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0.8¢ andromeda metals limited

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unwarranted

140 Posts.

20

13/01/23

18:22

Post #: 65683288

Originally posted by SignOfTheTimes ↑

I mentioned that I was running some numbers on the starter plant, truth be told I have had little time and to cross reference so many things take time.

In order to come to some figures I’ve had to make assumptions; I appreciate it is bad form to be optimistic and better form to discount, but I’ve attempted to make the figures realistic. Some could be higher and some could be lower.

Running on DFS figures, problems arise due to sunk costs with the plant. A road is a road, you simply cannot save and build 1/3 of a road. 1/3 revenue cannot be paired with 1/3 costs.This means that our third throughput is often associated with 100% capital costs. ADN estimates this at 58M for the starter, and around 105M for Stage 1, just over half.

Another problem is that the majority of product is KCM90, and it has the least margin of all – couple this with sunk costs and the numbers do not look riveting.I ran the number for DFS stage 1, and it is a cash cow which will quickly provide the revenue for Phase 2 and beyond.

The goal is to get to DFS Stage 1. Fact!

Here in my opinion is the worst case scenario

Column 1 Column 2 Column 3 Column 4 Column 5 Column 6 Column 7 Column 8 Column 9

0 Starter Starter Starter Starter

1 $/T AISC $/T Income $ AISC $

2 Output DMT Min Max Target

3 IMCD HRM 5,000 10,000 7,500 1,100 205 11,000,000 2,050,000

4 Planton KCM 7,833 12,833 10,333 475 336 6,095,675 4,311,888

5 AMR KCM 9,000 14,333 11,666 475 336 6,808,175 4,815,888

6 PRM

7 ? CRM

8 ? ? 28,167 12,834 20,501 475 336 6,096,150 4,312,224

9 50,000 50,000 50,000 30,000,000 15,490,000

10

11

12 AISC Summaries

13 HRM KCM CRM PRM

14 Mining 33 36 32 32

15 Processing 106 90 104 115

16 General 20 24 17 17

17 Trucking 49 44 44

18 Transport 9 126 124 127

19 Royalties 31 5 17 20

20 Corporate 5 6 2 4

21 Sustaining Capital 1 4 4

22 AISC 205 336 344 363

23

24 Voodoo Calculations - could be better or worse

25 Shares on issue and Loan Details 3.65B assuming a 15% dilutive raise - hopefully not

26 Equity raised in CR/SPP 20M $ raised

27 Loan Details 28M Bank Funding

28 Grant/Gov Funding 10M Partnership/Gov/Grant

29 Rights Issue during SPP/CR A possibility to accelerate to full DFS1 - seriously needed

30

31 Loan 28,000,000

32 Interest Cost say 6% 1,680,000

33 Coorporate Cost - minimum exploration, no MEP costs 8,000,000

34

35 Profit 4,830,000

Here are some annotations

-> I have used DFS Pricing for revenue (BOAs are actually higher than this - but this is a pessimistic scenario)
-> DFS Shipping costs were close to the peak during Covid, in fact they have dropped around 72%, I'm a pessimist
-> HRM is a game changer, I am making the assumption that they will supply somewhere between the target and maximum output (I probably should have made this 50% between the 2)
-> Coorporate costs I believe reasonable, as there will be money left over (which could go towards plant, MEP costs were several million, and they can take the foot of Eyre Peninsula if need be). I think this is reasonable
-> This assumes a horrible CR/SPP at 0.05c. I doubt very much this will happen.
-> I've included a Grant for 10M. This could also be Gov Loan, Prepayment, it doesn't matter. Increase the loan if you wish
-> As I assume ADN will max HRM, the rest is KRM. I have therefore used the max red column, and added a new KRM line (for new BOA)

The above is not fantastic, but it has taken time for me to understand why this path has been taken.

