Hi usc,
My take on this cash situation is that the company is seeking to preserve and restrict cash use for development activities at SDV, and to a much lesser extent, JB.
The aim, afaict, is for Mt Cattlin to be pretty much self-sufficient in 2020, and that is why we are co-processing stockpiled low-grade ore and leaning on product inventories. This is to get us through this tough period, where producing “as normal” would drain net cash due to the current low prices. The company has stated on several occasions iirc that they see this as a short-term issue and that this low pricing environment is simply not sustainable.
We are indeed investing our cash in SDV, and we should all be expecting cash to reduce significantly over the next couple of years. That is just how it works, and we are no different in that regard to anyone else.
The company seems confident that the stage 1 operation is affordable with current cash and credit facilities. Iirc we have access to $40m credit.
Earlier indications from GXY, supported btw by the published cost expectations of other companies, suggest that a circa 10ktpa BG operation might cost around $120-140m.
Considering that, and knowing that we have revised our flowsheet and our stage 1 is now simplified to produce primary-grade product, imo it makes sense that we should indeed be able to self-fund the cost of S1. My guess is $100-110 million....? Just a guess btw.
Imo it seems that spod prices will be on the rise soon, and I think that Mt Cattlin will be making money again next year, without leaning on inventory.
That will add significantly (again) to our bottom line, and assist with SDV development. Remember that every $100/t margin equates to about $20m per year. Even $20m next year and say $40m in 2022, would be a significant boost to our cash balance. History shows that prices can rise fast and hard. We’ll see, but I think these numbers are conservative.
The bottom line is - developing a new mine/operation costs money, and lots of it.
Imo it makes sense to lock in and progress towards a “complete” stage that allows revenue generation, in the absence of sufficient funds (i.e. a suitable finding arrangement) to move straight to a larger BG operation. Not ideal, but as they say, you p with the d you’ve got!
FWIW I also do think that once the sector really heats up again, a good JV/finding arrangement will come out of the woodwork and enable us to expedite S2 and beyond.
Just some thoughts.
Cheers
Imo
DYOR
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