has chemeq got anything going for it?, page-5

Very good post Heremes. Let us analyse what the company said and look at the probability of them achieving it.

The current plant capacity is 200,000 litres per annum., yet from 1 July, the plant produced only 8,200 litres (7,360 shipped + 840 inventory). 200,000 litres pa = 8,200 litres from June, credibility problem?

If and when the plant is functioning at 100% capacity, the output is 360,000 litres per annum. We are no closer to knowing when or if the 100% is achievable. Allowing for the traditional long Christmas and New Year break, when the whole industry either shut down or operates on skeleton staff for the month of January, let us assume the 100% is achieved in February 2006. So in the 4 months from March to June 06, operation at 100% capacity will produce 120,000 litres. This will provide the 130,000 litres production CMQ targeted for the year but this does not take into account the risk of shutdowns or other activities that may or may not impinge upon production such as testings, auditing of the plant by regulatory authorities (?).

Let us analyse sales.
On 4 August 2005, Dr Graham Melrose said in his news letter “and we expect the South African $1.5M sales signed last year will be fulfilled in the second half of the year”. If true, this means $1.5M sales will be shipped to Inviro Animal Health Solutions in Jan 06 to June 06 (2nd half of the financial year).
On 23 September 2005, Inviro Animal Health Solutions signed a $1.4M sales contract thereby fulfilling the MHI’s covenant for a sale of a minimum of 40,000 litres of CMQ products for the 12 month period ending 30 June 2006.
All we hear now is the new $1.4M order will be shipped over the next 9 months – what happened to the $1.5M contract Dr Graham Melrose stated in August 05? In the absence of a credible explanation from the company, is it likely that the $1.5M contract was rehashed into the new $1.4M September contract to satisfy the bond covenants? Credibility issue?

Let us re-read what was previously posted by chankk on who Inviro is:
Inviro Animal Health Solutions, the great white knight incorporated that came to the party just-in-time for the 2004 capital raising.
Again the great white knight incorporated came to the party just-in-time to satisfy the 30 September 05 sale covenant dateline!

And what happened to that $1.5M order? The approved pilot plant capacity is 2TPA and if you believe Melrose words - that's $2M products! What was the sale receipt for FY ending June 05 - $41,000. And part of this $41K was to NZ and not to our friendly White Knight Incorporated!

Very convenient and odd when you consider:
16/7/2004 CMQ in trading halt pending announcement on the same day as Inviro Animal Health Solutions was incorporated in South Africa.
18/7/2004 CMQ announced “Access to SA Poultry Market”.
27/8/2004 CMQ announced $1.5M SA sale contract.
08/3/2005 CMQ announced the $1.5M contract was due for shipment before 30/6/05 but customer indicated willingness to accept late delivery.
20/4/2005 CMQ announced “Chemeq will now commence fulfilling its existing AU$1.5 million sales contract in South Africa”
04/8/2005 CMQ newsletter – ‘we expect that the $1.5M contract signed last year will be fulfilled in the second half of the year’.
23/9/2005 CMQ announced $1.4M sale contract and ‘orders for the FY now exceeds 2000 units’.

All the above are facts that can be verified.


Will CMQ run out of cash? Let us assume the best case for CMQ:
130,000 litres produced, sold and turned into sales receipt. We don’t know what the selling price is. For this best case scenario, we assume Dr Melrose was right when he said some time ago that it could sell for as much as $1M per tonne of API.
130,000 litres (1 unit 20 litres = 1.1kg API) is 7.15 T of API = $7.5M.

CMQ cash burnt rate in October was $3.1M with minimal amount of products output. Wouldn’t expenses increase to reflect the materials and labour increase when the plant is running at 100% capacity? How long will the best-case scenario sale receipts of $7.5M for the whole year last?

On slide 13 in the AGM, David Williams said “Now you will readily appreciate that to expand the capacity as we anticipate in order to meet the expected growth in demand, we will need to RAISE FUNDS to meet this capital requirements in 12 to 24 months time".

The above painted the BEST CASE scenario - CMQ achieved 100% name plate capacity and all products sold at $1M per ton of API.

Ask the following questions:
When will CMQ achieve 100% nameplate capacity?
Will CMQ receives $1.4M in sale receipts from Inviro by June 06?
Even if CMQ targeted 130,000 litres is achieved can CMQ sells the products? To whom?
Is the selling price $1M per tonne API or is it much less?