The reason for the Starter Plant
Current BOA have not been forthcoming, we are aware they in the pipeline. Anyone who runs a business will also understand that these BOAs are sometimes difficult to achieve without face to face contact, a brand name, and with no guarantee of delivery. Problem Solved.

Starter Plant 101
1) Start with a lower MC, to open the door for better funding options for DFS Stage 1. Nope, the starter plant will NOT be significant enough to fund DFS Stage 1 - but it may contribute
2) Time to establish the Andromeda Brand and reputation. James mentioned at the AGM that this industry replies on brand and reputation. Once you have this, it becomes much easier.
3) It puts the negotiating power into OUR hands. 'We know you need offtakes - we will offer this' is now off the table
4) Meets all running costs of the business wiht a little spare
5) Allow commercial more serious tonnnage of product to be shipped around the world for future offtakes and research etc
6) Along with reason 5, BOAs, and the world opening up, we will be able to secure sufficient BOA's on great terms. Wait, where did James go? To achieve this goal

With this now in mind, I can live with the above, knowing it is a stepping stone for a limited time. I suspect that once enougth BOA's are signed up for DFS 1, Andromeda will upscale this Starter Plant and move at Godspeed to DFS Cash Cow Stage 1.

This is why the starter exists.....
--------------------------------------------------------------------

The figures above I believe are pesimistic - below the same spreadsheet, but with figures I think are closer to the mark.

Shipping Rates reduced acording to freight index
KCM a modest $25 increase (above DFS)
HRM a modest $25 increase (we know it between $1000 and $1500). My pessimistic case probably should have used $1000
Share Price at 10c, and only at 10% raise

Best Guess at figures to the Starter Plant

Column 1 Column 2 Column 3 Column 4 Column 5 Column 6 Column 7 Column 8 Column 9

0 Starter Starter Starter Starter

1 $/T AISC $/T Income $ AISC $

2 Output DMT Min Max Target

3 IMCD HRM 5,000 10,000 7,500 1,125 199 11,250,000 1,994,200

4 Planton KCM 7,833 12,833 10,333 500 258 6,416,500 3,309,374

5 AMR KCM 9,000 14,333 11,666 500 258 7,166,500 3,696,194

6 PRM

7 ? CRM

8 ? ? 28,167 12,834 20,501 500 258 6,417,000 3,309,632

9 50,000 50,000 50,000 31,250,000 12,309,400

10

11

12 AISC Summaries

13 HRM KCM CRM PRM

14 Mining 33 36 32 32

15 Processing 106 90 104 115

16 General 20 24 17 17

17 Trucking 49 44 44

18 Transport 3.42 47.88 47.12 48.26 Freight index to China at 3250 at DFS now at 1255 a 71% drop

19 Royalties 31 5 17 20

20 Corporate 5 6 2 4

21 Sustaining Capital 1 4 4

22 AISC 199.42 257.88 267.12 284.26

23

24 Voodoo Calculations - could be better or worse

25 Shares on issue and Loan Details 3.19B Assuming a 10% dilutive raise at 10c

26 Equity raised in CR/SPP 29M $ raised

27 Debt Facility 20M

28 Grant/Gov Funding 10M Partnership/Gov/Grant

29 Rights Issue during SPP/CR A possibility to accelerate to full DFS1 - seriously needed

30

31 Loan 20,000,000

32 Interest Cost say 6% 1,200,000

33 Coorporate Cost - not including exploration 8,000,000

34

35 Profit 9,740,600

This is much more attractive and IMHO I think we will be looking at something like this.

Now......... I believe the starter plant is short lived, as soon as those BOAs exceed DFS 1, they will proceed to Stage 1, this possibly may mean the starter may live for 12 18 months only. I will be sending some comments to Andromeda, my feeling is that should a CR/SPP need to occur Id love to see a non renouncable rights issue - this in order to largely fund Stage 1 proportionally across all shareholders.

Below is the final spreadsheet including DFS Stage 1.

