Im seeing this common trend of comments from Lithium producers.
- Strong interest from existing and new customers……….."
Such strong interest that the spodumene price has fallen by ~40% in 12 months and continues to drop (according to James Brown Altura)!!! Such strong interest that while the new line of producers are struggling to hit nameplate on just phase 1, shipments are still slow to leave port. Are 5-10 converters all going to come online in 2019/20 to soak up the spodumene supply? A question worth asking one of these lithium CEO's I think, its not just PLS that are making these comments.
So what have we got here at PLS?
PLS current debt/commitments, please correct if mistaken;
$US100M initial Nordic bond - 12% interest
$US50m new bond expected (to be completed this Q similar terms to above)
$US25M off take pre payment facility from G. Wall - 0% interest
$US15M working capital facility from BNP, 12% interest (undrawn as of end 2018)
$US10M Hedging facility from BNP (cannot find any info on fees for this facility)
$A19.5M NAIF concessional loan
By end of this Q or soon after total of $US165m @ 12% interest.
Equal to $A230m, almost $30m p.a for interest only.
$35m to GW, I presume not payable until stage 2 starts producing.
Cant find any details of repayments/fees for NAIF/hedging loan?
All up approx $A285m debt to date or to be signed off soon.
From the last Q activities report and half year accounts it stated;
"The funding package is expected to include additional debt financing, with Pilbara Minerals’ preferred source being a proposed new US$50M (~A$70.9M) Nordic bond to be issued in accordance with the terms and conditions of the Company’s existing Nordic Bond (“Tap Issue”
.
Pilbara Minerals continues to assess a range of debt funding options in support of both the remaining funding for the Stage 2 development and the continued growth of the Company’s working capital and hedging positions.
Once completed, the final funding package, together with Pilbara Minerals’ existing cash reserves and future cash-flow from Stage 1 operations, should see the Stage 2 expansion being fully-funded."
The company had $70.2m cash at end of Q and $83.2m outgoings projected.
Add $35m from Great Wall and $50m from Ganfeng and $20m from BNP Paribas giving $175m.
If they can secure the other Nordic bond that gives $245m less $85m for outgoing this Q leave $160m.
Add in shipments which I haven't followed closely, quite low this Q if im not mistaken, maybe another $20-30m?
So leaves PLS $50m shy for (estimated) total amount while still in ramp up phase of stage 1.
With current financial position, if they can sort out sales/shipping rates/production, stage 2 should be able to be funded internally.
Moving on to downstream;
$US400M is guided as cost for conversion facility with Posco (very little downstream expertise).
PLS attributed 30%
So $US120M for PLS share.
Thats another approx $170m of debt.
In the initial announcement Posco are said to be providing approx $A80m convertible bond to PLS but likely this will be increased now that its a larger plant. Lets go with $100m.
That leaves ~$385m of debt (at some point this year), $50m cash needed for stage 2 completion and another ~$70m to fund rest of Posco downstream participation likely not needed until late next year imo.
If we assume costs get reduced to $US350 p/t by 2h19
They also hit nameplate and find a home for 160kt of spod at $650p/t.
$650 x 160 = $104m
$350 x 160 = $56m
Add some Ta sales, Leave approx $55m.
Take away $15m in loan repayments (excluding Posco/NAIF loan), leaves $40m best (ambitious) case profit in 2H19. That wont cover stage 2 requirements but stage 2 wont be finished until mid next year imo at best which will give them enough time to cover it fully.
Todays announcement claims another $230m for stage 3 which they claim to start in early 2020.
Downstream part 2 now also.
Plenty of carrot dangling going on here.
Maybe Ken should take a trip down memory debt lane?
Happy to be corrected if I made some errors.
All figures should be correct, unless followed by a ?
(20min delay)