I decided I would include a disclaimer. The answers to these questions are written from memory and scribbled notes and should not be taken as fact. They are my interpretations of answers given to the best of my ability, but should in no way be used to make investment decisions. You should seek legal and professional services before investing in any stock. I am not liable for any financial decisions you make based on the information provided below and have done so in order to share with those unable to attend. ie. please don't try to sue me, I'm a nice guy
1. One of the members on HC talked to an industry professional regarding pellet plants and was given an estimated ball park figure of A$100 million for an 8mtpa pellet plant manufactured in China. Does this sound accurate to you?
They haven’t looked at plans for an 8mtpa pellet plant as a whole so could not provide a quote or whether this figure was at all accurate. Everything they seem to be doing is modular so I wouldn’t expect them to have an idea of a total cost for a plant such as this. The MoU also unlocks the potential of up to 8mtpa production, but this does not mean the whole amount will necessarily be produced into pellets.
2. How many skilled workers does NSL currently have as full time employees for operating its phase one plant?
The number of skilled worked currently working at the NSL site is increasing up to 150 or so in preparation for Phase Two. There is a lot going on, they have lots of contractors visiting for different site works.
3. How many skilled workers will be needed to run phase 2 when it is operating at full capacity?
Once Phase Two is commissioned, we can expect probably about 150 on going staff.
4. Does NSL own its own truck & loader fleet or are you relying on a third party?
I included this question although I already knew from a previous announcement (like 2 years ago) that they use a 3rd party contractor for these services.
5. Does NSL have to fork out money in regards to the loan with Magna even if it is not used?
NSL only needs to pay any costs associated for the part of the loan they use, there is no cost associated with not using the loan.
6. Do Magna still get 7% of all future gross production income from the Kurnool plant or is this dependent on whether you end up needing to use more of the existing loan facility?
The Magna agreement is dependent on whether the company use the loan facility to purchase and build the Phase Two plant at Kurnool. As this is not likely to be the case, there is probably not likely to be a royalty paid to Magna, since the company now has access to $3.2 million through the recent CR. However this royalty was included in the operating cost estimates provided recently in the case that it is used.
7. Are NSL currently waiting on land approvals in Bethamcherla and what are the long term intentions for this land?
The company currently have land approvals in place by the AP government parallel to the existing stockyard as outlined in previous announcements. This is about 25 acres of land and it allocation includes a road being diverted in order for the company to expand their future operations.
8. Do you have a 5-year time frame for your target of 8mtpa? Or is the time frame greater?
The company have no set deadline, but obviously based on the MoU with the gov of AP, they have a goal of producing 8mtpa through the 5-year MoU they signed. The gov of AP have been very helpful so far in enabling the company to expand their operations towards this goal.
9. What has happened to the Phase One plant? Is the plant running at quarter, half or full capacity?
As previously stated, BMM Ispat who are essentially the primary offtake partner for the Phase One output have still not restarted their Sponge Iron kilns since the price of Sponge Iron got too low towards the end of last year. From my personal research though, included in a previous post, it looks like this market is beginning to recover so hopefully this will enable Phase One to kick back into gear. This really was out of their control though and was just unlucky timing. The company have still been producing small amounts for different clients, but as we all know BMM Ispat were going to take up essentially all the capacity of Phase One.
10. How much has the Phase One plant produced so far?
This hasn’t been released to the market, so he couldn’t really tell me which is fair enough. It’s not a huge amount though, but is primarily due to BMM Ispat being shut down. There is nothing wrong with the product being produced as some were concerned. From my interpretation, Phase One ore is really just dependent on the Sponge Iron market as far as I can gather. They are in regular contact with BMM though.
11. Are you concerned at all that the Phase Two ore will be taken up just as slowly as the Phase One ore is?
Not at all. The demand for high grade ore as seen in recent articles regarding JSW is high. Both BMM Ispat and JSW are still producing high amounts of steel and are keen to get their hands on the Phase Two product.
12. Why did you feel it was necessary to issue 200 million free options to yourselves and other participants of the CR?
Cedric did a roadshow to different investors and parties in February and the feedback was essentially that people were keen to get involved. The company discussed their options a lot and had a choice between providing a discount to the share price, which at the time was trading around 0.8-0.9c, which would obviously drive the price lower, as people typically sell down to the issue price (as we are seeing now since it crept higher) or provide an option to go with the shares and issue them at market price. The benefit of the option is also that it allows the company to receive an additional $2 million at the end of the year if they are exercised.
