As mentioned a few weeks ago, I sent through a list of questions I had which I had hoped to have addressed in a broker briefing. Unfortunately, time constrained, this meant only question was asked and not one of the ones I had asked. Wasn't PSC's fault, it was a broker meeting with 4 other companies doing presentations and some independent party running it, selecting the questions.
The below questions asked are some that I genuinely wanted answers to. The others I already had answers to but wanted them asking publicly such that the responses can be heard.
The team took a little long to get back to me, but I was notified in advance that this would be the case. Apparently very busy. Noting usually I can get responses quickly, so I was actually happy to wait knowing the team was genuinely flat out working on more important things.
Irrespectively see below for responses to questions of mine below. Any sections underlined is additional context I am adding in now. With the question answer delineated by the Q) and A) respectively.
Please see below questions for consideration in broker briefing.
Q) With current cash at 8M AUD and relevant out-goings over the current and following quarter. Is PSC fully funded through to FID (final investment decision) that being where capital financing is secured.
A) For current cash and burn rate, best to refer to our recent quarterly, now 4 weeks old. This illustrates we have sufficient working capital deep into 2022. Costs are linked to activities, so our announced and planned activities will mean costs will vary m v m.
My comments now; The way I interpret this response is they are funded into 2022. Additionally the last quarterly which is what projects the next month had some expenses in there which would be present moving forward so I personally think they are looking for FID end of the year which will mean no vanilla CR required. If they do raise i hope that it's for the full portion of the equity component of capital finance.
Q) Our current offtakes for petalite with sibelco and sinomine are 212ktpa which exceed our annual throughput. How is this proposed to be balanced in production?
A) Both offtake agreements hold flexibility for PSC. As an example, Sinomine’s offtake is based on lithia units, so we have the flexibility to deliver varying volumes of both petalite & spodumene depending on what we want to achieve.
Thought this was actually interesting. Means they can be marketing on a variety of fronts for further offtake now and in the future.
Q) Are we still in talks with uranium one regarding offtake and funding.
A) Yes.
Short and sharp. I had mentioned previously that the MOU was simply not extended as it had exclusivity clauses. PSC wanted optionality. Put your offer down U1
Q) Are PSC looking to acquire more land/projects in the near or medium term.
A) Yes. We have identified various opportunities and are building an opportunity pipeline, for which we can pursue at a later stage. They vary from grass roots exploration to more developed opportunities. We expect to look closer at these opportunities and more once we have progressed Arcadia.
Always good to see some other stuff in the pipeline. My mind draws to some REO opportunities given the recent relative success of the recon program but potentially some additionally lithium/petalite prospect in the area make more sense for the skillsets and outcomes already achieved at arcadia.
Q) What follow up work is being planned on the chishanya REO project and are there other prospective REO in the area.
A) There a number of carbonatites in Zimbabwe. In our opportunity list, there are some REO projects although the focus is still lithium.
Pretty much affirms my comments in point 4
Q) Do we expect there to be a change in the ore reserves as part of the optimised feasibility study? If there are economic improvement more resources could be converted to reserve and extend LoM.
A) Cant comment at this point but information will flow within the quarter.
Worth a shot! But understand why they couldn't comment. I was hoping to get something along the lines of. As pricing has increased we are optimistic of an increase of LoM. But what was said was fine,
Q) How many years does the SEZ apply for?
A) SEZ is for an initial 10 year period, for which we can request to have extended thereafter.
I thought it was 5years for some reason but 10 is excellent. very very robust project in the important initial phases. Ultimately I want the zim community and country to benefit through the tax and royalty but you need to get these projects built to generate any of that so the SEZ makes sense.
Q) What is the nameplate capacity of the pilot plant and how much of that are we expecting to generate revenues for?
A) Plant is circa 5 tonne per hour but as it’s a pilot plant it isn’t operating at full utilisation. No comment on revenues although wont be material to our overall position.
I put some of my own calculations as to what this could mean theoretically. But even 5tph x 24 x 365. Then take 50% util 80% avail = 17ktpa. Noting this is the front end feed capacity. 4% petalite needs just under 4tonnes of product to produce 1t out the back end, Which is 4000tpa at say 700usd/t talking 3M USD revenues. Again this is totally theory based. If it's not running 24hrs a day 365 a year with util 50% then this is fiction. secondly it costs something to run. So i think take the comments that we won't get anything hugely commercial from it running in terms of profit. I think if we make any money it's a result or even free. Considering previously it would cost us to produce a 200T sample. now we can produce it and get paid for it.
Q) What is the current pricing for SC6 spodumene and SC4 petalite?
A) Vary from week to week. Current spot in China for spodumene is US$1,175-1,300 depending on which reporting agency you reference. Petalite is more lucrative but we know these prices have also risen in line with the overall market.
Still think 750-775usd/t is a responsible LoM pricing mechanism, but suppose the upside case is if we're economical at $750usd/t we're printing money at $1000 plus,
Q) What is (in managements opinion) the key enabler to unlock institutional/professional investment in PSC.
A) There is never an exact science to this. We are not blind to the fact that Zimbabwe is not as well known compared to Australia.
Our focus is to de-risk the Company’s overall position in Technical, Marketing, Funding and Operations to demonstrate
1. Management’s capabilities to deliver,
2. De-bunk the myth vs reality of Zimbabwe and
3. Petalite is a significant opportunity and not a burden.
We are building our relationships with brokers and analysts. Where you have credible names place their name/reputation behind the company, certain investors generally follow them. Canaccord is a good example of this but we are looking to grow our institutional broker support with a number of channels.
Q) What is the current timeline for construction and production?
A) 18 months to first production from financial completion. This has been unchanged for some time.
Means mid 2023 is production target if FID before end of year. 18months is a quite reasonable construction timeline.
Q) What is PSC's biggest risk in the next 6 months and how do you intend to mitigate and manage this.
A) Every listed company has a baseline of risks (equity markets, commodity markets etc). We have an added a number of potential risks around pilot plant, OFS, financing where we are de-risking the overall risk weighting of the project, which I have raised in response to your question 10. The overall risk is that we are running multiple key priorities and need to ensure we can balance the priorities. We have brought in help to deliver on all three:
Lead operational metallurgist from Bikita to run the pilot plant (huge learnings of DMS and production of technical grade petalite)
Lycopodium authoring the OFS studies
Axure/Vermillion now appointed as financial advisers
Hope the above provides current and prospective shareholders some additional context to base their investments on. Anything else not listed in the above had probably been discussed at length at some capacity or explicitly exists in the form of an announcement.
Recommend reaching out to the team if you have any other questions or seek clarification on the above.
I'm very happy with my investment.
(20min delay)