Hey all, the reason I'm making a new thread is because the announcement thread has turned into a cesspit. Let's create a new one with informed, constructive discourse ([noun] written or spoken communication or debate; [verb] speak or write authoritatively about a topic.)
As soon as I saw there was an announcement after market, I knew it wouldn't be good news. Management have never released news aftermarket before. Reading the announcement the first time over made it sound very dire. To see that we aren't getting the off takes and legal action mentioned in the following sentence on first reading doesn't look good at all.
I'm going to write objectively as possible regarding this news and thereafter, members can debate the points I've raised or constructively criticise them. The reason I'm doing this is for me to personally digest the information objectively and allow others to help me in criticising my personal subjective views of the developments.
1) Legal Action: first of all, we aren't resolving to expensive litigation. Arbitration is explicitly referenced as the medium of conflict resolution within the contract. AM has quite a bit of experience in this area dealing with the Chinese in arbitration (see PDN). I'm not a contracts lawyer, but from the little bit of what I understand, the offtakes and placement deals were separate from each other and therefore the offtakes are binding even in the case of AGY withdrawing the placement.
2) Insider Trading: I've seen this more on Twitter with traders suggesting that the pump was to allow insiders to exit before this news was released. The announcement states that management were notified only hours before the release of news. Moreover, the volume traded over the past week would not permit someone with a large position such as Airguide, Proksa (not an insider anyway) or our directors to exit their positions (each holding in excess of 20m shares). The weight of evidence suggests that insider trading has not occurred (can't believe I even had to write that).
3) Placement Revision: It has been noted by me that a few SI/Institutional Investors have been allegedly offered a revision on the 22c placement, down to 18c. The continued prevalence of this rumour suggests to me that it is true. If this is the case, an extra ~15m shares will be issued to cover for the reduced price. This is still a significant improvement on issuing 200m shares at 8.5c. The fact that the 22c raise was heavily oversubscribed suggests that we will have the 18c raise fully subscribed (regardless of some SI's stating they will not take it up due to erosion of trust). The raise will contribute $15m in funds and the refunding of $750k will not effect AGY's immediate plans - no further CR will be required.
4) Off-take cancellation: It's very sad to see the off-takes go. They provided us a lot of legitimacy which has now been all but eroded in many non-holder's eyes. There could be a number of reasons why QQ have cancelled the off-takes deal. I'll list some of them below:
* Their DD showed that PA's LCE processing to be unreliable and not of a battery grade; therefore they cancelled the off-takes because they would receive an inferior product. (I have my own views on this one, but I'll remain objective).
* AM and ML have tweeted that there are other players at the table, while AGY still wanted QQ's custom as it gave us legitimacy in the marketplace, they may not have liked the idea of us seeing other players. [Come on, QQ, if you weren't cool with an open relationship, just tell us in the first place.] There's been talk about BYD and other big players, QQ probably weren't cool with us working with the competition. They sought out a different lithium (the name eludes me) producer before cancelling on AGY.
* QQ spit the dummy when we cancelled their offtakes because they wanted an equity placement and gave us a sweet off-take deal to progress the project they would have 20% equity in and receive the lithium from. Their sweet meal had a whole lot of salt tipped on it when AGY took away the placement.
Now, my brief opinion.
I personally think that QQ have spit the dummy since they gave the off-takes as part of an equity package to progress the Rincon project of which they had the rights to fund and get off-takes for. The lithium market has changed (as AM tweeted last night following the announcement). There's more opportunity for better deals. AGY is the team to make it happen. We have an advanced project with the potential for the sale of 2000T of battery grade LCE in 2018. In this climate, it won't be hard to find someone who wants 8000T-13000T more LCE in 2019/20. When they find such a suitor, AGY will maximise shareholder value, yet again.
This caught management off guard, but it wasn't entirely unexpected by them either. IMO we'll see Plan B (which is better than Plan A, btw) continue to be executed over the next month. The ride will be volatile, but I think this will result in an improvement in fundamentals - it seems AGY have outgrown QQ.
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