13. Is there a reason these options weren't unlisted so that they couldn't be sold on the market, essentially giving away free money at the expense of holders?
I asked this question, then redacted the term “free money” as it was decided that people wouldn’t be able to find a buyer on market anyway and why would they give up their options when it enabled the option of purchasing shares at a lower price than the market price may be in December.
14. Is there a reason you chose not to perform a Share Purchase Plan so that shareholders outside of the Top 20 weren't excluded/disadvantaged?
The company heavily discussed this with their lawyers, corporate advisers and among themselves and it was deemed at that based on previously low uptake of share purchase plans over the past 12 months in Australia (which is usually just the Top 20 participating) and the associated cost, it was not worth pursuing this option and as we can see today, you can still purchase shares for the exact same price anyway.
15. What is the $3.2 million raised in the CR actually going to be used for? Was an over subscription really necessary?
This full amount will be used for Phase Two in one sense or another. There are a lot of costs beyond just the purchasing of the plant, including site works, contractors, staff, training (the company have very high OHS standards and have received several awards for this) and administration. The over subscription was entirely necessary to augment the Magna loan and essentially provide what I see as a cheaper funding method.
16. Are you planning on completing another consolidation after December if all of the options are exercised since you will have near 2 billion shares on issue?
The company haven’t even thought about it at this point and are focused on Phase Two.
17. When are you expecting NSL to finally make its first profit?
As released in a previous announcement, the company are anticipating to be cash flow positive in Q4 2016. They have a large amount of tax offsets accumulated over the previous 8+ years, so the company are in a good position once they are cash flow positive.
18. Has anyone who participated in the recent CR sold any of their shares on market since its announcement?
Out of the larger holders, none have sold on the market since participating as far as they have noticed. They don’t keep an eye on the smaller individuals though, so it is possible they have sold but he can’t provide a definitive answer.
19. What is the tax situation for the company once cash flow positive? Does our subsidiary allow us to avoid high tax rates applicable for foreign entities?
The tax situations for the company is actually pretty awesome. NSL Consolidated own a subsidiary in Singapore, who own NSL Mining in India. India and Singapore have a tax agreement and Australia and Singapore have a tax agreement, so we will only pay tax once and that will be the normal company tax in India, which is essentially the same as in Australia. Working with the AP government will also hopefully allow the company to get access to different tax rebates for different things. This is a great setup imo and as you can see in the financial reports, the company have about $8 million in losses they can still offset against future profits.
20. Are you at all concerned the wet season is going to impact commissioning of the plant?
I was previously laughed at on the forums for saying this, but it is a wet plant. This means that moisture should have no impact on the wet plant phase of the production. The only issue that the wet season may pose outside of mother nature being nasty is the ore going into the crusher being too muddy and clumpy. This however will hopefully not be an issue since the company have a lot of ore stockpiled which has already been crushed. Note the wet season is also not until the Aug-Sep period, so hopefully won’t impact things too much.
21. Has anything eventuated from the law suit over the coal tenements?
Nothing that hasn’t been released to the market. The company lawyer remains confident they have a good legal standing.
22. If needed can the dry plant be converted to a wet plant at a reasonable price if that is the type of product the buyers are chasing.
Essentially the dry plant is a part of the wet plant, so the answer is yes and no. The two plants together can still theoretically produce 400ktpa, however they work together to produce the Phase two ore. You can then assume that any future plants will have elements of both, if they are not just modules added on to the existing two phases.
23.What is the plan after phase 2 plant is running successfully later this year?
Obviously he couldn’t answer this one directly, but said the company obviously have big plans for the future, which is evident from their MoU with the gov of AP, their recent land approvals, the growing demand for high grade ore domestically, the land the company are expecting in the new industrial area and the recent AP26/AP27 royalty agreements. The company are planning to expand as soon as they are in the financial position to. The plants are modular from my understanding, so they may or may not just repeat the existing plants or go bigger, they were unable to disclose this to me. However, if you use your imagination and all the work they have been doing, you can get an idea they are heading in a good direction.
24. Is Phase 2 coming along well?
As stated in a market announcement, the first stage is expected to be shipped by the end of this month, the stage 2 to follow next month. Cedric is heading over to China in a weeks’ time to oversee things. Things are on track.
Hopefully you all find those answers satisfactory. As cashi said, I did leave full of confidence and appreciated the hour they allowed me to ask all of the questions. It's easy to be critical of people you never meet and only see a small part of what they do, but I am very confident NSL is on the right track and are making the right decisions given their options.
