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Thesi

8,739 Posts.

2622

12/02/19

20:34

Post #: 37415405
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Originally posted by SeeTheWorld: ↑

I am also in the buy back camp. I see the following scenarios.

First I think the buyback should only be $50-$100mil max, and not necessarily fully deployed. When you look at current earnings, MC cash flow can continue to support exploration and further upgrades. The remaining POSCO dollars can support the construction of SDV in the earlier years and JB does not need much money short term as it is fairly clear overcoming the environmental hurdles is going to be a slowburn.

- Fundamentals if we go buy the opinions of the loyal HC community, is that GXY is very undervalued. What a great way of making each and every one of our shares worth more money. I see one of two things happening:
1. The shorts fight against the tide of the buyback and keep the price low. This would be a great outcome because it means the company is buying more of itself for ever increasingly low values. Holders win, by owning more of future profits with each share they hold.
2. The share price goes up, even if it is temporarily. Again the win in ownership of holders, but if it can be played right and our price goes high enough compared to our peers it would present such a great opportunity to undertake an all script TO of one of our tiny explorer peers, providing an even better future.

We don't need to spend all POSCO money today on any project. If we can buy cheap today and if there is no JV partner than we might need more cash in 2+ years. If my predictions are correct and in 2020 we really see the price take off then we could sell equity at say maybe around $6 (to some that would be conservative). So if GXY purchased $50mil shares today at $2 and then sold exactly the same equity in 2+ years at $6 that would give the company $150mil to play with to finish off construction. If that is not win win I don't know what is. When could you get that sort of money from leaving it the bank for 2+ years waiting for the point of time of needing to spend it? However, under that scenario an equity raising may not be needed if cashflow from MC increases to the point of providing the money needed. If there is a JV partner then this is all redundant.

If it is spent on a dividend then none of the value I talked about would be possible and then I would be pissed off at management. I am happy to start receiving dividends when all 3 mines are producing.

Of course my argument is based on the assumption that the EV explosion will start to get extremely tight from 2020, but if you read the message from every LIT company it appears to be on the cards and that is why I am invested in the sector.

Time will tell, but it would need to be a very strong argument to make me think differently about a buyback right now given all the data we currently assume/have.

They are just my thoughts for anyone interested.

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Agreed, and if you think about Sal De Vida being constructed on a modular system that requires offtakers to stump up cash prior it opens up more opportunities for the company to remove the cost to build from the equation.

Is a share buy back becoming the most logical solution?

Ive been considering the options going forward and one of them is ignoring the market and proceeding as planned.

Does proceeding as planned have any negative detriment to the business without focussing on the share price?

GXY Price at posting: $1.94 Sentiment: Buy Disclosure: Held
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