Yes, the dividends are new but they are probably here to stay...

Yes, the dividends are new but they are probably here to stay considering the underlying strength of the business and balance sheet. Over the last 2 years, the company has had free cash flow of $38mill which has all been reinvested in the business other than the approx $700k paid out in dividends which have resulted in the company which traditionally operated of a revolving working credit facility is now running almost entirely off its own equity. It's hard to think this major reinvestment of cash in itself wouldn't underpin the strength of the company for the long run and not just 12 months.

Steve did mention deteriorating conditions in Europe however he also noted that the financial strength of the business protects from interest rate rises and also allows the company to make the most of the conditions through opportunistic acquisitions throughout the period. He also noted the anode business which MGL is the largest player in the world is growing, albeit the margins won't be as high due to the suppressed Mg price it will be very profitable. Also, the anode business derives approx 80% of its business from replacements which is consistent revenue and doesn't solely rely on new builds or economic growth.

Qinghai is the obvious blue sky that MGL has been waiting patiently for and one thing I'm glad of is that we are not miners or producers as every project has major risks and huge blown-out timelines and massive capital raises. The China risk will be mitigated by the product as Quinghai will produce the cheapest, most environmentally friendly magnesium metal in the world and MGL has all the infrastructure, offtakes, and people in place and paid for to make the most of the opportunity. MGL is a true global vertically integrated player so the Qinghai offtake will positively affect every aspect of the business from raw metal to recycling to finished goods. When they turn the taps on at Qinghai the increased revenue could be as much as US$300- $500mill which is bonkers anyway you look at it.

Just my take on it, I just don't see why we are trading at such a low PE or at such a discount to NTA considering we have so much going for it and they're giving money back to shareholders rather than putting their hand out for a top up like most juniors on the ASX. I do think MGL is flying massively under the radar.

All IMO DYOR