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18/06/19
18:57
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Originally posted by Rick19:
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Have been a little perplexed about my investment in A40 for the past few weeks so went through and re-read all of the announcements from the past year or so just as a refresher. As we know, conditions for spod producers are less than favourable at this time. Is there a genuine lack of converter capacity or has Australia been played by the chinese?? Maybe a bit of both.... ignore certain companies PFS/DFS's out there, Most hard rock Australian spodumene is being sold at or below cost by most players. We need a few things to go our way. 1. Hydroxide JV is crucial- We need this yesterday. Simply put, there is no money in spod sales in current climate. To weather the storm we need this to go through and quickly. 2. Shipping: I was concerned that A40 had only made one shipment this qtr but reality is selling product into this market is not to our advantage. It's depletes our ore reserves, depletes our cash reserves via the production costs and adds very little (if anything) to bottom line. Who's to say that A40 hasn't initiated not shipping in the first place? I wouldn't be too disheartened if A40 took a similar approach to PLS and did back things off slightly for the short term and focus on cutting expenditure and preserving cash. Maybe already are and just haven't announced it like PLS has. There is a need to keep spending the allocated 700k per month on drilling out the expanded resource though. 3. Preserving cash is key. A40 has a minimum of 32m in kitty plus whatever additional we end the qtr with in the bank. That should see us through to the end of the yr, by which time our competitor base will have diminished (lights out for one in particular by then i think!) 4. Who's to say the name change to Alita Resources doesnt signify the start of A40's desire to become a chemical company once hydroxide JV goes through and potential agreements with new offtakers/JV partners come to fruition. We supply the product, a "loss leader stradegy" perhaps, to be able to cash in downstream where the real money is. 5. Second/third offtake with non chinese parties needs to come good. For no other reason other that to give diversifation and a bit of direction for the company. Hopefully these lead to downstream opportunities too. 6. Then theres the wildcard- Cowan. Still risky, but as holders we knew that when we bought in. See how it goes. All IMO. good luck all holders
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I agree with the vast majority of your points. I disagree with the assumption that there will be enough cash in the kitty to see out the calendar year. My previous assumption was the CR proceeds were needed before the end of the current quarter. I've been over that previously and don't want to drag everyone into a negative debate over the reasoning. I do however believe A40 has partners who are prepared to stump up for a CR late October early November. I had anticipated a second raise a month later than that, however recent shipping sentiment has led me to shift that timeframe a little. A40 has an excellent underlying asset. No doubt about that. DYOR