Let me go back a bit for people asking for background.
Pre 2018, VML was interested in a mix of projects, gold in Burkina Faso, Cobolt, from memory, in Germany, but the main game was the Watershed Tungsten project in Queensland.
They raised a lot of capital to drill in Burkina Faso and in Niger. They abandoned the Niger project, after spending too much money on it, circa 2018. Burkina Faso had hits, but nothing that came to anything. I expect the current Board would readily sell the property. The Germany project has not cost them a lot of money, but it too would probably be quickly disposed of by the current Board.
Many of the shares were issued to support these programmes.
The Watershed project was the big attraction for me, because JOGMEC, a Japanese Government agency invested a lot of money in preparing a feasibility study for the project, but no Japanese company took the project when JOGMEC offered it to them, so JOGMEC withdrew, having completed its part of the bargain and the project became 100 % VML. JOGMEC's contribution should be recognised because it put flesh on the Watershed project.
VML tried, but did not have the resources, or secure an offtake agreement with which to get Watershed off the ground. Much to my disappointment.
Tungsten Mining came along and bought the project for $15 million. This paid off VML's debts, and left a good sum in the banks. It was now a cash box with several low value projects and no annual income. A team headed up by Phillip Coulson, currently a Director, noticed the cash box and bought shares over a period of time, so the price did not escalate quickly, until they had enough voting power to win positions on the Board and begin a process of pruning expenses, management, and directors. Nothing rushed, just one sensible step at a time. Like, let the office go and retreat to a post box in premises owned by the now major shareholders. Evan Cranston was behind Phillip Coulson and his team. Also, no consolidation because that would cost and reduce the amount of money in the kitty. Annual meetings were held in a phone box for a couple of years. Directors fees were not extravagant. They seemed to have other irons in the fire and were not depending on VML to buy the groceries. All of that was a plus for me. I did not sense that they were keen to boot the shareholders out in order to have complete control. That was noted.
The team went looking for a suitable project, considered many, got into discussions on a few, and ended up liking what they saw at Cheetah.
VML's cash was attractive to Cheetah, the project was attractive to VML, and the dilution to existing shareholders was acceptable, if as a shareholder, you put sufficient value on the rare earths story. New shares in VML were granted to the owners of Cheetah, in exchange for its projects, and the Board was given a period to settle down, before further rationalisations were carried out and new directors appointed. There are now fewer Board members than in the Watershed era. Coulson is on the Board, but there are no Directors from the Watershed days. VML's cash went into advancing the Canadian project. I would reject the accusation that the previous board treated it as a lifestyle, I believe they worked hard, but the Tungsten market was against them, as was investment strategy in Japan, by the time the Watershed project was ready to kick off.
James Henderson, the most recent Board appointment, appears to have been the main backer of the Lynas team, led by Geoff Atkins, when they identified the Nechalacho project, and gave them the support they needed to grab the once in a lifetime opportunity and develop Cheetah. From there, VML offered them a lot. There was synergy for both parties in the deal, take-over, merger, whatever descriptor you want to give it.
The really powerful thing for me has been their perception of how to develop a rare earths project with little capital, and how to keep it that way when cash starts coming in. Something that appealed to a down and out VML shareholder. They seem to have found Avalon at a moment when Avalon was focused on an impressive major major project, digging out and developing the huge reserve lying below the VML ore body, but did not have the market and cash required to take another step, at the time. Cheetah offered them a way forward. Nechalacho offered Cheetah a once in century strike, and fortunately for VML shareholders, it looks like the Board and management has the perception to grab the opportunity and make something really special of it, and the company.
Long term shareholders, from before the Niger expedition, like me, have been diluted by about 80 %, as a result of all this, but my holding is now worth more than it was back then, and it has good prospects of a wild ride ahead. The potential I see now is greater than anything I imagined with Watershed, so I am pretty relaxed at the moment.
Sadly, given the geographical location of the key players, VML is moving to Sydney which means I am going to miss those meetings in Perth. In all the above, the chance to attend meetings and observe the team performing, and ask them questions, was very reassuring. Also, it allowed me to leave my VML shares alone and sleep easy at night.
I believe all this can be confirmed if you read the ASX releases and Annual reports from, say,, 2016 onwards. I recommend it to you.
VML Price at posting:
2.6¢ Sentiment: Hold Disclosure: Held
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