Interesting comments. I wonder if you could comment on my response below:
1.The 12,500 kilos is not their only way to create revenue. They've already creating revenue without the Mildura site producing anything
2. The announcement, and previous announcements have suggested other ways to grow domestic sales and export market sales
3. I feel like I’m missing something really obvious here so please help me out. Where did you get $7.9m from?In earlier reports they said that 70000 kg would generate approx. $220-280m in revenue. If we take 17% (12000/70000) of $220m we get $37.4m.
If they sold 12,500 for a $7.9m profit then that would be $632 profit per kg. Seems off to me
Now if I’m looking at the latest report the expected sales price for a gram of DFE is $7-$7.9 and the associated cost is $3.75-$4.25. Let’s assume the highest cost and the lowest selling price and say they produce 12,000kg to be conservative.
Total produced(grams)
12,000,000
1 Cost per gram
$4.25
2 Total cost
$51,000,000
3 Revenue per gram
$7.00
4 Total revenue
$84,000,000
5 Gross profit
$33,000,000
I must be missing something here, right? Have I forgotten basic maths or something?
The report that gives the $7-$7.9 figure also states that they're exploring value added products such as resins with IDT (see announcement earlier this month), so I think the actual revenue would depend on how the 12,500kgs is used. If it's created into a resin or just sold as the flowers in a bottle - price will vary.
4. You also seem to be confusing operational profit against return on capex. Not many companies expect to get a 100% return on capex as soon as their asset has been built. That never happens.
If they can remain close to operationally profitable in the next year then it's a fairly positive sign. The main cash burn has been through investing activities - not operational. They're trying to address this by scaling down the work going into the Mildura site and aiming to time the increase in production with global demand. We have recently seen similar measures take place across lithium miners as global supply outstripped demand last year. It's not a unique thing for cannabis industry. Also happened with iron ore industry in the past. If they can weather the storm and survive they'll be in a strong position long term.
IMO
