PUA (ASX) Ann: Inside Briefing interview on Polar Sapphire acquisition

Originally posted by Cuse: ↑
Sorry everyone, I'm currently in the USA searching for investment opportunities so I've had limited time to re-post. The table I posted looked fine in preview, but it was all messed up when I posted it so I took it down to re-post it but haven't had the time.

I was lucky enough to be on the PUA investor call last month where the proposed acquisition was discussed & have taken some time to digest the information given in the announcement, from questions asked on the call & the unexpected announcement made last week.

There are a number of takeaways I think are important for investors to understand which I will layout below. As a disclosure I have been buying since last months announcement & I'm sure when you read the analysis below you will see why.

Firstly, lets talk a little about Polar Sapphire (PS) team. This is obviously a team that is very experienced in developing IP for complex processing of highly purified materials, as mentioned on the call a lot of their equipment is custom made, they have been developing the IP a long time & they have patents already granted in the USA.

The team have been dedicated to the HPA space for 6yrs, we are purchasing IP which will fast track our progress at least 2 years & have acquired a team with the right experience IMO to merge the technology & integrate the Kaolin feedstock (further reducing our OPEX costs.

Of note, the modular plant design developed by PS is what will have the ultimate impact on the project here. The current market is problematic for many up & coming mining companies. It is currently difficult to raise equity or debt, so companies that are looking for $90M+ to build a plant are hard having trouble finding it. The value of the modular design will be realised into the future as the low capital cost will provide multiples of returns for years to come.

Before I go into the proposed capital structure scenarios, I'd like to talk a little about the acquisition & why it makes sense to me. If you look at the PS teams background, they are clearly excellent at developing IP & integrating processes. PUA has very experienced mining/finance directors & some of the largest small cap investors in the mining space. I have little doubt that Tolga & Tom will have an issue raising the $30M required, this game is all about contacts; look at SYR or NCZ & see the deals they have put together; neither of those mines have the potential NPV of PUA once its reconfigured for the lower cost of capital.

So let's have a look at the potential capital structure at different share prices & look at the implications for current shareholders, incoming vendors & new shareholders.

PUA Proposed Ownership Structure Scenarios *updated to include SPP shares*.

Column 1 Column 2 Column 3 Column 4 Column 5 Column 6 Column 7
1 Share Price
$0.04
$0.06
$0.08
$0.10
$0.12
$0.14
2 Current SOI
171,090,933
171,090,933
171,090,933
171,090,933
171,090,933
171,090,933
3 SPP @ $1,750,000
43,750,000
29,166,667
21,875,000
17,500,000
14,583,333
12,500,000
4 Consideration Shares
360,937,500
240,625,000
180,468,750
169,000,000
169,000,000
169,000,000
5 Capital Raise
750,000,000
500,000,000
375,000,000
300,000,000
250,000,000
214,285,714
6 Total Shares
1,325,778,433
940,882,600
748,434,683
657,590,933
604,674,266
566,876,647
7

8 Current Shareholders
12.90%
18.18%
22.86%
26.02%
28.29%
30.18%
9 Vendor Ownership
27.22%
25.57%
24.11%
25.70%
27.95%
29.81%
10

11 MC
$53,031,137
$56,452,956
$59,874,775
$65,759,093
$72,560,912
$79,362,731
12 Cash
$17,400,000
$17,400,000
$17,400,000
$17,400,000
$17,400,000
$17,400,000
13 EV
$53,410,912
$53,410,912
$53,410,912
$53,410,912
$53,410,912
$61,962,731
14

15 50% Debt Structure
950,778,433
690,882,600
560,934,683
507,590,933
479,674,266
459,733,790
16 Current Shareholders
17.99%
24.76%
30.50%
33.71%
35.67%
37.22%
17 Vendor Ownership
37.96%
34.83%
32.17%
33.29%
35.23%
36.76%
18 MC
$38,031,137
$41,452,956
$44,874,775
$50,759,093
$57,560,912
$64,362,731
19 Cash
$17,400,000
$17,400,000
$17,400,000
$17,400,000
$17,400,000
$17,400,000
20

21 EV
$20,631,137
$24,052,956
$27,474,775
$33,359,093
$40,160,912
$46,962,731
I have separated the table into 2 sections. The top section shows the potential SOI, % ownership for existing shareholders & PS at different stock prices.

The second or lower 1/2 of the stable shows the same, assuming 50% of the $30M raised is funded with a debt facility. I won't go into the pros & cons of this in this post, I will go through the implications of dilution & valuations at different SP's.

As you can see from the above table, changes in the SP have minimal implications for the new vendors & mainly affect existing shareholders. Obviously the best case for existing SH is for the SP to be around 14c as that would enable a pretty even split for all parties if no debt is used, however using debt will enable an even spit at a SP around 10c & only 500M SOI.

The MC of the combined entity doesn’t seem too high at 10c with an EV $33M. Given we are paying $27.1M for PS it seems a higher SP is also reasonable under the 50% debt scenario

There has been a lot of talk on the forum about how the SPP will affect the dilution of existing holders & the answer is minimal (when included in the combined cap structure), especially if we can get the SP up. This seems to have been a well thought through strategy IMO.

Many have voiced their concern over how the dilution will affect Tolga & Tom’s holdings. Remember this, their last participation was in the 10c placement. Their holdings are only diluted if they cease to participate in future raises (the same as any other deal) & the current SPP has a provision for $500K placement to clients of Patersons & CPS Capital.

There will also be another opportunity when funds are raised for the acquisition. Tom & Tolga will obviously need to participate if they intend to remain majority shareholders, but they will be purchasing considerable IP & the project economics speak for themselves. Given there will be plenty of equity available, they shouldn’t have an issue maintaining their holdings if they wish.

