SHP Chart Only, page-361

Hi @HeliosUK

I have been doing my due diligence on both HFR and SHP and had a lengthy post to share here but I lost what I was typing a couple times and gave up...


plenty of positives on both. My only concern apart from the elevated fertilizer prices softening a little long term is how is SHP going to power this mine?

The "transformational" and "comprehensive" scoping study as it has been described has been delayed not once but 3 times.

-First saying it would be released in Q1, stated a couple weeks before Q1 starting.
-Then it was scheduled for May.
-Then a couple months ago it was said to be July.
-Now it's August.

He seems a little out of touch. How did he expect to deliver a scoping study Q1 knowing full well two very deep drill holes were needed to be completed and assailed as well as a resource upgrade needed first?

Can't help but feel he has disrespected shareholders with these timeframes and probably why the SP has suffered.

In a recent proactive interview (2months ago).

He states that the scoping study is complete in terms of Capex and Opex. Just waiting on those holes.

But then when asked about the energy crisis in Europe he says the scoping study is based mostly on green energy.

"I must admit, because it is only a scoping study, we haven't quite gone in detail on where that (green energy) is going to come from".

Even though it is a scoping study (-+50%)

I can't see how they can already have capex and opex numbers 2 months prior to not knowing how or where they will source power the mine from.

Another concern is why the CEO departed suddenly without any description as to why - or maybe I missed it.




I could have talked about how big the resource is or how much potash prices have increased etc but this is well known. So cutting to the point i just thought i'd touch on the negatives of the company as a way to offer a different perspective from an outsider looking in as im shopping for fertilizer stocks but happy to bide my time. It is in no way an intention to downramp the stock.

Btw i'm not invested in HFR but their market cap is less than 350m and advanced to the point where they have conducted early works. They have 490million Aud in funding albeit non binding and the terms of the loan are undisclosed - not good if high interest rates come out but will have significant upside if they are good terms.

They still require approvals to build the plant but have a mining concession in place.

The first mover advantage is a key factor for me in making the most of elevated prices, with China restricting exports as well as sanctions on Belarus and Russia.

Resource is much bigger for SHP as we know. The new appointment of Babette as well as the strong backing of the minister is stellar in terms of receiving permits and approvals in the future. I prefer Germany over Spain in terms of Jurisdiction. However, SHP have a long way to go in terms further studies, offtakes, financing, construction.

In terms of dilution, HFR currently also has 35% less shares on issue enabling more leverage to share price aporeciation with less risk of further dilution as the DFS is up-to-date (2021, financing advanced and construction beginning.

I also suspect it would take approximately 3 years to get to where HFR are at. Factor in 30% dilution and you get a share price of 50c. Not bad if all goes well and a 400% gain in 3 years.

Hypothetically, lets say we dilute HFR by 15% to secure working capital needs. At current prices that would net them over 50m.

Then if we give it a very conservative market cap of 2b Aud nearing production as it moves closer to NPV 2.74b aud. We could expect in say 2 years HFR could be trading at $4.78. A 415% gain and at NPV $6.45 a 600% gain. Obviously this hinges on them locking in finance and the time it takes do so. Construction going smoothly etc. But is very conservative as at current prices outlined in December it had a post tax NPV of 4b Aud which is unrealistic but provides a lot more upside.

In this scenario SHP hinges on pretty much no delays and as we have witnessed already 3 delays to a basic scoping study doesn't instill confidence. SHP should have a much bigger project and would receive a much higher market cap deoending how much of their gigantic resource is included in feasibility studies and mining plans. Worth noting only just over a 3rd of HFRs resource is in the DFS.

This was meant to be a very short post so I am sorry for rambling. All very rough figures so take it with a pinch of salt as anything can happen when it comes to our industry.

Look forward to seeing the scoping study.