WAK is a punt for me – a very big one for a bod in my circumstances. I have invested $117,301, and I am down $22,723, so my track record suggests I am not the person to ask where the SP may be 12 months hence. If I lose on my punt, my heirs would get less, but it would not affect my lifestyle, so my appetite for risk is high. I do not expect others to have a similar view.
To answer your question, I would take a low-conviction stab at a tad above 25c (the exercise price of options that expire on 25/11/2023. If the options are not going to be exercised, Management may raise more capital at between 15c and 20c to get things moving, or they may do nothing, and delay a Stage 3 expansion.
What makes WAK difficult to value is its newness as a business, and hence there is no history to help form an opinion. When we have a history at the 400,000 TPA of kaolin, that is when we mushrooms might be able to venture a possible SP based on known facts. That may be circa January 2024 (a year after I expect the plant to be running).
In 12 months time the SP would be what Management wants it to be. If Management wants the circa $40m that the 25c options would deliver to fund expansion to meet high demand, then the SP could be north of 25c by the option expiry date of 20/11/23. My reasoning is that if anybody knows what profits can be expected, it is Management, and all they have to do is release that knowledge to the market, coupled with a smidgen of inside buying. If Management were Machiavellian, and not wish to dilute their holding, they could say nothing, and hold the SP down to allow them to increase their share of the company via on-market buying, or via a CR.
The next set of options are limited to insiders at 35c, and they expire on 20/11/2025. By then the 400,000 TPA capacity would be installed, and had about a year to substantially build sales to that sort of level. Further, the rail connection date would be known with a high degree of certainty, and the dollar advantage of railing product from Wedin to Kwinana would be known. Management may be more enthused to hit the 35c by 20/11/2025 than 25c by 2023. Even then, a Machiavellian management may prefer to buy shares at lower than 35c in 2025 either on market, or via a give-away CR under conditions hostile to retail shareholders.
After 20/11/2025, Management may have an incentive to talk up the SP, so that if any large party wants to acquire WAK, they would have to pay a top dollar. If anything emerges in the HPA 5N game (99.999+ purity), WAK's Wickepin resource would become very attractive to the likes of Alcoa, (a local proxy for Alcan). The market for HPA 5N is not the issue – rather, it is the economics of the process of producing HPA 5N from a kaolin resource, especially a resource that is cheaply beneficiated to WAK's 99% purity K99 product. Alcoa would have the technical and financial ability to exploit the Wickepin ore body, and obtaining the IP in K99 may be an attractive front-end step to the total process. An acquisition could be that “inestimable positive” that I call a Golden Goose event.
A Golden Gosling event would be to get into paper-grade kaolin using K99 as feedstock. The latter is not a good-versus-nil event, because if WAK makes very good profits from cheap-to-produce K99, there may well be a good financial reason to jettison the paper-grade dream that Management has cherished for a decade. A JV with Stanco to shift that step (make the kaolin less viscous) to Asia may be a better option, and not unlikely, IMO.
WAK is too illiquid to recommend, and too tightly held too. A great deal depends on the ethics attitude of the major holders, rather than the viability of the business.
WAK Price at posting:
15.0¢ Sentiment: Buy Disclosure: Held
