Lets start with: End of Q3 Cash: $5 million Q3 operating cash flow (excluding investment): -$25.5 million.
Forward estimated cash outflows (Q4): $8 million.
Probably a gross underestimate even without the disruption, damage and ongoing investment in kilns etc. Total outflow in Q3 (including investment) was $36 million. And they think they will only be $8 million in the negative in Q4...Yeah right!
I'd guess a better estimate of Q4 outflow is $25 million (same as Q3 operating outflow, and ignoring investment costs in Q4, which there will be despite not provision for this in forward estimates).
So, as an estimate at the end of Q4: $ 5 million cash Plus M&G cash : $15 million Plus Deutsche bank cash: $10 million Lets say $30 million.
Minus outflow of $25 million Minus repayment of convertible notes from Lithium 1 merger of $5 million
Leaves no free cash cash at end of Q4. And now we are in Q1 and still producing minimal cash relative to cash burn (plus additional expense related to shut-down). They are probably already drawing on the $17 million in undrawn credit mention in Q3 report. This lack of cash is probably why they resorted to the Deutsche equity issue which was not on good terms.
And even after ramp-up, its going to take a while to begin producing good cash flows (not $1 million here and there). We will already sailing very close to the wind BEFORE the shut-down in terms of becoming cashflow positive by Q1. Now, it might be Q3/Q4 until we are cashflow positive, especially with recommissioning costs in WA to consider.
So that $66 million from ECE is critical. They would not have raised that much if it was not necessary (nor resorted to the Deutsche deal). I hope there are no unexpected surprises with regards to covenants on our debt that may require early repayment; for example, if share price or revenue does not reach a certain level by a certain time.
I honestly thinks its worth a second thought.
GXY Price at posting:
13.7¢ Sentiment: None Disclosure: Not Held