At the end of the day, this looks like a strong deal to me, it is in all current shareholders interest to support the SP as the impact for PS is low, impact for current shareholders is high & the potential future MC of the combined entity is significant given the lack of debt & potential for organic expansion.

All the best to everyone here, the next month should be exciting for PUA
Expand
Great post!

My initial thoughts once the outline for the acquisition was made, under the pro-forma for capital structure was as SP around 0.8c or more, also hoping for a higher debt component to prevent too much dilution. Given the economics of the project, and the knowledge of TK and Eadie as you mentioned, I am leaning towards that being the case.

This is shaping to be a cracker. Good luck to all!

No.	Vol.	Price($)
2	214015	0.6¢

No.

Vol.

Price($)

214015

0.6¢

Price($)	Vol.	No.
0.7¢	18052913	10

Price($)

Vol.

No.

0.7¢

18052913

No.	Vol.	Price($)
2	214015	0.006
14	26250317	0.005
15	47511921	0.004
7	30866666	0.003
18	18679779	0.002

No.

Vol.

Price($)

214015

0.006

26250317

0.005

47511921

0.004

30866666

0.003

18679779

0.002

Price($)	Vol.	No.
0.007	18052913	10
0.008	7777387	7
0.009	5833000	3
0.010	18607300	7
0.011	5000000	1

Price($)

Vol.

No.

0.007

18052913

0.008

7777387

0.009

5833000

0.010

18607300

0.011

5000000

(20min delay)
Last 0.6¢		Change 0.000(0.00%)		Mkt cap ! $14.98M

Open	High	Low	Value	Volume
0.6¢	0.6¢	0.6¢	$46.30K	7.718M

Great post! My initial thoughts once the outline for the...

Blue Star Helium sees approval for five more wells at 'Galactica/Pegasus' project in Colorado

Cyclone signs MOU with Vale for development of Iron Bear play

CuFe sells its Crossroads gold royalty to Northern Star for $4M cash; says better than waiting for mine launch

Bigtincan's Board backs Investcorp offer: Why a NASDAQ listing could be game-changing

InhaleRX gains approval for clinical trial to test non-opioid therapy for cancer pain

Banshee's historic trenches prove rich in antimony and gold for GDM

Week 46 Wrap: Copper hits 2mth low as Trump threatens net zero pace; US rally fades; HotCopper’s picks

To make modern missiles, you need 3D Printing. And in that gold rush, Amaero is selling shovels

NT Gov't delivers environmental approval for Empire Energy's Beetaloo Carpentaria pilot gas play

HotCopper Highlights: Your most watched stocks for Week 46, 2024

Featured News

Buyers (Bids)

Sellers (Offers)

Featured News

	Column 1	Column 2	Column 3	Column 4	Column 5	Column 6	Column 7
1	Share Price	$0.04	$0.06	$0.08	$0.10	$0.12	$0.14
2	Current SOI	171,090,933	171,090,933	171,090,933	171,090,933	171,090,933	171,090,933
3	SPP @ $1,750,000	43,750,000	29,166,667	21,875,000	17,500,000	14,583,333	12,500,000
4	Consideration Shares	360,937,500	240,625,000	180,468,750	169,000,000	169,000,000	169,000,000
5	Capital Raise	750,000,000	500,000,000	375,000,000	300,000,000	250,000,000	214,285,714
6	Total Shares	1,325,778,433	940,882,600	748,434,683	657,590,933	604,674,266	566,876,647
7
8	Current Shareholders	12.90%	18.18%	22.86%	26.02%	28.29%	30.18%
9	Vendor Ownership	27.22%	25.57%	24.11%	25.70%	27.95%	29.81%
10
11	MC	$53,031,137	$56,452,956	$59,874,775	$65,759,093	$72,560,912	$79,362,731
12	Cash	$17,400,000	$17,400,000	$17,400,000	$17,400,000	$17,400,000	$17,400,000
13	EV	$53,410,912	$53,410,912	$53,410,912	$53,410,912	$53,410,912	$61,962,731
14
15	50% Debt Structure	950,778,433	690,882,600	560,934,683	507,590,933	479,674,266	459,733,790
16	Current Shareholders	17.99%	24.76%	30.50%	33.71%	35.67%	37.22%
17	Vendor Ownership	37.96%	34.83%	32.17%	33.29%	35.23%	36.76%
18	MC	$38,031,137	$41,452,956	$44,874,775	$50,759,093	$57,560,912	$64,362,731
19	Cash	$17,400,000	$17,400,000	$17,400,000	$17,400,000	$17,400,000	$17,400,000
20
21	EV	$20,631,137	$24,052,956	$27,474,775	$33,359,093	$40,160,912	$46,962,731

Great post! My initial thoughts once the outline for the...

Top Stories

Blue Star Helium sees approval for five more wells at 'Galactica/Pegasus' project in Colorado

Cyclone signs MOU with Vale for development of Iron Bear play

CuFe sells its Crossroads gold royalty to Northern Star for $4M cash; says better than waiting for mine launch

Bigtincan's Board backs Investcorp offer: Why a NASDAQ listing could be game-changing

InhaleRX gains approval for clinical trial to test non-opioid therapy for cancer pain

Banshee's historic trenches prove rich in antimony and gold for GDM

Week 46 Wrap: Copper hits 2mth low as Trump threatens net zero pace; US rally fades; HotCopper’s picks

To make modern missiles, you need 3D Printing. And in that gold rush, Amaero is selling shovels

NT Gov't delivers environmental approval for Empire Energy's Beetaloo Carpentaria pilot gas play

HotCopper Highlights: Your most watched stocks for Week 46, 2024

Featured News

Buyers (Bids)

Sellers (Offers)

Featured News