Very true, we are not out of the woods yet.
My thinking is as follows:
The entire financial saga relating to the ATO Rebate has continued to have a ripple effect that has not been closed out. A knock-on impact where operational funds for this entire year were absorbed in lue of the 12.6M being received from the ATO and the 3M then payable by R&D (15.6M).
Essentially, LMG have borrowed from Peter to pay Paul. Drawing on cash that was intended to pay for "Operational/Working capital" that would have been otherwise available now.
In addition, as the loan from R&D was not repaid according to budget forecast, the loan continued to incur the higher interest rate (supposed to be 10% by now but elevated to 14%) as R&D had not been paid out.
For the year prior to the first inkling of the ATO Rebate delay, LMG was confident that the Demonstration Plant was fully funded, including the cost of the GHD Yallourn fly ash study. The fly ash study is still in hibernation until further notice.
During a period where LMG should have had sufficient operational funds for the demonstration plant (past and present), the additional interest added to the carryover deficit.
LMG then endeavoured to fill the shortfall with two cap raises in succession. Both raises were thought to be sufficient on each occasion in order to tread water while waiting for the 'anticipated' ATO rebate (Trigger or tipping point).
What a shocking and outrageous failure in budgeting, from a CEO that is a Certified Accountant!
24/05/23“The surplus $3.5M will provide working capital to operate LMG’s demonstration plant.”
And
21/12/23“The surplus $3.5M will provide working capital to operate LMG’s demonstration plant.”
The expenditure of $7.8 million in surplus from Capital Raises (Specifically assigned for operations of the demonstration plant) in lue of access to the $15.6M, created a compounding impact. The impact now is equivalent to approximately $10M over-run due to scavenging from "Working Capital".
The delay from ATO
- Pushed back Mg production
- Pushed back some cost recovery
- Forced a change to the MgO strategy
- Forced the use of "Working "Capital for management and operational costs in the interim.
- Pushed back the PFA B
- Pushed back the fly ash study
- Dismissed Mincore
- Compounded overall loses due to the time value of money.
- Other, such as possible unbudgeted penalty payments to suppliers who have been contacted for equipment, other infrastructure or service providers, to progress towards Mg production?
The current cr will cover the 10M already drawn and expended. The remaining ~$8M and the $3M interest from the ATO will be used for "Working Capital" for the period up to first Mg production.
It should now be possible for LMG to perform a bit of catching up on the delay that has been approximately 10 months. Remembering that the demonstration plant was fully funded and on track to be fully commissioned by Sept 2023. If you look back, there is plenty of evidence that the major change in circumstances commenced at the end of the last financial year.
Perhaps the impact on financial challenges for the last financial year commenced even earlier. Perhaps LMG's reporting to the ATO throughout the 22/23 financial year was abysmal. Perhaps...
The impending c.r which is currently being expedited, will add to the $3M in interest payable by the ATO. Therefore ~$11M moving forward to the first Mg. Hopefully Fast Tracked!
Not much to say about the MgO, I'm not a chemical engineer.
Further conjecture:
From numerous other stocks assaying purity, there are often large delays. The compounds need to be accurately assessed for percentage and then MgO purity. For the results to be presented to the ASX it is requirement for the certified test to be performed in Authorised labs. The labs are being placed under enormous pressures due to a prolific increase in projects. LMG take a number and have to stay in line.
Volume of MgO produced so far is indicative of 'only producing enough for testing'.
Once assays are received and announced, then LMG would commence production runs.
The volume of MgO to be produced is about 800 tonne or less. David said this about 4 months ago. The period between certified MgO and Mg needs to be as short as possible, as we have offtakes in place likely tapping their fingers.
All just thoughts.
Regards
Ken
(20min delay)