Another pessimistic posting I see, focussing on NEO and twiggy...

Another pessimistic posting I see, focussing on NEO and twiggy only.

I found the webinar very informative and my only concern was explained by Charles.

In the coming years I think the NEO purchase will turn out to be a stroke of brilliance considering the cost to build the operation and time to replicate from the ground up, ie, permitting etc as Charles explained. (What wasn’t mentioned was the IP that NEO obviously have) To be able to purchase the value added elements of the supply chain with all the associated IP, real estate, permits etc is such forward thinking exercise that is was obviously a no brainer for Twiggy to loan the money.

In the future if Twiggy decides to ask for his money back with interest (I doubt it though) then Charles said he can re finance the loan as he sees NEO as part of Hastings 2.0. I expect Twiggy will take the option to convert to shares at $5.50 as by then we will be in a supply deficit and RE prices will be well north of where they are now and hopefully mining. Charles also said you need to be bold and that is certainly what he is and I like it. No risk no reward. There was a reason why the strike price was put at $5.50 when Hastings was trading at $4.40, Charles has hand or did at the time and it smells of Twiggy wanting to come on board and not the other way round. Next thing Gina wants into ARU, so there are dumb rich people that see something in the space going forward.

From my 15 years or so of investing in Lynas I have seen the trials and tribulation of the RE space and Lynas previously was trading at such a discount that even the CEO couldn’t explain it. But once the market woke up Lynas shot to a high of $11.59. Charles appears to me to have the same knowledge about the space and is very cluey and it gives me confidence in my investment long term.

Tesla announcing they will produce cars without magnet motors doesn’t faze me as in the future we will see robotics and other industries taking up the slack for magnets, including wind farms etc so this doesn’t really affect in my view the ongoing supply demand schematics.

FID discussion is very interesting and I think there will be another capital raise once the share price recovers, but only after there is more finance. Charles said they would be around 150 million short without corporate costs and fees etc and gave a total of 200 million ball park. Let’s settle on 200 to 250 million, which would give working capital for ramp up as to commission a plant takes time to get the process right and to be able to extract as much as possible from the ore.

If everything else goes well and the SP recovers to around $5.50 then to issue 40 or 50 million shares would raise the remaining capital required for the go ahead. HAS would still be a company of around 150 million shares on issue, which in the mining world is amazingly low. I’m sure Barrenjoey could pass the hat around for investors for an underwriter to cover any shortfall in the capital raise if share holders don’t want to stump up the cash.

The only risk I see at present is what I explained above. Will the share price recover to a point where they can do another capital raise to cover the shortfall in finance? Charles may end up getting the full amount of finance and not need a capital raise but the option is there and lowers the debt burden. I’m glad he declined to take EURO Bonds also at the rate mentioned as I would prefer a strategic investor over a pure bond play as there may be further opportunities in the future to acquire other holdings or expand ownership and or production in NEO to capture market share and a strategic investor can be handy to have on board, or two.

The next few months are going to be busy and I see a bright future ahead, but then again I’m a glass half full type of person.

My post aren’t for entertainment purpose but are my views, opinions and thoughts. But as always, this is not financial advice and do your own research.