Just thinking through the macro situation for a minute. Nothing...

Just thinking through the macro situation for a minute. Nothing meaningful, just putting some thoughts down on paper.

Clearly failed second sale process meant an unlikely quick resolution except a TO out of left field. Doubts about how much time cash would buy SFX before another CR is probably as a bigger issue as doubts about when/if funding and development would happen. A low the share price after 12 months of failures and doubts meant that regardless of fundamental value the share price would crash hard, and it has.

Major holder lost patience, wants to signal displeasure, readiness for a cheap TO, or just cashing out on a negative view things are likely to get worse before they get better. Until they are done selling the share price can't rise, simple as that. Nobody knows if Colonial are done, or if another major holder will joint he sell down.

Buyers have emerged despite the potential for a long wait and global recession, increased chance of a future CR while SFX sits in a holding pattern. In the face of continued heavy selling, collapsing market and fears of how long and bad this global downturn might be, heavy volumes of buyers at the same or higher prices is one of the bottoming signs I look for. If volumes are higher while the price is falling it only signals that 'bargain hunting' low bids keep getting hit to satisfy the selling demand. Enough buyers need to be attracted by 'value' despite the downtrend and heavy selling to form a bottom. Last two days are promising signs at approx 12c given the market backdrop.

I have my own views of fundamental value, but it helps when other buyers in volume confirm that view. Throwing around silly prices of 5c gives SFX a market cap of ~$15M, less ~$10M cash for approx $5M equity value. I know that $10M will get spent but SFX must have $10M of early works and camp assets at TB for starters, forget how much value is embedded in the project and years of permitting. At 10c we get $30M less $10M cash for $20M market equity value. Frankly too cheap on fundamentals but believably cheap in a bear market where everything is sold down to very little. It's a little random, but 10c is a round number and at $20M EV SFX just has so much asset and intrinsic value with very little to spend moving forward how can it get lower without years of future dilution? >$100m spent getting to this point and a very profitable project is not worthless imo.

I called 15c the low but with Colonial's heavy selling continuing and the markets crashing 12c isn't surprising. If I'm right, 10c is too cheap and thus many other buyers also are happy to jump up a couple of cents instead of waiting for a 10c offer that might never come. Whats 2c to a stock that fell from $1.25 over 18 months... If I'm wrong then it will get cheaper, but sub-10c, I just can't see it short term. Another year and then I will re-access.

In the mean time we have a global; downturn or recession. To some extent it might be the recession that the world has been heading towards since the slowdown mid 2018, a pause that is needed to refresh and set the scene for inevitable rebounds in demand and growth that happen after every recession in history. It's the rebound in growth and commodity demand that developing mines want to graduate into. Rising prices and a good few years to make money and pay down debt. Nobody wants to be like the lithium guys who ramped up production just in time for a downturn.

"From 1919 to 1945, there were six cycles; recessions lasted an average 18 months and expansions for 35. From 1945 to 2001, and 10 cycles, recessions lasted an average 10 months and expansions an average of 57 months" (wikipedia). Many factors have contributed to a moderation in the duration of recessions over time, including public policy, central bank policy, industry practices, insurance, bank guarantees, technology etc. My personal view is that Japanese style fiscal deficit spending funded by CB's will take the batton from lowering interest rates as support to economic growth. MMT, helicopter money, call it what you will but governments will not let economies fall over without a fight. People want to work, to consume, have a better life etc. It might get a bit fruity, but i think the world will continue to develop and consume, eventually raising the living standards of the many more people. The GFC taught me that money is largely a figment of our perception, resources not money is the economic system's limiting factor.

The point above is that the world has already been in a global downturn and skirting a recession, but if a recession happens it will likely be only a couple of years if it's twice as bad as average. TB will take two years to build and ramp up into production. Two years where Iluka will be running down the JA deposit and annual zircon production into it's end, two years of falling grades and production from existing mines etc. PE was savvy enough to step back from a deal when the WuFlu got a head of steam in China, will they be savvy enough for a cheap counter-cyclical buy-in to TB and start the build before the recession has turned back into boom?

That's how I'd do it, wait for the worst of the recession to be over, with enough green-shoots to say buy and build while the building is cheap. The odds of ramping up production into a recovery in demand and prices is high. There is never any guarantee of global economic conditions when embarking on a 2 year mine development, only long term owners will ever get involved. In fact, there is more chance of the economy turning down from boom conditions over 2 years than staying in a boom, the economy has always operated in cycles. The stock market is always forward looking, it anticipates recessions and sells off, or anticipates recoveries and prices move up well in advance of economic reality. Can't see why savvy companies are not also forward looking regards demand-supply and mine development.

When the timing looks right it still comes back to that equity funding gap to trigger finance and break ground. In that respect, have a look at Salt Lake Potash I mentioned last year with respect to their Taurus development loan. Taurus loaned SO4 over 100% of the total upfront capex, plus another $10M to complete the BFS if you don;t mind. I can see another $125M capex reduction by dropping the zircon processing plant. On the same gearing metrics as SO4, SFX may only need ~A$50M equity for a similar Taurus developmental financing deal on a table I just did up. Leaving aside the obvious question of why didn't we do it in the first place, or that we have almost raised that much over the last 18 months, I say we are down but not out.

Good luck