Doing some research for a letter, I have an inkling of what is...

Doing some research for a letter, I have an inkling of what is goin on here. The following will not be within the letter but in brief. Here are some thoughts I had along the way...

If you see this post as down ramping, then you are not considering that positives and negattives are a worthy discussion.


Frozen funds

The ATO’s ongoing review of LMG’sapplication for an R&D rebate claim, creates some angst for shareholders. Webelieve, given the immense budget overruns and LMG’s current tight financialposition, the reasons for LMG to arrive at its current financial position hasnot been adequately disclosed. A Tax rebate of $12.6M is not a trivia amount ofmoney.

The $12.6M has been budgeted forfinancing the demonstration plants final construction and operation.
Inaddition 'RnD Funding' will only provide the final $3M in project finance whenthe project is fully funded through to October 2024. There are significantholes in the budget moving forward. I believe shareholders have a reasonableconcern for the $15.6M of suspended funds and the lack of acceptableexplanation to the market.

$15M in funds frozen and also yet to be determined if it will be recieved.

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Overrun of budget

The capital raise where LatrobeMagnesium Completed a$4.2M Placement on the 24/05/23

“The surplus $3.5M will provide workingcapital to operate LMG’s demonstration plant.”

And

The capital raise where Latrobe Magnesium completed a $3.06M placement on the 21/12/23“The surplus $3.5M will provide working capital to operate LMG’s demonstration plant.”

And

The last capital raise on the 09/02/24 “The funds raised by this issue will be used to pay for an unforeseen cost overrun on the first stage of the demonstration plant of some $3M.”).

$10M Overrun covered by cap raises since May 2023

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Reconciliation


$15.6M - $10M = $5.6M

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Question 1:
Was it reported that LMG organised an early draw down of the last $10M of funding?

The $5.6M that was to be used for the GHD study, PFS Stage 2, 10,000tpa BFS, EIA, etc, was absobed by construction delays.

Question 2:
What was the cause of the absorption of $7 million in surplus from Credit Raises (Specifically assigned for operations of the demonstration plant) and now positions LMG so precariously?

Question 3:
Given the need for the last capital raise on the 09/02/24 (“The funds raised by this issue will be used to pay for an unforeseen cost overrun on the first stage of the demonstration plant of some $3M.”). Does not this in total exhibit a $10 million cost overrun sincefor the total budget to date?The 7 million previously raised and designated specifically for operation of the plant, had been absorbed prior to the delay/issue of the R&D rebate.

Question 4:
Why has LMG not been transparent regarding the ongoing significant cash burn of operational funds?

Question 5:
$5.6M is suspended within, so the GHD study, PFS, BFS, EIA, etc cannot proceed without the Tax rebate on R&D and the $3M of finance for the demonstration plant held by R&D until the project is fully funded through to October 2024. How do you propose to be fully funded by October 2014?

The LMG ATO R&D rebate is far more critical than I had first seen. (What a funny sentence)
We need to know why there is a delay and what LMG is doing about it! The information is price sensitive and according to the ASX rules and "LMG Continuous Disclosure Policy" ther is a great deal we do not know.

ASX Listing Rule 3.1
Listing Rule 3.1 requires that the Company must immediately notify ASX of any information the Company becomes aware of concerning itself that a reasonable person would expect to have a material effect on the price or value of the Company’s securities

LMG policy: 7 Role of the Board.
The Board is ultimately responsible for the Company’s compliance with its continuous disclosure obligations and this Policy. Its responsibilities include: monitoring and ensuring the Company’s ongoing compliance with its continuous disclosure obligations;

I believe the Board is non-compliant and these matters will be raised in a letter.

The budget for the Demonstration Plant should be revised to ~$50M and we deserve an explanation.

Regards

Ken