I took the opportunity to meet new CEO Mark Cooksey today after his presentation. He is incredibly knowledgeable in this field having spent over 20 years working with the aluminium industry, mostly at the CSIRO.
Has anyone actually read this presentation yet? Somewhat buried on page 14 is an updated EBITDA forecast for Alcore of $23-41m per annum, based on 20,000t/y. I had been basing my calcs on 30,000t/y, but my estimate of $30m profit per annum was in the ballpark. This is a worthy goal to work towards, which will justify a share price 10x where it is now in 3-4 years (hopefully! That is a total guess on my part!). And it is only the beginning, as overseas opportunities will then follow. The capex estimate is $16m for the first commercial plant (which will produce 1,300t/y and then another $80m to expand to 20,000 t/y.
The ABX team has done a magnificent job securing a $7.5m grant from the Federal government, and they now have the challenge of finding another $9m for the first plant. Given how critical a secure source of aluminium fluoride is to the 4 Australian smelters, I have been quietly hoping they might provide this funding. It would be nice to see some official sign of support from them. I understand most of them supported our grant application in writing, but none of us get to see that!
Putting that to one side, I discussed with Mark today the issue of funding for the $80m expansion. He agreed that once the first plant (module) was built and operating well, it should be possible to secure bank debt or equipment finance for additional modules, as each additional plant module is just a replication of the first one. If the first one works as it should, the process is de-risked and banks should be able to get comfortable. So all the focus will be on the remaining $9m required for the first commercial plant.
I still feel that Alcore is valued at practically nothing by the market. Now that ABX has confirmed the target EBITDA of $23-41m, the market should be able to discount that for time and execution risk and start placing a value on Alcore within the ABX share price. In my view, the market is waiting for management to remove customer risk by making it clear that the 4 Australian smelters support the project and will buy aluminium fluoride from Alcore if it meets their specifications. If management could also provide clarity over development timelines, that would also be highly useful.
ABX Price at posting:
17.5¢ Sentiment: Buy Disclosure: Held
