H-Rick, You are right that if they can produce Mg ingots in the lab they should be able to do it in a large scale plant. The key question is; Is it commercially viable? Whatever problem they are trying to solve with CSIRO at the demo plant, I hope the solution does not mean higher cost of production, thus reducing profitability.
Looks like the share price is headed for 4.1c so I might get in-line and try to pick up a few.
Something that bothers me when I look at the Prospectus, on page 8/9, Section 1.4:
Proposed use of funds
$
%
1
Capital costs of the Demonstration Plant for magnesium oxide production
8,700,000
48.33%
2
Capital costs of the Demonstration Plant for magnesium metal production and research and development
4,300,000
23.89%
3
Operating costs and corporate costs
1,900,000
10.56%
4
Estimated costs of the Placement and the Issue
1,500,000
8.33%
5
Working capital
1,600,000
8.89%
6
Total (maximum raising)
18,000,000
100%
They plan to spend almost half the funds, $8.7M to finish the demo plant for MgO production. Do we assume that the plant is not properly finished for MgO production ??
$4.3M to get to producing ingots with R&D help from probably CSIRO to improve the process - no surprises there.
$1.9M for operating costs of the demo plant as well as help pay the bills(wages, power, rates, offices, Directors remuneration etc).
In the end, left with $1.6M working capital which I assume will be used to progress stages 2 and 3. That hardly seems enough even if we do save a few million out of the tax rebate after paying off remainder of the loan. We really do need the demo plant to be covering its own costs.
I sure hope that they have a built-in contingency for items 1 and 2 above!
LMG Price at posting:
4.3¢ Sentiment: Hold Disclosure: Held
