@Franpower thanks for the link, a typically bullish report by the good doctor. Must be relieved as his clients, and us, the share price is finally leaving the station even if the train remains delayed. Some time to remove dusty skeletons of stale bulls and clear seats for some new passengers hopefully.
Reckon we all guessed by now that NAIF wasn't signed end of Feb as Franpower teased, but it seems word has filtered down to Bridge St that NAIF delays may be more substantial than we feared. I mentioned back in Feb that with an election due by May, surely NAIF will sign off before the government goes into potential government/minister change-over and public servants all consider the blue fluff in their naval wondering if changes at the top will have any impact. Seems not, which for SFX is both typical and shitfull in equal measure.
Finalisation of debt funding we believe is close. However, with NAIF’s involvement there could be a delay during the Federal election process. FID is therefore scheduled for mid-year, but Kimberley Mineral sands (KMS) is well cashed up and ready to continue with construction. Commissioningremains scheduled for late next year with first sales due in early 2024. A revised EPC agreement has been signed with constructors GRES which will be mobilising to site in April.
Bold my emphasis... change of government on the cards, new NAIF CEO to be appointed by new Minister no doubt, mid-year reads like FID next financial year, sigh. Thank goodness TB is now a simple HMC product project or first sales would be more like early 2025.
It is important to note that the combination of a lower capital requirement and the sale of non-core assets (which raised ca. $36m) appears to have removed a requirement for any further equity by SFX.
Bit early without NAIF to say what CR may be required. Don't like being the nit-picker, but that $36M of asset sales was on the books at $6M, which means Mr Taxman will be wanting his $15M in capital gains tax (CGT cannot be reduced by operating losses carried forward I believe?).
Our take on this is that the outcome is a significant positive for the project: • The sale of 100% of the mag con is now locked in, pretty well at a fixed price for the next 5 years, take or pay. The bankers will like this. • The process flowsheet is greatly simplified and what could have been a commissioning issue, the LTR, has been eliminated. Yansteel now takes on this risk at their Chinese plant. • Start-up risk is reduced.• Project capex has been reduced. • Power requirements for the LTR are eliminated, so costs will come down.
Project is now as technically de-risked as it possibly could be, with maximum risked rated returns owing to China's much lower operating costs than WA far north. YS is a natural partner, and project looks a big win for their pigment plans and vertical integration.
I get the STA vs SFX market cap rubber ban thingy fair enough, but find the determined comp of TB against Coburn a bit baffling to be honest. The similarities are highlighted but the substantial technical, development, risk and corporate differences glossed over or ignored. STA management have done a great job meeting timelines, getting funded, signing construction contracts before cost inflation took off, selling the project, getting analysts/funds on board etc. STA is obviously 12 months ahead of SFX with the benefit that 'first mover advantage' brings. SFX was miles ahead before it's management fell over and STA did a 'Stephen Bradbury... I apologise, we are all looking forward now.
Both projects have their own specific risks, I agree Coburns look very much around meeting aggressive throughput, recoveries and cost forecasts. TB has it's set which isn;t for this post to get into. "Time will tell" is the key line amongst the comps and doubts thrown around regards Coburn. Min sands is a competitive global market and both projects can succeed or fall over, by their own hand or others. The market will not price SFX on similar multiples as STA until the project is mostly built, maybe even commissioned and overlain by each other's idiosyncratic risks. Good luck to both projects...
Regards valuation, I'm not going to argue with the spreadsheet NPV guru lol. Bump up exploration value, muck around with other costs and product prices etc, but SFX is clearly undervalued by 'a lot' until time tells us where all the critical variables actually fall.
SFX Price at posting:
59.0¢ Sentiment: None Disclosure: Held
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