Column 1 Column 2 Column 3 Column 4 Column 5 Column 6 Column 7 Column 8 Column 9 Column 10 Column 11 Column 12 Column 13 Column 14

0 Starter Starter Starter Starter DFS 1 DFS 1 DFS 1 DFS 1 DFS 1

1 $/T AISC $/T Income $ AISC $ $/T AISC $/T Output Income $ AISC $

2 Output DMT Min Max Target 153,000

3 IMCD HRM 5,000 10,000 7,500 1,125 199 11,250,000 1,994,200 1,125 199 15,000 16,875,000 2,991,300

4 Planton KCM 7,833 12,833 10,333 500 258 6,416,500 3,309,374

5 AMR KCM 9,000 14,333 11,666 500 258 7,166,500 3,696,194

6 PRM

7 ? CRM 775 267 138,000 106,950,000 36,862,560

8 ? ? 28,167 12,834 20,501 500 258 6,417,000 3,309,632

9 50,000 50,000 50,000 31,250,000 12,309,400 123,825,000 39,853,860

10

11

12 AISC Summaries

13 HRM KCM CRM PRM

14 Mining 33 36 32 32

15 Processing 106 90 104 115

16 General 20 24 17 17

17 Trucking 49 44 44

18 Transport 3.42 47.88 47.12 48.26 Freight index to China at 3250 at DFS now at 1255 a 71% drop

19 Royalties 31 5 17 20

20 Corporate 5 6 2 4

21 Sustaining Capital 1 4 4

22 AISC 199.42 257.88 267.12 284.26

23

24 Voodoo Calculations - could be better or worse

25 Shares on issue and Loan Details 3.19B Assuming a 10% dilutive raise at 10c

26 Equity raised in CR/SPP 29M $ raised

27 Debt Facility 20M

28 Grant/Gov Funding 10M Partnership/Gov/Grant

29 Rights Issue during SPP/CR A possibility to accelerate to full DFS1 - seriously needed

30

31 Loan 20,000,000 70,000,000

32 Interest Cost say 6% 1,200,000 4,200,000

33 Coorporate Cost - not including exploration 8,000,000 10,000,000

34

35 Profit 9,740,600 69,771,140

Phase 1 is likely to include some remaining KRM, especially if Stage 1 is brought forward, so take a little CRM off if necessary. I also have added 50M bank funding, this of course could be grants, SPP, RIghts - too far in the future to consider this.

Finally, Andromeda is not a one trick pony.

I expect Andromeda will contribute to the Cobra JV - they can afford this, and we want this. Cobra is shaping up to be a significant SA project, with Gold, and an overburden of Rare Earths (how convenient is that? - your overburden is a payload). Cobra's tenements remains open and significant upgrades have been mentioned. Andromeda also has 2 Copper projects, one being sold, but, Copper is entering a bull run, and Andromeda is lucky to have a foot in this space.

Finally there are all these bla bla NNT opportunities, at their own time some of these will come through. CC is progressing and should this come off will be a company maker on its own. Secondly, our new CEO Bob, knows his way around HPA. Coincidence???? Doubt it.

To be confirmed, but should BOA exceed 50mt I believe the design of starter is semi flexible, so we may be looking at larger tonnage, perhaps 60? 70?. I will try to confirm this.

I need to say This is not investment advice, please do your own analysis, do your own research

Expand

Correction - a Renounceable Rights issue, possibly with a small volume attaching option.

To reward long suffering existing shareholders only, not some "accounts" that have been lined up by a broking firm ( No names) who promised that they would bring new cornerstone long-term shareholders.

Shareholders who have been around for a little while know exactly what I am talking about.

SOTT a non-renounceable rights issue means many shareholders may have no value available for the dilution of their shareholding, it may be captured by outsiders - who have never supported ADN. Introduced by "brokers" who have never supported ADN despite glib promises.

ADN Price at posting: 6.2¢ Sentiment: Buy Disclosure: Held

0 Great analysis

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