This post is too long, too complicated, probably too boring but it's written so might as well send it. Only sat down after dinner to explain my attitude and shed some light on what's transpired. Don;t read it or don't chip me if you do, you were warned... GLTAH
If I came across too harsh this morning, it's because I despise misleading or unfathomable market releases and information asymmetry biased against retail that comes with it. Never held HAS personally, not bitter, just the principle. Looked into the Feb 2022 DFS Update release and simply knew it wasn't right. No way can the grade drop 15%, opex costs increase 13% yet expect the annual average EBITDA to jump by $112M (61%) ...all driven by a measly 9% rise in NdPr LOM price assumption.
Lower recoveries from more intensive beneficiation pre-hydromet, and possibly higher plant throughput, managed to keep annual average NdPr-Ox production roughly the same, but that only treads water at best. The 2022 math vs reported financials is so far out it's simply unbelievable. The obvious culprit was NdPr and TREO basket prices, because the grade, recovery, opex, capex and generally all other critical variables were as expected. As coincidence has it, I was working through Yangibana numbers in detail over the weekend to comp Mangaroon next door when toady's release dropped. The huge lift in TREO basket price assumptions in today's DFS update basically corrected the 2022 'mistake' by officially lifting revenue to the required levels.
The opex cost increase was no real surprise in this environment, though still hurts. It was the casual way in which product price assumptions were lifted to close the gaping hole that was a shocker. Really bullish RE investors will think higher prices are fair and makes Yangibana a winner. If those prices come to pass, it might have been better to jump on better opportunities earlier 2022, priced on more conservative price forecasts. Some holders might be asking themselves if today's clarity would have been nice to know last Feb when HAS was around $6, not now heading towards $3 (despite raising $110M at $4.40 September in what must be candidate for CR snafu of the year, hat tip Twiggy).
I'm not saying it's a buy or a sell today. Lost almost 50% value over the last 12 months and maybe smarter analysts or frontrunning the bad news have already priced in reality? Maybe it is just a coincidence. I'm only following this story as part of the RE market, and trying to explain how/why that 2022 DFS Update was released with the numbers they claimed. The following spreadsheet was built and populated for my own purposes only, it's rough, rounded, makes assumptions and no doubt has some minor errors. To my knowledge the maths is materially accurate and assumptions fair, as demonstrated by the ballpark agreement between spreadsheet and HAS released numbers around previous feasibility studies.
It's an easy way to see how Yangibana has progressed across many key DFS metrics since 2017 in one hit (if spreadsheets are your thing I suppose
). Nobody wants a detailed explanation (least of all me), so follow it through as you like. The yellow cells are formulas which can be matched against HAS reported figures, thus points of spreadsheet verification. 2017 DFS reported A$2,164M LOM revenue and $849M LOM opex, and $351M post-tax NPV for example, all pretty close (though my NPV is rough, based on annual averages and 2 year build/ramp). The 2022 DFS told us the 2019 Average Annual Opex was $183M, and the 2019 study said the LOM basket price assumption was US$39.9. I got payable US$31.1/kg TREO from the 2021 MRE etc. The formula 'basket prices' in green (back calculated from the NdPr price, NdPr quoted basket value %, and the proportion of NdPr vs TREO in the MREC) don't always match quoted figures, which that has to be expected given how many averages, rounding's and assumptions plugged in.
I'm only trying to get a handle on the critical trends and outcomes of these numerous iterations. The spreadsheet proved to me 2017 and 2019 financials all made sense with the costs and REO prices provided. The 2022 Update claimed Payable US$112 NdPr/kg LOM (for "over 90% of the MREC basket value) and is represented better imo by the 2021 MRE column that studies "Net Payable TREO/Kg of US$31.1" (very similar to the formula calc'n). The 2022 Update claims $4,376M Free Operating Cashflow, a 236% lift on the spreadsheet from 2019 from a US$9/kg NdPr but higher costs which is just crazy
.
So crazy (requiring US$161/kg NdPr on the spready to return Net US$49/kg) I assumed it was the biggest mistake yet, and goal seeked for a payable basket price that at least matched the closer to earth 2022 "$295M average annual EBITDA" (which is Payable US$45/kg TREO or $149/kg NdPr Equiv). At US$45/kg, the annual EBITDA equates to $295M as per HAS release, the LOM EBITDA is $4,400m (suspiciously like the Free Operating Cashflow), and the NPV is also in the ballpark (just like the 2017 and 2019 studies)... can you see where this is heading
I see mistakes in feasibility studies and releases all the time, because I fact check. Let's assume 'mistakes' are ignored and forgiven by the ASX, ASIc or whoever where they are made, picked up by someone and reported. Unless someone grizzles enough, the company probably doesn't even have to release a correction release. What if that massive Feb 2022 DFS improvement was due to just one unfortunate mistake? "Sorry Sir, someone placed the $45/kg TREO Gross Basket Price into the Net Payable Basket Price cell by mistake and we... ummm, unwittingly released the erroneously higher EBITDA, NPV, IRR figures (and,.. ummm, mistakenly reported LOM EBITDA as Free Operating Cashflow... sorry)" ... LOL, too funny, I'm just joking, it's surely just one big coincidence
. Otherwise, how the hell did LOM US$112/kg NdPr, just a 9% increase, create a 236% increase in LOM Free Operating Cashflow to $4,376M, which requires a NdPr close to $161/kg according to fairly simple maths?
The trend of increasing opex on decreasing grades (mitigated by beneficiation pre-hydro plant hopefully) is clear. Time will tell when it's built how close the capex and opex is to reality. Meanwhile the best leaver to pull and hit the desired 2.5:1 revenue:cost ratio lifting product price assumptions. Other RE developers playing the same game to some extent. I have no problem, so long as it is clear and accurate to all investors, especially retail. The spreadsheet says the 2023 DFS Update will hit around $1.4B post tax when they get around to releasing it, and the market might love it. REO prices might even go for a big run, the future is uncertain...
This post is for entertainment purposes only, is not investment advice, I take no responsibility for errors, omissions or opinions formed.
(20min delay)
