half full or empty?

Seems pretty quiet here today so excuse the waffle - just thinking out loud regarding the delays to the ponds.

Chatting to a mate the other day we were discussing MHM and the delays and went down the worse case scenario track....just a few snippit's of the conversation addressing market worries....

1]what if it doesn't work and they are stalling?

- contracts with large players such as ALCOA, SIMMS, SSC and others which have been developing in the Tennessee area are a very strong indication that those in the industry who should know are convinced. The Pilot plant study proved the full process with various feedstocks at one tonne an hour. Now the science of it at that rate make this upscaling a matter of when not if. MHM's are acting as if this is a no-brainer - management don't even seem that worried about the pond delays and seem focused on making money - piling throughput on the dry process whilst bagging in preparation for the wet. They continue to advance discussions on ramping up the USA doing deals with large players - now if this didn't work that would be a deep embarrassment for a guy who has been in the industry for a long time. Managment are acting in a way that they are convinced...no snake oil here.

2] Why are we not being kept fully informed on US developments and Silica? Is it really happening?

Thinking about this from managements side - they have a very profitable operation per ton in Australia and have mentioned they are looking at similar margins in the states. Now if I was negotiating with the secondary smelting industry in the states I wouldn't be advertising margins -it is a very competitive industry over there and margins are tight. Our operation would seem like a pot of gold to these guys and you can be sure they would want a piece - by reducing our margin or insisting on partnership. Likewise Silica - the large companies, especially Wacker have a culture of discretion. It will not look good for MHM to be spruiking small wins in negotiations - quite unprofessional even and could threaten the relationship. So it is in the companies interest to keep these developments v.quiet till after the event both in AL and Silica. MHM have shown a history of discretion so we know to expect it - SSC was done before we even had a whiff of a rumour.

3] Management are having trouble keeping up with the size of what is being attempted here.

This could be the case, its very new tech so every step of commissioning process could be met with unexpected hurdles independent of the technology. Dealing with other trades for one is going to be a learning curve. Dealing with the Al industry I see a key strength here tho - they seem very well connected with the big boys and know the industry. Its going to be plumbing,electrical,govt,transport, envronmental etc that will take a bit of a learning curve as they ramp up. - conclusion, expect a few delays but won't change the outcome.

4] Market was wrong to send this over $1, and given market jitters it is unlikely to give us a big re-rate even if the USA plant is given the nod.

This one was pretty easy as unlike most small caps with huge potential it is much easier to work out a base value for things. We went over $1 as the market had no choice but reflect the change in earnings forecast for the upcoming year. Delays have pushed this out however we are churning through slag even now, and about to send of our first shipment of alox 80 so the delays are in the past - this next year of earnings look very strong and support our SP at these levels. We can get sell downs but market will like to find fair value again soon after. I give 20c to Silica, 20c to tech and potential and 80c for the Geelong plant - think we are trading cheap for these things alone. Now it looks very likely 90% chance that we enter the US market with over 200,000Tpa plant. If margins are even remotely similar we are looking at profit after tax of over 25mill . Now even a pessimistic val on that assuming worse case capital raising scenarios would be 300mill plus our current 100mill
= 400mill min MC . Now I think we'll spike higher than that but should be our new base to launch plant 3 from.

5] So should I reduce holding till delays and markets are settled?

Certainly the risk free approach, cash in and preserve capital just in case the Greece worries spread and MHM like others takes a hit.

Given the previous points it would turn this into a trade rather than an investment as all I would be looking for is to sell then buy for an advantage. Sell $1 and buy at 85c -if I could guarantee I can pull it off then lets go but will be just my luck and news runs it the other way and I'm out. With the investment target and reasonable timelines its a no-brainer for a life changing return here, not willing to let that go for a few cents trade gain.


conclusion and apologize again for the waffle. If someone told me for the first time today all I know about MHM and info that I have become accustomed to would I buy ?

yes and a large stake so rules out the selling option for me.