Ann: Successful SPP Closed Early, page-72

ok mate, I'll bite, I don't often do so, but I'll share what I think.

I subscribed to the maximum value of the SPP and did it the day it was advertised. I am convinced that the future of CXO is bright, and I did not want to miss out on the SPP by subscribing late. I already hold a large holding and did not want to see my voting rights diluted. I am what you would call an active investor - one that is involved in the company and one that believes that management should understand my opinions. They can take it or leave it, but they will at least understand where I am coming from. If they diverge too much, I will sell.

Now, to your question about when the best time to buy is. I bought in the SPP at 4.25c less the JMEI as I think that this is the best price that we will see for a while. I am factoring in what I hope to see in the shape of dramatic improvements in the updated DFS, and upward movement in the SP very soon. I firmly believe the market is in for a marked shake up when the government stimulus scales back and when the average Australian loses the ability to remove excess cash from their super. There has been a number of reports around recently that the number of retail holders in the market right now is roughly 4 times what it has been before COVID-19, fuelled by more people staying at home and the stimulus currently in the economy. This could be resulting in inflated share prices, being pushed up by people with more cash than usual, and not enough of an idea about how to value a company. All the recent progress in the share market is very interesting to me, as I have no idea how earnings are currently being valued if a significant amount of companies have reduced/removed dividends or at the very least removed their earnings guidance. I read an article the other day that stated that retail holders are the net buyers at the moment, and Institutional investors are the net sellers (they are selling more than retail are buying)....what does this tell us? perhaps that the smart money is offloading and the ill-informed money is buying? The key question is what happens when the retail funds run out - lets face it, it is a finite resource. It could be argued that an uninformed buyer is more likely to act on emotion (experienced holders should have learned how to trade void of emotion), and this could potentially result in panic selling.

Ok, so in my version of the potential impending doom and gloom, why did I participate in the SPP? I had a look back at the GFC and analised how resource stocks did. Given that that crisis was largely a liquidity crisis (and based on COVID likely pushing the market into one), resources stocks held up reasonably well. I took this perspective, and then considered the issue about not being able to predict company earnings.....this is where CXO has some strengths in my view. CXO did not need to withdraw guidance or suspend dividends as the company is not at a point where either of these matter. The general argument is that the market is forward looking, if this is true, then CXO is incredibly reliable compared to most other companies right now. It is easy to work out where our earnings will be when we hit production and there isn't much that is known now that can derail this - yes I recognise that our earnings potential is based on ability to hit name plate quantity/quality/cost as well as sale price, but this is better than the massive unknowns in the broader market IMO. Our earnings (based on our current DFS) is approximately AUD 160m per year (noting that some upgrades might occur very soon that could improve the longevity of this), this amount is reliable as of now, and this is more security than is widely available in the general market - I hope this will result in some stability in our SP. On top of all this, we are now funded (as a result of the CR) for this year at least, which should remove any need to access debt from out immediate future.

If the whole market tanks in Aug/Sep/Oct because of stimulus withdrawal/reporting season, I cannot guarantee that CXO won't get pulled down because of this and therefore there may be better buying opportunities, but I am encouraged by the last few days of trading. The whole market dropped and CXO was the only company that I follow that was green (I have become accustomed to it being the opposite) - this could provide some insight into what some form of surety provides to creating a stable SP...at least I hope it does. This could mean that our SP holds up and that you may not find better opportunities to buy. If the price drops dramatically again sub 3c, I will likely top up as it will likely be based on emotion and not calculated numbers.

So I guess to answer your question from purely my perspective - if you think that the market will drop later in the year and you believe that CXO could be wrapped up in this, then perhaps wait. If you align with my thoughts and think that should the market drop and CXO not get too consumed, then perhaps buy earlier. We are so cheap right now, that perhaps it doesn't matter? if you believe in the long term prospects of the lithium sector, then a cent or so now really won't matter much if the take up of EV's increases and carbonate prices start to climb.....you really can't lose if you subscribe to this view.

No financial advice here, just the ramblings of someone that reads some stuff from time to time and has formed some opinions. Good Luck in your decision making.