Ann: Exciting New Exploration Targets at Windarra, page-59

Me too, Blowie.

Being a numbers nerd and also curious by nature, I did previously did some crunching to identify that the EV (Enterprise Value) during the significant lows made in June 2017 (1.8c) and March 2020 (2.5c) were both very similar at ~$40M each. Today's EV is $~24.5M.

Interestingly, the MCs at both times were $16.5M (2017) and $66M (2020). They both contained the same CN debt element (AU$25M), but 2017 was stint with cash ($1.6M) and 2020 was flush ($50M, being the remaining balance of the 2018 $70M net raising).

I like EV as a metric because it factors-in the effects of debt vs. debt-free and also the effects of having a little vs. a lot of cash.

Keen eyes might notice that the 2017 low had $1.6M cash on hand vs. $1.7M right now (my est. today). So why the $40M EV in 2017 vs. the current ~$24.5M today? Well, as I see it, and I reckon you'll already know this, the main differences are:

1) Macro Differences: 2017 was the back-end of the 2015-17 cyclical Ni Winter caused by Indonesian Oversupply v1.0 (i.e. raw ore and NPI exports to feed China's NPI disruption of the traditional s/steel market). Contrast against today where we are at the beginning of the next Ni Winter caused by Indonesian Oversupply v2.0 (i.e. in-country over-development ramp-up and oversupply of Class 2 laterite Ni ores to now also disrupt the Ni battery chemistry inputs market). The addition of in-country Indo processing capacity and the development of industrial processes whereby Class 2 laterites can be used for traditional s/steel AND NOW ALSO to supply intermediate battery input products strongly suggests a much, much longer Ni Winter this time around, barring any Black Swan interruption events.

2) Mico Differences: During 2015-2018 POS wound back its overhead structure to be as tight as a drum. Board members (always) took their rem as shares, not cash. Staff costs were slashed. No CEO (the Chair, CI, acted in this role on a p/time basis (0.4 FTE) taking shares as rem for this role too, not cash). No CFO. No fancy West Perth offices. No Helly Hansen jackets, yadda, yadda, yadaa. This was the era of The Laundromat, which LTers may well remember. It kept the company alive until the Ni Spring came in 2018 and $70M was raised for a restart. Contrast this against today's (also non-producing) cost structure of $17M p.a. (rolling yoy actuals to Dec, 2023) or $14M p.a. if/when the slated $3M p.a. cost saving initiatives begin to flow and one sees a cost structure that appears totally disconnected with what is unfolding in the WA Ni sector today and for the foreseeable future. And, thus far, there isn't anything coming out of Ord Street to suggest the Board is taking this seriously.

While the prospect of a longer Ni Winter is very disconcerting, of more immediate concern is the very real solvency risk. Unless there is an immediate wholesale change in the ongoing cash burn, the current board/management will simply drive the company into the ground. If it's funded by asset sales, a hollowing-out of the company will ensue. If, by some small miracle, the market is willing to be continually tapped to provide the necessary funds, then continued massive dilution will ensue. A lose-lose-lose scenario for SHers, but not the Board or staff who will continue to earn cash.