Part-time self-managed investor and hobby researcher/poster, keeps me off the streets and entertained.
No off-take isn't correct. I was writing off the cuff in response to the webinar where Charles said he had to walk away from Finvara or someone because they would only lend on a committed take-or-pay full off-take basis, which HAS didn;t have and couldn't risk the company signing up to. No change to the 60% off-takje they had when looking at Finvara and Nordic Bonds last year. Having brought it up I quickly ran through previous releases and the off-take situation is:
Apr 2021... 60% off-take locked in with trading house TMTG.
Jul 2022... another 15% to Solvay but only an MOU, Non-binding, and thus currently worthless
100% of planned production doesn't need to be locked into off-takes, but most lenders want to see >80% imo to de-risk sales revenue. Part of the problem for RE developers is that off-take agreements are linked to Asian (Chinese) markets, which are not sufficient over long periods for high capex, high cost developers to comfortably cover debt and interest repayments.
A lower-risk model is a 'cost-plus' where so long as the project is built and operated close to specifications, revenue is guaranteed. A good model for lenders, OK model for shareholders so long as the price doesn;t run high and they get left behind with locked-in forward sales (ie like funding a gold mine development) high-risk for off-takers who then have to wear the heavy losses if prices fall/stay under the cost-plus forward pricing. ThyssenKrupp certainly aren't going to take on that risk without deep REO futures market to lock in hedges, they are traders not a charity or gamblers.
People wondering why I was so outraged over the Feb'22 DFS, it's because the NdPr price at which HAS makes bank is just so critical imo. The higher price required on the industry cost curve, the higher the risks for lenders. and equity investors obviously. We have seen the Feb'23 MRE update with higher opex than DFS'2022 (driven by much higher hydromet opex), this webinar just soft-guided another ~$150M capex increase after the ~$150M increase from 2019 to 2022. It looks to me more likely that lenders will not commit until HAS get a 'real' figure out with sufficient confidence, fixed price potential and contingency that it might actually do the job. Not long before the next capex/opex iteration is released he says...
STA and SFX are both mineral sand developers and one of my sector interests, thus my knowledge of their funding obstacle course and outcomes. As I looked back today I couldn;t help but take some unhappy snaps of the guidance made by HAS over the last 18 months.
Feb 2022 DFS release, Charles quote seeking JV funding partner and debt for 2024production
Mar 2022... Well advanced in funding discussion for production by 2024
Jul 2022... More partnership and funding name dropping, even as we now know some were backing out.
31 Oct 22 Qurterly... still pushing the KFW deal, which he said died before the Nordic Bond roadshow...
31 Jan 23 Quarterly... all names dropped, language changed to basically continued desperately trying...
Fed2023 Update where CFO announced resignation... Nada on Finance
Thanks to commentary in the webinar, everyone now understands better behind the scenes of reported finance history from Feb 2022 (well advanced with a range of partners) until Feb 2023 (crickets and the CFO is off). There are some genuine reasons I'm sure some lenders walked away, but the change of tune over a relatively short 12 months is stunning. Even after the Australian tax payer has lifted our funding to $220M though NAIF, Charles now says he is hitting Export Finanace Australia for a taxpayer double dip
... not happy Jan. I don't mind Aussie tax payers taking a big slice of debt and giving projects a leg up, but not the lions share which removes much of the private risk-judgement from the development. Speaks volumes that he is now seeking more government handouts instead of private lenders to finish the job as planned. If it doesn;t stack up enough for private lenders to come in with $220M NAIF support, then it probably shouldn't get funded.
The whole NEO purchase and muscle into magnet production all the way from MREC product... luckily I'm done today. Time will tell as always. Hopefully share price bounce reflects a continued 'sell the rumour, buy the fact" rebalance, now this webinar confession of the true state of play allows the market to digest what many seemed to be frontrunning...
GLTAH
(20min delay)