Ann: Strategy & Outlook Forum, page-51

Replying to:
Post #:52953452

Spot on @georgef1027

PLS down, while GXY and ORE up.

PLS use Macquarie Bank for Corporate Actions. With an array of projects requiring financing, it was no surprise to see MB pumping the share price close to the Quarterly ... and then increasing target price after POSCO revealed their intentions.

Financing?

So after the Quarterly, one where Question Time was dominated by questions from Big Banks like Citigroup and Bank of America, Citibank place a SELL on PLS. Corporate voodoo.

Was this because they got wind of PLS seeking debt/equity finance placement enquiries?MB wanted to increase the share price for CR, while Citi wants to get the lower pricing for its SophNoms.

Is that what is happening with our share price? Because we take over ALO for a bargain price and have the ball in our court for POSCO JV. Its like the market doesn't care. Yet GXY and ORE rise purely due to rising Lithium prices. I can understand their respective valuations are coming off a low base ... but so are our expansions.

We're on our way to becoming bigger than Greenbushes and the IGO share price must have the GBs total valuation upwards of A$14b now (ballpark guess, don't sue me).

We need A$50m to upgrade Plant 2. Maybe more, perhaps to expand production? I like what @Sjlasx said about using different Plants for processing different ore types.

We need A$50m+ for Plant 1 Stage 2a. Will take 9 months to complete and expand Plant 1 production by 100ktpa.

Sounds like the A$80m Conv Note (plus A$80m JV Loan) will go along way to financing the preliminary 21% of the POSCO JV. At least by the staged participation, we have some insurance over CapEx disasters (like Kwinana going 75% overbudget).

What if we do participate in another downstream venture, such as Europe? How do we finance that?

While we have A$112m Cash at Bank, we'll need to finance an ever increasing Inventory. We have 40kt now but we'll need a Quarters worth of production at any given time. Production of 600ktpa would require inventory levels of ~150kt. That would move A$50m from Cash at Bank to Inventories on the Balance Sheet.

MB predicted recently, their financial forecast for PLS, as follows:

Revenue
2021 - 166.5
2022 - 295.8
2023 - 456.2

EBITDA
2021 - 47.1
2022 - 151.7
2023 - 192.5

EBIT
2021 - 19.6
2022 - 124.3
2023 - 154.7

NPAT
2021 - 5.1
2022 - 115.2
2023 - 104.3

Gross Cashflow
2021 - 32.6
2022 - 142.7
2023 - 142.1

GCf of A$142.7m will contribute nicely to finance Plant 1 Stages 2b and 2c and also to financing the additional 9% of the POSCO JV. I'd imagine the POSCO JV being on an ever increasing expansion up to 2030 and we'd finance participation out of profits.. I could also imagine them buying us out at some stage in the future too.

I reckon we need at least a lazy A$100m or so over the coming year. Although, we have US$40m BNP floating finance (mentioned at the ALO takeover) and the back up undrawn US$15m. That's about A$75m. Although I'd reckon a more robust form of financing may be required.

Perhaps our share price is at the whim of the BEOT thinking we're looking at finance near term. The market hates uncertainty. The one thing that next weeks Strategy & Outlook session will achieve, is certainty.


IGO at A$7.60 now, really underlines the increasing market value of Greenbushes. Our own MC of A$3.4b will look very cheap soon.

The Pilbara producers have already proven they can rise to the occasion. MIN have now announced Wodgina is in production and that all its output will be directed to LiOH production. This will leave PLS to control the world Spodumene prices.