The Placement provides the Company with significant flexibility with respect to its ongoing capital expenditure requirements at Hombre Muerto West (HMW), Candelas and Greenbushes South. In particular, proceeds from the Placement will be applied to accelerate:
• Purchase of long lead items in preparation for stage 1 (4ktpa LCE) including; liners, piping and lime plant; • Prepayment for earthworks contractor; • Workers camp expansion; • Stage 2 DFS and production expansion studies; • Further exploration and production well drilling; • Contingency for extra work at Greenbushes; and • General working capital.
This is where I wish they would give more detail in their announcements which at times are far too vague. Note they say the money will be used to accelerate the below items. Some detail on how prepaying the earth works contractor prevents X months delay or same with workers camp expansion here to elucidate how much its accelerating the project would be really helpful to investors. Both these items undoubtedly would be on the critical path but more details here on time savings and costings helps paint a better picture in the communication, ie, give us an idea of how much is being spent on those items individually. The last 2 items have nothing to do with acceleration. General working capital can be practically anything, so would be nice to know how much cash was for that bucket ?
Mondy makes some good points about cashflow . The maths doesnt really add up and points to what I suspected / feared might happen and that is more funding will be needed even after this just to get the 4ktpa pilot plant done and that is not what has been previously advised to the market . Now yes, inflation globally is a problem, but again here is where good communication should come in if that is the case they should detail what items have risen and by how much they have risen from prior estimates. Its called transparency.
As time passes I am coming round to view whoever is writing these announcements comes from the "less is more" school and being purposely scant on detail , and that is by design. I would argue that has to change particularly as we are no longer an explorer but a project developer and they have to start stepping up the level of detail in market communications otherwise it is coming across as too vague and sounds like they don't really know what they are doing with confidence or at least showing they are accountable with shareholder capital ( which is vital market information now we are actually executing a project and not just exploring) and trying to run to a self imposed budget.
This isn't a Galan problem alone as I see it in a host of smaller explorers and small developers. Not making excuses but part of the problem is too many lawyers writing or having a hand in writing these announcements so they are purposely vague with letting key commercial information make its way into the final wording of these things. This is where I would hope also the CFO starts to step up to add some value to these announcements.
A critical path time schedule and basic of the pilot plan's development should be at least published to the market now its clear ( that part of the stage 1 dfs must have been completed by now or how would they know they need the money sooner rather than later) we are progressing to production but we have have nothing at all on this as yet. Guessing it will come in the stage 1 DFS but given the way this has been done is back to front, would have been nice if there was at least some words that more details will come in next week or two in stage 1 DFS.
So if there was a good story here you woudn't know it with the bland and vague on detail language, so most people perhaps rightly see negatives.
GLN Price at posting:
$1.09 Sentiment: Buy Disclosure: Held
(20min delay)