Did you know that Bruce Griffin first became involved in TB when...

Did you know that Bruce Griffin first became involved in TB when he was engaged by an external PE fund looking at potentially becoming a partner in TB through the 2019 partner search?

At that point he didn't recommend the investment to the PE fund due to product risk given a significant part of the offtake was for very specific product that couldn't easily be mass marketed should the offtake partners default on their commitment.

As a result of Mr Griffin's expertise, some months later in late 2019 or early 2020, following the unsuccessful conclusion of the partner search, Mr Griffin was engaged by existing shareholders to provide an independent assessment of the intrinsic quality and worth of TB. This was done because at the time, despite the positive commentary on TB from within SFX, commercial deals were not materialising, and therefore these major stakeholders wanted external and independent verification of the TB economics.

During the course of that assignment (which concluded in a positive assessment affirming TB's value, and identifying alternate, less risky mine plans) Mr Griffin and the company agreed on an ongoing working relationship which eventuated in Mr Griffin taking on the role of executive chairman. The story I've been told is that Mr Griffin was keen on dedicating significant time resources to SFX because of the untapped value he saw in TB. His negotiated remuneration package was structured to benefit him from a successful development of TB.

To today's announcement m, there will be those that balk at the prospect that SFX is committing capital to other projects, preferring that SFX instead hand that capital back to shareholders once TB debt is paid off. I can see the logic in this, however it's also a limiting strategy, conservative one could say. A more progressive strategy, and the sort often employed by resource companies is to use free cashflow to expand the business to maximise shareholder returns.

my point here is that SFX shareholders have the benefit of having a person who is extremely capable of assessing these sorts of investment opportunities (as demonstrated by the fact that historically BG has offered his services and expertise, and has been specifically engaged by professional investors with the sole objective of determining the value of similar mineral sands investments, I believe he also consulted for institutions in the Fingerboards project).

In the same way that YS acquired part of TB in a very strategic manner which ultimately provided them a very cheap entry into TB, I see that BG is using his expertise to identify and do the same for SFX shareholders.

he similarly proved his worth in this regard in the reverse scenario when he very successfully secured a positive sale of SFX's non-core assets at the beginning of 2023 (resulting in SFX shareholders not being diluted through a CR that would otherwise have been needed to complete SFXs commitment to the JV agreement and plant construction).

The only downside to this acquisition strategy is the current SFX share price which unfortunately doesn't fully represent the value of the company's assets and in such a scenario raising funds at a low sp is not ideal. Having said this the value in TB is real and once the production and profitability is proven (next three months should go a long way to demonstrating this), then there is a good prospect that the SFX share price will re-rate accordingly. In the event it doesn't, management have sufficient flexibility to decide how best to allocate funds and whether (if necessary) CR will be in the best interest of share holders.

it is also important to note that SFX currently has sufficient funds to undertake both this investment and it's next 12 months commitments to SA.

My view is that BG is very strategically identifying strong assets which due to circumstance present SFX with cheap entry pathways to acquiring substantial ownership in said projects. This, in theory, is a opportunistic value accretive approach that will end up providing SFX shareholders with a more diverse and much larger asset base that has the potential to significantly increase the underlying value of each SFX share.

I believe that this strategy is the reason why investment in stage 2 of TB has been pushed back. The exposure and upside stage 2 is retained by SFX however can be exercised at a more strategic point in time while allowing some of the cashflow that would have been used for Stage 2 to be applied to these new value accretive investments.

my optimistic streak also tends to agree that such contractual commitments suggest that all is going well at TB.