the right to uncommitted Phase 1 offtake and the committed offtakes from LG & POSCO of 10,000 tpa contained Nickel already exceed the numbers in the PFS. Anyway, as you can tell I don't really know what's what anymore. I think I know what's going on but I can't be 100% sure which means I have less confidence in my investment than what I used to have. Maybe I'm being a bit thick here, but if I have this confusion then surely other people in the market do as well. Why isn't all this laid out clearly in a presentation?

It's a phenomenal story, I just think its not being told very well (particularly in terms of the financial metrics of the project). Perhaps they think that if they just focus on ticking boxes the share price will take care of itself. The problem with this approach is that it means the SP is lower than it should be right now which means that every raise we do, including the GM raise and last $30m raise, is more dilutive than it should be. At the end of the day it won't stop this from being a great investment - you can see the numbers above look pretty good no matter what share price we raise funding for the capex - but it does stop them from maximising shareholder value (which is supposed to be a top priority).

Sorry for the rant... just meant to post an updated valuation after the GM raise... please let me know if I'm way off base here (perhaps there is some presentation or announcement that nicely ties all this together?!?).

ALL IMO DYOR