This trading suspension and debt restructure negotiation pushed out to Jan was time to demonstrate enough improvement that brokers would tip in the required equity for new capital works imo, buy time and buffer creditors some more. Obviously been trying to sell Tanzanian projects, but any buyers if they exist are almost certainly waiting to pick it up from the receivers for free given creditors have no interest in maintaining them.
I thought everyone except VinceS2 knew solvency was balanced on a knife edge, seems not. Every month STA cannot demonstrate strong and permanent improvement in production is a month closer to creditors stopping the bleeding and/or wiping out shareholders. How bad are things financially? Start with $40M/Qtr op-costs, sustaining capex and corp, plus $5M interest payments. Revenue in for the 6 months to 31 Dec 2023 I calculate at ~$45M... so going backwards $45M every 6 months excluding Tanzania and extra capex beyond standard sustaining capex. They need to double production and start producing premium products to get cashflow positive...
As at 30th June STA had $71M of financial liabilities due over the next 12 months. Most of that is over and above the op-costs, sustaining capex and corp, which is running at ~$150M annually in a state with rampant inflation. Push out debt and interest repayments is a given because it ain;t happening this year, but who the hell is going to keep tipping in $20M per Qtr plus extra capex to keep the thing running? STA only had $27M cash end Sep Qtr because that $20 unused finance facility is held by NAIF for future Amy Nth mine expansion, it's not available. They will go into the new year with <$10M I reckon depending on how much airstrip, tailings capex etc is being spent, almost certainly in breach of debt covenant minimum. Companies with $16M invoices outstanding would be nervous and probably started demanding cash up front now...
No wonder negotiations over a recapitalisation are dragging. 6 months on from Luke's Noosa all is going well snow job, and STA may well be the quickest hero to zero bust in history of the ASX. Not from one single reason or risk, they simply managed to fk-up everything from pit to plant to product on a deposit of low trash, free flowing relatively coarse sands. The choice is more funds from an extremely risky CR to buy time though i can't see brokers touching it (ultra diluting STA <1c), creditors stump up to try and get operations cashflow positive giving Coburn a chance of repaying debt one day (ie STA = 0), or creditors decide that's good money after bad just cut their losses and close for good?
Not improving my mood with a hangover feels like it will outlast religion...
STA Price at posting:
9.5¢ Sentiment: None Disclosure: Held
(20min delay)