Rough call for Bryce but his performance was certainly more...

Rough call for Bryce but his performance was certainly more realistic compared to the bullish/arrogant commentary that I heard in past versions. That was the call I feel he needed to give at least one, maybe two quarters ago. How could a punter like me see what was coming but they with their inside market knowledge kept pushing ahead as if things were going to miraculously improve?

No denying it’s been a huge fall from grace, all this talk about three operating assets and now they’re down to trying to turn one around. But it’s the right move. Also a much-needed mea culpa on the legacy contracts at Kokkola. No institutions on the call, just a pissed-off bondholder and a retail investor (well done @RCammo), that’ll hurt some JRV management egos considering in the early days the whole pitch of the company was “creating a vehicle to allow institutional access to invest in the cobalt market”. Right now they’re nowhere to be seen except Mercuria and AusSuper. But Mercuria are there and buying - that’s something. But Kokkola’s adjusted EBITDA (NB: anything ‘adjusted’ is frankly a dreadful metric) was still negative US$10M so it’s a bit early to celebrate positive cashflow. ICO costs have blown out 55%, that’s pretty incredible – but most of it outside their control so I won’t hang it around their neck. That’s the unfortunate reality of developing a remote mine at altitude in an inflationary environment with a tight labour market. They tried their best.

Lots of talk here on there being no capital raise but I think you need to take management comments with a pinch of salt and do the numbers (literally every single ASX company denies they need a capital raise). I took the “no equity raise” comments to be directly in relation to SMP. As pleased as I am to see SMP effectively go on ice along with ICO, they still have US$70M due to Mercuria (maturing 31 Dec 2024 but this might hopefully get deferred) and US$100M due 20 July 2026. The latter is still some time away but to be frank that’s still a fair chunk of cash and they have US$6.25M due twice a year until then in interest alone. That debt has to get serviced – Kokkola isn’t close to doing that at the moment. If the cobalt price falls any further they may be required by Mercuria to pay down more debt. I still feel the cash position is going to get tight: on an annual basis they have at least US$24.5M in costs as flagged in this quarterly: US$12.5M p/a for the bond interest payments, and approx. US$12.0M p/a for the ICO C&M costs. This is before considering any Mercuria annual debt costs (LIBOR +5%). Hopefully they can get a half-decent chunk of cash from selling Nico-Young?

Bryce has had to drink a cup of cold hard reality and the turnaround is underway, but I’m unclear if they’ll make it without tapping the market, if I’m honest. My personal sentiment changes to 'possibly worth some sort of punt here'.