Hi all, and
@FreeflyerNZ, I'm just moving our ongoing conversation from the Charts thread into here. This post below is in response to:
@FreeflyerNZ's first great post
here - bringing up some key risks, and HFR comparisons
My response
here - countering some (although opinionated counters, not necessarily quantitative), and accepting some points
@FreeflyerNZ's second post
here - great points on construction & timelines
In response to your second post....
Construction timelines - you're right, my late-2024 is a HUGE ask. A best case
I'd assume that if they take the DFS road after the impending scoping study release that this will take them through to the end of the year if they can move at pace. Funding needs to be found after that - this could be very quick if the macro economics lead to German government support, but more likely a few months, or worst case could well take longer. This is the point where SHP could well become a more likely takeover target as funding is going to be dilutory and expensive. I'd be happy with a takeover assuming we're sold at minimum 8% NPV (my assumption of this would be $150m AUD for Project O, plus unknown additional for Projects B/C/D which are ~90% of our total resource). Again, Allana resources in 2015 sold for $200m for a far smaller African resource, and that's how I feel that our current SP (10c) has most downside risk accounted for.
So... best case finance in Q3 FY22. Planning, sourcing people and materials, building a mine.... with people and some existing infrastructure in place from the mines when they were closed in the 90's, I do think that a 2 year timeline to the first shovel is possible, but that would be early 2025 (2.5 years from now). It could of course be longer..... that's where if you're here for long term and dividends you should be happy to wait. I'm here for 2-4x, whatever the instigator
Financing costs, long term potash prices, key skills are the larger risks here if they're looking to go it alone.
Regarding aquifiers - a great question which I cannot answer. My best answer is that because it was mined for decades there will be a lot of on-the-ground knowledge about this, as opposed to inferred knowledge through geological data.
Downside risk of HFR vs SHP
Now here's something which would be riddled with assumptions, and it likely best for each investor to pick! I've mentioned my reasons for my belief that SHP's downside potential is, I believe, low. My reasons for not investing in HFR (which is in a really solid position for a developer) is that I've been bitten before in that orphan phase where funding has been received but there's time and complications before the first revenue comes through the door. It's for that reason I'll watch keenly from the sidelines. I do think HFR will get all of their necessary approvals though, so there could still be a bump in the share price before that orphan phase (if it occurs)
Belarus / Russian potashBelarus' supplies have been cut off by Slovakia (I think) through which the railway passes. Russia is finding its way into the market, but not Europe. I strongly believe that Europe will look to avoid these supplies for the long term. If and when these sanctions drop (pretty big IF), then the market will likely be flooded and take a short term hit, but Germany and the rest of Europe is learning that they don't want to be funding Russia's war through purchase of their resources. If the war ends tomorrow, they won't want to be funding their re-armament through purchase of resources they could get from Spain and Germany
(20min delay)