Its taken into consideration in the financial model in the detailed BFS study on the company's website - see below. Who cares if VRX has to pay 6.6M each year and not draw down on capex debt if they are able to pay for the second plant with cash?
- It looks like the company will be operating at no profit for the first two years because of 50% nameplate capacity + production costs + borrowing costs + small amounts of capex drawndown. 55M in debt is about 6.6M in interest payments each year so the graph makes sense.
- At end of YR3 they will turn over about 30million in profit each year before tax (includes any interest payments on remaining CAPEX) with revenue above 100M.
- Plus a 2yr ramp up is extremely long post commissioning. Name plate capacities are usually achieved in 6months - 1 year on much more complex operations like polymetallic deposits. If Bruce does have high demand for his product then I dont see why he cant process 2million tonnes per year in YR2 which would mean payback on capex would bring it to 3ish years. Again, quite conservative which has been his approach right throughout the BFS from 2019 to now.
- Since its taken about 3 years since first referral to EPA for ASN then this would mean that we will start running into a net profit around the time EPA approves of ASC or Muchea, depending which project he chooses next. There may be very good synergies with having ASC up first considering logistics would be in a steady state at that time or he may decide to bite the bullet and get Muchea running to please the greenies and the crazies (uprampers and de-rampers) retirement plans.
- So my take is that he wont pay off the capex for ASN so that he can build up enough profit to either pay for CAPEX in either of the two remaining projects with cash to fully prevent debt and equity financing. A win for shareholders, right?
- Based on the graph, pricing seems to be done at around US$36/t which is consistent to 2019 BFS. So a $US 38/t FOB contract (at the lowest end of product pricing in the BFS) is a US$2 price increase at 0.66 exchange rate processing 2 million tonnes a year equates to AU6 million in additional revenue which pays for the financing each year...So I dont see issues with debt repayments especially if pricing is favourable (>US$36/t) and we get to the second project will low debt and equity financing to pay for the second plant.
- Time horizon for me on this project is perfectly fine but those who seem to be semi retired and in their mid 60's may prefer to make their money work somewhere else. The good ol' excuse of FOMO from some of the people is silly. Whats FOMO got to do with it if people are going to end up in a retirement home in the next few years anyway.
- Share price right now hinges on EPA. BFS has nothing to do with it. People are bored after realising that VRX has to wait a little longer because they have to respond to all comments once EPA provides it to them... Unfortunately bordem doesn't strike well with the average emotional human.
VRX Price at posting:
9.8¢ Sentiment: Buy Disclosure: Held
