Third Time Lucky – Moving Forward

Hello all,

Here’s some clarification on what has apparently occurred at BGS from the rumours that I have heard. Don’t take anything I say as gospel, because I am unable to substantiate much of the information I am sharing, as I am hearing it second or third hand. I apologise in advance if anything I say in this post offends anyone, and if anyone feels that any of the rumours or my assumptions are incorrect, then by all means please correct them with substantiated information so that we have more to work on than hearsay. The new board will have to be diplomatic in their stance as they are formally representing the company and have longstanding careers & reputations in the industry and won’t want to burn too many bridges, but I am more than happy to call it how it is and share the rumours that investors are discussing off the forum.


Let me share a story with you all…


Birimian Limited: A Song of Lithium and Gold

Just to be clear, the RM’s from the initial board spill have not been actively involved in this intervention, however they fully support the changes that have occurred.

The majority of us took a step back after the second board was elected to let them do their thing. The board didn’t waste much time before making huge mistakes, consistently missing deadlines, and lying breaking promises. However, these were all forgiven as we gave them the benefit of the doubt, offered them excuses like “they are new to the company”, “they just need more time”, or politely offered alternative strategies/opinions that ended up falling on deaf ears. As time has gone on, I have become more and more vocal to the board directly and with my posting on HC expressing concerns towards the management of the company, yet nothing has changed.

I find it extremely disappointing and to be honest quite unbelievable that the second board were able to let things slip so poorly when they couldn’t have had an easier project to execute fall into their lap. A world class resource, low EV, cashed up, hot commodity in a disruptive market, customers falling over themselves to pen deals with us and they still managed to mess it all up despite their decades of collective experience. I don’t think a board installed deliberately to mess up the operations of BGS could have done as good of a job as this lot did.

I have been quite outspoken about my opinion of Greg being unsuitable for the role of CEO. It was always intended that Greg would be an “interim” CEO i.e. for a very short period of time while a suitable MD was sought, however this was never achieved, and why would it be, considering he was incentivised to remain employed at Birimian on very lucrative terms. I spoke to Greg on the phone within a couple of weeks of his appointment. It became clear almost immediately that he had very little understanding of the technical attributes of the project, and he lacked the ability to understand basic mining/engineering concepts that feed into developing an ideal development strategy for a project. I found him to be rude and contemptuous. A personal highlight of the conversation was when he condescendingly referred to the RM’s as “enthusiastic” shareholders. Almost every other investor I have spoken to who has had contact with Greg reports a similar experience. Greg wasn’t even able to get the titles on public announcements correct. Remember the time that he forgot to include the drilling results table in a drilling results announcement? How about the PFS1 fiasco. By signing off on that dogs breakfast, it was crystal clear at that point that he had absolutely no clue. Flip flopping in strategy between targeting Korea, Europe and China for sales was another indication that he was in over his head.

Gillian is supposedly a corporate governance guru – I don’t understand why she was still with the company up until this intervention. Her $2,000/day services were unnecessary beyond the corporate review. We gave her and the board much praise for conducting the review, but why? All works were conducted by other contractors, and at a very large cost to BGS. I’m sure the same outcome could have been achieved sooner and at much better rates if it was in the interests of the board for this to occur, but as they collectively owned negligible shares in the company, they were not incentivised to do so.

The plan was always to move Greg and Gill on once the “house was in in order” and an appropriate MD was found, so the fact that they are now gone is only a positive. No more poor board level decisions will be made and the company will now receive a direct saving of $3,500/day + GST + expenses. Day rates are intended for temporary contracts, not fulltime 18-month stints. I would be interested to know who was auditing their timesheets?

James came across as a very nice bloke with good values, is well credentialled, took a lot of credit for the Sunshine Gas merger and was recommended strongly by Michael Langford, hence why he was recommended for appointment for the RM’s.

However, it appears that early on in this story, he decided that he wasn’t completely dedicated to giving his full effort to turn BGS around and maximise value for the shareholders that he had committed to helping. Instead, he decided to quietly shift into the backseat of the BGS bus, and let Greg & Gillian take the wheel. They were only too happy to oblige and drive us all the way down to the mountain towards VA, decking out the interior of the bus with unnecessary expenses and picking up as many ex Paladin friends they could along the way to come along for the ride.

