Good News & Bad News, page-5792

Who's afraid of a little debt?

POSCO have been sending out some optimistic messages. If they expect to have the Gwangyang 40ktpa LiOH Plant up and running "within '22", they'd better give PLS some forenotice.



As mentioned in the Mar20 Quarterly Report, Stage 2a could be up and running in 9 months once they get the nod. Full Stage 2 will take at least as long. If PLS starts now, they could be operating at full Stage 2 by the start of CY22.

POSCO had better give PLS the nod soon and sign off on the JV. The Mar20 Quarterly Report did say a decision was expected in Q3CY20, although of course its been dragging on now for a year.

Nice to have $A108m in the Bank but I expect at least a $30m cash outflow this quarter. Fortunately we're seeing the $A appreciating back to almost 70c, just when a principal repayment is about to fall due.

The Jan20 Quarterly Report showed debt of $A142.735m (exchange rate: 07006). The Mar20 Quarterly showed $A161m (exchange rate: 0.6175).

Net debt (~$A35m) isn't much to worry about. Compare our situation to AJM. I still expect them to survive ... limply. How do they finance expansion?

We need some $A60m for the POSCO JV and another $A50m to finance Stage 2a. It would come as no surprise to me, to see KB increase our debt. We need to rebuild inventory, maintain a healthy working capital buffer and finance the JV and Stage 2.