Hey everyone,
I went along to one of the investor briefing sessions and met Luis and Lawrence, and wanted to share my thoughts. For background, I started buying 18 months ago, rode it all the way to 25c but didn't sell as I was only 1-2 months from cap gains 12 month rule. By the time I hit that I was waiting on the scoping study to re-ignite the flame. The rest is history (and a bloody good lesson) but I remain, and so I was keen to meet the team.
I'll break it into a few points...
- The people (Luis and Lawrence)
- The greatest risk(s).... Funding
- Roadmap
The people
I have to say, I found Luis a truly humble guy. He's done great things in the past and taken companies through all phases. He's very honest, well spoken, clear with his views. Very experienced in taking companies from being not-much into quite something. He's got some of the contacts we will need, but we will need to grow in market cap before some of the bigger guys even answer the phone. He's a tough job here, but I value sincerity, and he's got that in spades.
Lawrence, classic characterful confident happy Canadian guy. He is credentialled to the hilt, and I honestly think he's a unicorn in a company of this market cap and opportunity. He grew up in Saskwachia (or whatever it is) in potash region in Canada. He has held key roles in building AND operating multi billion dollar potash mines, green and brownfield site. He was only on the market because he was working for EuroChem (Russian) when the war started and it became illegal for him to be working there, so he had to leave. He spent a few months looking at what to do next and then was headhunted for this role, by the same headhunting agency that found Luis, at approx the same time. I and others quizzed him a fair bit about his skills and potential here, but literally the only thing he doesn't have is the creds on ESG because the Canadians and the Russians don't give a shit and they just dump the waste on surface. His point on this was that the consultants that they have hired for P/DFS are THE masters of backfilling, because it's the same company that actually invented and ran the backfill process in the original South Harz region for decades, and have become consultants in this. So, box ticked
The greatest risk
This really is capital. It's the current risk for medium term value realisation, and the longer term access to go to production.
A passing nod to the other risks - they have huge government and regional support. The x-miners brass band turned up to an event that SHP were at, nobody is standing in the way. The market is strong, and they are confident that their PFS and DFS will have no holes in and reflect a low production cost. I really need to re-iterate Lawrence's skills on this - I don't think there's anyone in the world you'd rather sat in the COO seat at this point. A takeover really isn't going to happen this side of Christmas - the likes of BHP go after certainty (see Oz Minerals), not companies in pre-PFS. Once this baby reaches DFS I think there then becomes some risk, but we should be re-valued by then.
So, capital. My take is that they will likely need alittlemore on or around Christmas / PFS as they have 5.3m at the start of Jan and they talked to their run rate and PFS cost. The outstanding options are likely to do nothing (my opinion) unless the market views SHPs opportunity well (and look at what happened last Friday). Luis was visibly frustrated and stunned by the current share price, and says that's the main reason they are touring the country. I can't explain how stunned they were by what is, in their opinion, a massive underappreciattion of the assets and opportunity that SHP has. To try to explain this, I think if someone had sat in the room and repeatedly banged their head on the table until they passed out, they'd have had the same level of stunned confusion.
There's some woes from the past that shadow us a little but Luis doesn't buy that being the main cause of current performance.... feels it's mainly macro market, and the fact that most of the book (60% or so) is retail, and most of the top 20 are happy with the current allocation. We need institutional long term interest, and he's looking to find it without spending fortunes.
He's in contact with the key top shareholders (I think one is a personal investment from Cannacord's CEO - fact check please). Delphi sold a load of options last year as they had some pain elsewhere, but they still hold their remainder in SHP
Close to $1bn AUD to bring the project online is the risk, but they didn't give any sign of concern or fear over that. They have already started making relationships with banks. They believe that European debt for a story such as this would be relatively easy to come by vs other companies. They are also well connected into broader markets and fertiliser producers. All in all - it's a challenge that they seem to honestly believe that they will get the project into production, and they totally buy the story. Just last week they wrote their $100k checks each for their 4.5c shares.
Roadmap
They are happy with their roadmap, and feel it's cost efficient (with all far now trimmed). They've negotiated the lowest rate with the best consultants, they've high levels of interest from the locals. They are starting to investigate how they might obtain support from local/fed German government.
They expect that next year they will likely need to sink the additional hole into the second project in order to utilise the exploration licence, but want a higher share price first (as it is a $2-3m hole) but it does firm up an entirely additional area off a single hole, from which a second scoping study could follow (unless they want to go straight to PFS).
Confident in the PFS by December, and that it will be one of the most accurate PFS you'd find in any developer - potash or otherwise.
My take? If I'd listened to myself at 24c I'd be in a very different position right now so I wouldn't take much from my views! Could it break 3c? What is safe in this financial market turmoil. But this last week could also be the turning of the tide to drum up enough interest to put a base under it (thanks
@cmwilson). If I weren't in the red I'd be buying more right now, as I think even if they don't get funded to produce, by mid next year this could be a pocket liner. They believe they should already be 150-250m market cap.
Be careful - I must take my own advice there too - but I did leave the meetings with positivity
(20min delay)