Lots of positive news articles, page-16

Spec stocks like SRL will always have their risks. None of us has a crystal ball, so we have to make investment decisions on the basis of the information at hand. With hindsight, we can all see that the smart move would have been to sell in the enthusiasm of late 2017.

There are risks with buying a spec stock like SRL, but we can definitely see that the risks in 2022 are significantly lower than the risks in, say, 2019. For a start, we already own the autoclaves - key long leadtime equipment. We have a completed Bankable Feasibility Study and a completed Project Execution Plan (now up to Modification 7). We have restructured the company by spinning off the water business. We have all the permits and approvals in place. We have the support of the local Indigenous community. We have the heavy haul route planned. We have agreements in place for offtake of renewable power. We have a water pipeline in planning. We have a limestone resource identified. We have the support of the local, state and federal governments. We have offtake agreements with a handful of companies for scandium and we have the entire nickel - cobalt resource available for an industrial partner. We have Major Project Status, which will accelerate key activities during the EPCM phase. We have $400m in non-recourse debt from Export Finance Australia. We have a consortium of banks working on securing 50% of capex. We have more than $25m cash in the bank, which means there is no need to raise capital ahead of a final financing decision. These are the things that SRL has done to de-risk the project.

You could say that the macro environment has been negative for investing in mining and that would be a fair comment. But, it seems the macro environment has improved substantially in the last year or two. The price of nickel and cobalt has improved substantially, while stocks have fallen. The US has broadened the definition of 'domestic' to include Australia with the express purpose of enabling the Dept of Defense to directly fund Australian mines. OEMs have announced plans to build an enormous number of gigafactories which will need a lot of nickel and cobalt. Our own chairman launched a SPAC for a next-gen battery startup (SES AI) that attracted significant investment from Hyundai, Honda, GM and Geely. He even told SRL shareholders at our last AGM that SES and Sunrise "fit like hand in glove". These things have significantly derisked the project; however, this has to be balanced against risks from inflation and rising interest rates (i.e., rising capex and cost of debt). Broadly, though, the macro environment is more positive for the Sunrise project than it was, say, two years ago.

If you wanted, you could also pay attention to the recent claim by our CEO that shareholders' patience will be rewarded. Sam is known to be very conservative with his claims, but, you might choose to ignore claims like this.

Whatever your personal level of risk is, you've got to admit that the Sunrise project is substantially derisked now compared to two years ago. But, of course, there is still some risk. When finance is finalised, the risk profile for the project will be a lot lower than it is now. But then, the share price will also be higher. Personally, I manage my risk by limiting my exposure to spec stocks like SRL.

Ultimately, it's up to you how you allocate your investment dollars.