Execution is everythingMoney is the keyThe above headlines in my...

Execution is everything

Money is the key

The above headlines in my view sum up where MNS sits today. At this juncture, they have removed the key impediment to making iM3NY operational with the certification box finally ticked. Next comes making it into a facility that can deliver to quantities that make it relevant. Hence, Execution + Money.

Short term it is all about Execution. They need to get iM3NY operational in a normalised manufacturing and sales sense – delivering product & collecting cash. I would expect we will hear more on this front in the next 2 to 4 weeks.

Critically, to make iM3NY relevant at scale (5GWh and beyond), they need Money. Need to raise both debt and equity within iM3NY.

The equity is supposedly to come via the HSBC process underway. We know that HSBC but an implied valuation of iM3NY “as is” at US$1.2bn – whether this is the pre-money figure that new equity is then raised remains to be seen. They apparently have 2 term sheets from interested co-investors. One would expect we hear more on this in the next 6 to 8 weeks.

Then we have the US$700m US Government loan application – again, I would expect that we will hear more on this front in a similar timeframe to the equity raise. I suspect that they will still need some additional loan funds (on top of the new investor equity and a US$700m loan) to take this to 5GWh, but that becomes much easier to arrange with these two pieces in place.

How that debt + equity piece for iM3NY gets put together will be telling for MNS on a couple of fronts:

1. It will give us a third party view on the value of the MNS equity into iM3NY. Let’s say that equity comes in at a pre-money valuation of US$900m for iM3NY – this equates to AU$1,300m for 100% of iM3NY or about AU$800m for the MNS 62% of iM3NY.

2. It may also release some cash for MNS, in two possible ways. Firstly the repayment of the additional bridging loans recently put into iM3NY by MNS (US$15.575m). Secondly, MNS may be able to extract some additional cash from the equity raise (maybe a partial sell-down of its equity – per the above, 10% = $80m) – conceivably MNS could end up with $100m flowing back which would be more valuable to MNS at the moment in funding AAM and Nachu.

The bigger prize for MNS at the moment is getting its two 100% owned enterprises off the ground – AAM and Nachu. Again, requiring focus on both Execution and Money. Time is ticking on these projects and unless they tick some serious boxes on both in the next 3 months, I can see things slip away very quickly. What I think we need to see between now and September is:

1. Money is sorted for AAM so that they can progress construction. I am assuming that they will tick the site location box in the next fortnight as is required under the current offtake contract.

2. Regulatory approvals progress is near to finalised for Nachu.

3. Funding for Nachu is much, much clearer (with maybe a 31/12 target date for close) – at the moment we have no visibility on this other than vague references to financing.

4. A clear pathway to commencement of mining operations at Nachu. Clarity on things like is MNS going to be the operator or will they contract to a third party; timeline to tenders for construction; timeline to tenders for supply of critical componentry and machinery, etc.

Execution is everything

Money is the key.