"Trust the process"... I understand there's a process and even tactical fibs CEO's must tell to buy time or juice the price, but there are ethical and disclosure lines one shouldn't cross imo. Trust is worse than hope as a basis for investment, which simply assumes all facts are known and it's just down to luck, Trust assumes you're accurately informed of the facts, when clearly the market is being made to wait 3 months beyond insiders for disclosure (of which there are always plenty, especially when share price is so obviously on notice of imminent risk) and the disclosure being made is so obviously misleading... I'll work through my trust issues for you.
Nordic Bonds... I have a copy of the STA Nordic Bond key terms as things have it, final 50% balloon repayment is due March 2026 at latest (5 years after date of issue) yet they shifted $56M from due 1-5 years, to after 5 years duration, when clealry it's all repayable within next 2.75 years. Inexplicable shuffle, other than to make short term financial liabilities look better than they are...
Fungoni $15M PAP Re-housing and Compensation Liability (a contractual liability)... has been excluded from the balance sheet Liabilities as "event after 30th June", which beggars belief that it wasn't a contracted liability they were made aware of before 30th june, but dropped as a surprise early July and thus, happily, could be left out and make financial liabilities look better than they are...
From MAR Qtrly released in April
From July Qtrly released in July, "substantive payments commencing in July" ... so no, I don't believe this Liability only came to light in July when it was reported as coming back in April and payments started in July. (PS... Trade and other Payables doesnt not include $15M for Fungoni).
Operating Costs... on 'allocated' FY23 operating costs, Coburn is running at 10% gross margin on HMC sales for FY23. Depreciation and Ammortisation in that $55.5M Cost of Sales figure was only $321k all year, so that's over $55M cash costs. Morgans forecast Payments to suppliers (CostofSales plus Corp, admin, exploration ect) at $126M FY24, Shaws $131M FY24, I have it at $135 on the basis of inflation (oil-fuel rising strongly atm) and the ongoing clusterfk of operations and staffing issues ($120m Cost of Sales + $15M Corp and Other).
Cash Out-Flow Forecast... The Brokers have capex at $27m on STA guidance from CR presso, interest, debt repayments etc all just maths. Op Costs, Other Costs are a thumb suck, as above Morgans forecast $126M FY24, Shaws $131M and me $135 (going to run with my $135M because I'm not a selling my own book like the brokers, who always flatter their client). Sales Revenue in is the other critical variable, which relies on Production volumes, USD product prices and AUD rate... I come up with A$185M Revenue FY24 by using Shaws production volumes but Morgans more realistic product prices (especially since China GDP and RE turned south, and ILU confirmed demand dropping off since broker reports were made)...
They have $70M cash on hand beyond the table below, and the NAB debt fascility can be rolled over which takes some pressure off. Ultimately though, Coburn needs to make some good free cash because it's debt repayment crunch time sooner or later, and modest margins won't be enough to prevent more share price pain.
Production Performance July-August... So far we only have the 21st Aug Ilmenite shipment to gauge how production is going this Sep Qtr. 21st Aug ~6000t Ilmenite shipment indicates the WCP production is still only running 50% by maths, maybe 60% assuming 'some' HMC being stockpiled for later large MSP runs instead of processed for the ilmenite while ramping up zircon-rutile.
- DFS = 120ktpa Ilmenite Years 1 & 2 (110ktpa LOM )
- 10,000t per month Ilmenite production
- "ilmenite product consistently produced and stockpiled" from 10th July Shipment Release
- ~7 weeks of MSP Ilmenite production (6 weeks between shipment releases)
- DFS = 16,000t ilmenite produced in 7 weeks at nameplate capacity
- 6000t Ilmenite shipped 21st August (TiO2%??... may be +5% waste in Ilm-con and TiO2 <59% etc? )
- Sep Qtr = 70% WCP nameplate (Morgans) = 11,200t Ilmenite (Shaws have 15,000t ilm sales Sep Qtr, no way making 9,000t 21-Aug to 31 Sep)
- 6,000t in 7 weeks = 37.5% of nameplate HMC feed (assuming DFS Recoveries, but HMC might be below spec)
- 6,000t in 7 weeks = 53.5% of 70% HMC nameplate HMC feed (assuming DFS Recoveries, but HMC might be below spec)
- At <70% WCP HMC production, no excuse to not run it all through MSP to separate out Ilmenite product while commissioning Zirc-Rut circuits
- March Qtrly stated "chloride Ilmenite is already consistently being produced and stockpiled"... plus fixes in Jun Qtr = good MSP Ilmenite Prod'n
Based on the above logic, although 6000t ilmenite over 7 weeks says WCP HMC production is running at min 37.5% nameplate, we can be generous and assume for reasons of MSP commissioning and what not, that Coburn is still stuck at ~50% nameplate production by 21st August. Sep Qtr forecasts of average 70%+ nameplate production thus cannot be met by 30 Sep, and raises risk of how long until 100% nameplate production is achieved?
2ic's Grizzle... i can process data and logic alright, but what sheets me to tears is the attitude "no updates until Sep Qrtly" (end October)... The ONLY REASONS that secret squirrel game is played is because LG has no faith in guided production improvements, and wants to try and protect the share price and buy time to hit big improvements before confessing it took longer than anticipated to get there. What's the point though, we're all locked in for the ride and the share price will arrive at 'fair value' no matter how he tries to hide the facts.
Regardless of how production is going (good or bad) the non-disclosure of critical monthly data on a struggling post-CR ramp-up risk mine development, MUST create an uninformed and asymmetrically informed market because so many insiders (brokers, favoured investors, those with contacts across the hundreds of company/contractors employees) will be asking questions to front run critical production developments now it's a crisis and not 'ramp-up as designed". I don't mind gambling with everyone else on the same information and risk, but the situation has been deliberately designed to create a two-teared informed market over this critical recovery period.
Trust this lot all you like, but can anybody tell me WHY holders, including those participating in the last CR/SPP, don't deserve a simple monthly update so everyone rides to the same destination on the same information at the same time? (like G1A and many others who at least make some effort at monthly updates for reasonable market disclosure). LG was happy to let insiders bail out to retail coming into the last CR, maybe that was necessary to protect the share price cum-raise, but now it's just a piss take of uncertainty and asymmetrical information risk, as those in the know move the share price in advance of disclosure... By the time management disclose Sep Qtr facts it's already one third into the Dec Qtr FFS.
So yes I'm filthy with myself. I said (advised) the SPP wasn;t a risk worth taking so far out and given how Luke wants to create an uninformed market. I should have bit the bullet and sold the lot at 18c, taken the hit and come back later if/when the share price or updates told me the risk-reward proposition had changed. I sold some at 18c after the Aug Ilmenite shipment, and more lower since, but not enough. I might be hard on others at HC... but I'm hardest on myself because I know better. Frankly, I'm also sick of riding binary min sands bets, especially when management insist on selling the market one story while insiders walk the price towards reality (SFX pre BG, BSE classic case in point last 12 months).
Grizzle over.... GLTA Mushrooms
(20min delay)