@benwex2 beat me to the punch.
I think it is instructive to study AustralianSuper's moves over at Syrah & some of their commentary around that.
> They are staunch believers in the EV/energy storage thematic.
> They've adopted a LT philosophy around this (decade+).
> They've gained exposure to lithium, graphite, nickel & cobalt.
> They look beyond ST commodity price fluctuations.
> They target strategically important assets.
> The best way to protect their clients money is not to withdraw support when a company is floundering like Jervois. And make no mistake - without AustralianSuper's ongoing support (now up to 500m million shares or 20% of the company) - Jervois would be goneski IMO.
Saying that, I can't help but wonder how long AustralianSuper are going to tolerate Crocker's gross incompetence. It is one thing to believe in the thematic, assets & strategy & another to keep backing in an arrogant & incompetent MD at the helm.
And this is where I now find myself. I believe in the thematic, assets & strategy, but have lost confidence in the Captain.
Investors only grow by learning from their mistakes. And the biggest mistake I have made over the past 4 years is cultivating a relationship with management & buying their hubris & outright lies.
I'd crunched my own numbers & knew things were tight, but was led to believe they had it all under control & were exploring multiple (non-equity raising) options. I trusted them & they let me down.
I will no longer trust anything they say. And I will now scrutinise the numbers more carefully. I've sent scathing messages to both Crocker & Johnston in recent days/weeks.
Cobalt is off the mat, but the SP isn't moving. Why? The answer can be found in their capital raising presentation. "Current gearing & constrained liquidity are impacting shareholder value". In other words, we aren't generating enough cash & have decent debt commitments.
Disappointingly, they've used the same flowery language in the capital raising presentation that they used last year - which made it sound like everything would be OK - after the last monstrous raise. It wasn't OK. And despite what they say now - it still isn't OK.
Kokkola alone isn't capable of the heavy lifting needed to fund group activities & meet debt commitments.
The rising cobalt price means they have some breathing space with the Mercuria facility - as the value of the inventory covers the remaining US$49m - but that still has to be repaid at the end of 2024. It isn't going away - but could be renegotiated or deferred.
They will have approximately US$50m left after finalising the ICO payments & Mercuria facility payment (spread across June/July - I see what they did there) & how much general cash have they burnt in the June quarter?
Assuming no accounting alchemy at Kokkola, EBITDA will be positive & may surprise to the upside, but not enough to party hard.
They desperately need deals with others. A deal with an OEM/s to fund the Kokkola expansion (along with capital - this takes time). They need a deal with an OEM/s to fund the SMP restart capex (will also take a year to refurb this refinery "after" funds come in) & critically - a deal with the USG to sub out that Nordic bond.
The ICO is their flagship asset & with that offline - their entire strategy has crumbled. While they may announce commercial deals around Kokkola & the SMP - they still need to exercise balance sheet discipline in the interim. And I have zero confidence in them being able to do this - as they treat capital like confetti.
They'll sell Nico Young for peanuts no doubt & are probably waiting until late in the year when they anticipate another capital injection again before doing that. Again - while I believe in the long-term future of this company & haven't lost sight of the forest for the trees - it's time for me to pay a tad more attention to the trees.
I can foresee another capital raise either at the end of this year or early next year - regardless of what they may say to the market. Crocker has gone nuclear on the capital structure of this business & seemingly doesn't care.
Pure speculation here, but I suspect that if Crocker doesn't deliver on multiple deals by Xmas - he'll be out. Support shouldn't be taken to be an ad infinitum proposition. And it is possible that large shareholders will make management changes conditional upon further financial support when it eventually comes to that.
I am still backing the business in - but honestly speaking - I'd put Crocker & Jimmy StevieWonderBoy May into a cannon & fire them at the sun.
(20min delay)