Good News & Bad News, page-5078

antonist
I'm not here to enlighten you, you should DYOR, read the company announcements from the past year. After doing so, most would conclude that free cashflow should be directed to expansion initiatives as opposed to paying down debt. Why?

While loan principle payments are due to commence in October 2022, and therefore P&I payments will be ~$52 mill pa for the subsequent 3 years, right now, they paying interest only of ~$7.5 mill. It's also likely the company will refinance before October next year, and may increase debt to help partly fund future growth initiatives.

However, the return derived from paying down debt right now would be 5%, whereas using their free cashflow to fund spod production expansion, while spod prices are at historical highs would yield a substantially higher return on investment. For example, spending free cashflow of ~$39 mill on improving, recommissioning and ramping up Ngungaju plant ( to 190kt) will likely deliver $220 mill EBITA over the coming 12 months, which after tax of say 25% would be $165 mill, enough to retire debt if they chose to do so.

In summary, which would you choose, using $150 mill of free cashflow over the coming 12 months to paydown debt and save $7.5 mill, or spend $39 mill of said free cashflow to generate $165 mill in free cashflow, it's a pretty easy one to answer.

Also, as at the end of September 2021, the company held $137 mill cash at bank, once again, balance sheet very lazy at present.

AIMO, not advice, DYOR...

Haveagoodone,

SF