p.s. AustralianSuper at 25% & tying in the bond holders on the...

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Deme

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22/08/23

10:31

Post #: 69472480
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Originally posted by Deme: ↑

Agreed, mate re: big trouble, but it isn't terminal (yet).

They have real assets.

Debt financing imposes hard realities, but their cobalt inventory covers the remaining Mercuria facility. And worst-case scenario, they could sell their refining share of Kokkola to clear the Nordic bond. Extremely unlikely, but just pointing out that they have "smash glass in case of emergency" options.

If it ever came to that - they would be stuffed IMO. Kokkola is their only cash-generating asset online. They would be left with an unfinished cobalt mine on C&M & the Brazilian nickel refinery also offline & requiring capital (and time) to restart. And they would have zero cash coming in. Any capital raises - if they could manage them - would wipe us out even more than we have been thus far. Their capital management has been appalling.

Imagine you are an institutional investor assessing a potential investment here.

You would note the extreme capital destruction (95%) over the past 12 months & wonder why.

You would conclude:

1/ They are carrying debt.
2/ They aren't making any real money off their one cash-generating asset.
3/ The other two assets require capital, better cobalt prices & critically - help from strategic partners - both government & industry.
4/ They are woeful at capital management.

What would you do?

If you were convinced on the way forward - as articulated by management - you might be attracted by the risk/reward proposition, especially on a NAV basis.

The issue you would face here is a management team who have consistently made mistakes & more importantly - failed to keep their word. Without trust, it simply isn't worth the risk at an institutional level. Retail investors may think differently or not, but ultimately - institutional investors drive SP growth of operating entities. And they simply aren't interested right now.

If I am an institutional investor, I would be adopting a wait & see strategy. I'd give them till Xmas 2023 to deliver on their promises to do deals.

1/ USG funding deal, off-take at a premium, refinery funding, etc.
2/ SMP financing & partner involvement.
3/ Kokkola expansion funding via off-take.

If NY2024 rolls around & if they have failed to deliver on these - I'd be wanting to see a clean out of management & a restructuring of the Board. I'd actually prefer to see that now (to be honest), but will give BC four more months to turn this around.

Every quarter - they are basically running down cash. They can sell assets like NY - but it isn't going to make any difference. They haven't proven that they can run a sustainable business - meaning consistently generating free cash flow.

Jimmy "Stevie Wonderboy" May is about to present at the NWR Communications (the media relations company they use to operate their social media accounts) Melbourne Resources Lunch. Jimmy couldn't sell tickets to mosquitoes for a nudist colony event - what hope does he have selling the Jervois story?

I think the company will survive (but only if others save them), but am not so sure on BC & Co.

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p.s. AustralianSuper at 25% & tying in the bond holders on the equity side during the last raise are their only saving graces. Be careful, though, in assuming that both would continue supporting the company ad infinitum. They may or may not.

JRV Price at posting: 4.9¢ Sentiment: Hold Disclosure: Held
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