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3.7¢ latrobe magnesium limited

Ann: Quarterly Activities/Appendix 5B Cash Flow Report, page-10

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Patmeate

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30/07/24

16:53

Post #: 74986514
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Originally posted by tropic: ↑

This report is disappointing and the market has also expressed its disapointment.

I'm desperately trying to look for something positive in this report and all I can find is , essentially,
we will get to producing MgO by mid October?, hopefully Mg Ingots sometime into the future.
The MgO produced during the ore commissioning trial was over 80% pure MgO.
We received about $16M - from capital raise to "sophisticated" investors $12M and a further $4M from converted options
Currently we have cash in the bank(Great!) it says we have 12.7 quarters of funding after the capital raise (item 8.7)
expecting circa $16M tax return
An application for a federal Manufacturing Licence for stage 3
LMG has been formally granted access to a 113 Acre / 45.73 Hectare plot for stage 3
Sale of property, plant & equipment for $11.4M(item 2.2c - though we don't know what are the recurring lease-back costs)
We paid $9.4M off the loan(item 3.6)
Noting the CF statement incorporates $12M capital raise but is pre capital raise for the public issue(most of it underwritten by OM) so in July we got in $6M not accounted in this statement. It's unclear from which capital raise tranche Ord Minett has been paid their $1.5M, I gather from the CF statement item 3.4 they have been paid about half of it.

On the other side of the social capital ledger:
Demo Plant
Once again in typical LMG management style, not meeting announced Milestone dates with further delays which also means delayed revenue. While the revenue is delayed, the monthly expenses continue and gradually erode cash.
While we have zero production revenue, we still have to pay for salaries, Office expenses, Board costs, utilities, land rent, etc......items 1.2(d) and (e).indicates about $3m/quarter however unclear f that reduces by laying off staff - many of those staff were contractors.
MgO production in September/October, with revenue from sales expected in the near term.(Expecting MgO production sometime between mid September and Mid-October - given LMG's track record I read that as December/January.)
This report refers to successful completion of the ore commissioning trial in May, related to the 13th May announcement that implied they were producing MgO. So, they had not reached production as they had announced, they had completed Ore Commissioning. Their announcement was misleading.
Targeting a production capacity of 1,000tpa of magnesium oxide. That's about 2/3 capacity because the plant was to be 1000tpa Mg which equates to about 1600tpa MgO. So we are targeting MgO production at 2/3 capacity only?? and therefore get 2/3 of revenue we expected?
There were e 180 identified construction and commissioning punch list items however we don't know how many of these are non-conformance items, agreed rectification period and whether there is opportunity for consequential loss. I would assume the contracts would specify these matters.
Construction of the remaining plant to produce magnesium metal has been temporarily paused - another failed Milestone date!
Proposed use of funds from capital raise is different to what they said in the prospectus page 9 - I guess they are using the line "However, in the event that circumstances change or other better opportunities arise the Directors reserve the right to vary the proposed uses to maximise the benefit to Shareholders." and the cynic in me reads "we reserve the right to reallocate to fix our mistakes!".
They have known they need 3 shifts since early May. Where are they up to in the recruitment process?? They can advertise/recruit with a September/October start date. The silence is troubling.

Stage 2
We still don't know where we are building stage 2, LMG announced in the prospectus issued 3rd June that stage 2 commencement build date is to be january 2025?? - in our dreams.
"Additionally, other possible sites are being considered as part of a location assessment that is currently underway", so it's not just the 3 sites mentioned - other sites are still being considered. That will cause further delays.
We still have to do the Location Study(Consultant), Feasibility Study(hopefulluy Bechtel), Financial Investment Decision(FID). We are about to enter August with a January build date - not possible. I think they would have known this when they issued the prospectus.
Looking at selling off the Demo plant site to generate some cash to cover cost of Stage 2 mine planning work, the feasibility study, additional test work, and funding costs for the Commercial Plant. Where is the money coming from to pay for the lease-back costs of the Demo Plant site?
By removing the competitive tension of a tender process, LMG anticipates greater transparency from SSP suppliers regarding technological and financial matters. I don't like this - it will result in higher costs. It also tells me that the contracts in place for the Demo Plant had inadequate recourse for delays, cost over-runs and non-conformances.

Stage 3
Where are the non-binding MoU's that were to be signed by December 2023?? "now expected to be signed by the end of the second quarter of 2024". Is that 2024 Calander year(30th June which was a month ago) or 2nd Quarter of 2025??

Well, I think we have to put these shares back in the bottom draw again! The Board has a lot of explaining to do. We need:
DP and PC need to be put on performance-based pay. Even better, some new leadership.
Greater realism in reporting and not over stating achievements
Realistic target dates - it would be wonderful if we saw one (even just one!) milestone/target date achieved.
Monthly reports for stage one to continue until we into ingots production.
Accept that we will be looking at another capital raise within 12 months, on top of the current 2.5B shares on issue.
to all go to Church on Sunday and pray to Jesus!.

Call me nagative if you like and beat me up with your pom poms, but I call it as I see it. Happy to be elightened.

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it’s simple, we go bang or we go bust. Management know one thing now. They have 0% chance of anyone underwriting a capital raise and -0% chance of getting any new investors now until they deliver some serious results.

that is exciting and very dangerous as an existing holder!

I filled a little order that I sitting at 4.0 today, lowered me down a few points
LMG Price at posting: 4.1¢ Sentiment: Buy Disclosure: Held
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