Luckily, the two institutional groups who have substantial holdings in BGS along with some large top 20 shareholders who must have been hearing the same rumours I have been hearing set up a road block to stop the BGS bus in its tracks.

Apparently, the word on the street with the brokers in Perth was that no one would raise capital with BGS if Greg was to remain charge. Makes sense now why they delayed the metallurgical test work. It sounds like whenever the company met with groups, they were put off by Greg, much like I was in my first interaction with him. Apparently, the only funding option that was offered were convertible notes… dire times when this is your only option to keep the company afloat.

This group of shareholders apparently wrote a formal letter to the board approximately 2 months ago. I haven’t actually seen the letter, but I believe the main points of contention were that the company was being managed poorly (refer to recent cash flow statement and share price performance over the past 9 months), no suitable MD had been found to replace Greg in 18 months, despite this being a key concern highlighted by shareholders, and proposals from companies including the one that rhymes with battle, were not presented to shareholders. It is my understanding that the letter gave the board a deadline to make progress on these major concerns by a certain date or further actions would be taken.

Consistent misinformation from James & Greg did not result in the effective management of shareholder expectations. I recall being told in mid-late 2017 that the board “expect to finalise a deal this side of Christmas”. Remember the BGS BS Bingo that DPR posted a little while back, I’m sure you would have heard many of these lines if you ever spoke with any of the second board:
https://hotcopper.com.au/threads/ex...4505295/page-57?post_id=36284129#.W__6z2gzZPY

Here’s a few zingers that I was verbally told repeatedly, that DPR forgot to include:

“Give us 1 month after the PFS and shareholders will be very happy”
“I think Greg is the right man for the job”
“Our market cap will soon eclipse AVZ’s”
“If only you knew what we know”
“I would be buying all shares on offer if I could” – I cannot wait for members of the second board to load up on market upon our reinstatement to official quotation

Very little in the way of marketing or promotion of the company was undertaken other than random photos taken in Mali, for example of Greg’s accommodations. Also, begrudgingly hiring Mark Hepburn to undertake this role and then besmirching him when discussing his appointment with a shareholder.

According to a consultant who works in China, BGS was viewed with confusion by Chinese groups as it appeared that the second board wanted to develop Goulamina completely on their own as they were knocking back any form of offtake or sale/partial sale proposals.

The BoD should have raised capital on the back of the “rumours” of a 95c takeover offer from “Prattle” which potentially catalysed the run late last year to 84c. I can only assume that the board were stonewalling to encourage a higher bid that never came. All the while, shareholders were urging the BoD to lock in a deal while sentiment was at its highest. Instead, the only strategy that came out of Greg’s mouth (which he now claims is what shareholders asked him to do) was to continue drilling so that we aren’t resource constrained. Comments that lithium stocks in general are down is an absolute cop-out and not holding the second board accountable for poor management practices. If capital was raised appropriately, and legitimate deals were put forward to shareholder vote, the story of BGS would have gone down a completely different tangent.

I never once saw any sign of passion, drive or aspiration from the directors, it appeared that they were content to continue to collect day rates to sign off on consultants to deliver the work. In my opinion, if we had switched on operators on the board, we could have achieved what we have today and more 12 months ago, with two thirds of our cash still in the bank.

The second board has been assisted/advised/warned/urged to move in certain directions for the past 18 months by shareholders of all types and size, yet things never changed. Action had to be taken to stop the haemorrhaging of the Birimian bank account. It’s just very disappointing that the second board resigned and walked away in this manner. This action validates a lot of the rumours going around. Now that we see their true colours, I am glad to be rid of all three of them

A lot of emotions are flying around right now, we are all hurting, but step back and relax. I know this appears to be a big shock, but you have to realise that this intervention is a hugely bullish event for the company. The company but was on its way to extremely dire circumstances before the intervention occurred, but now that the rot has now been cleared and the right people are being appointed to the board, the company will now be able to progress in strides.


Onwards & Upwards:

Enough dwelling on the past, let’s look at what we’ve got moving forward:

Brendan Borg is an outstanding operator, very intelligent and experienced in the industry. He will be an invaluable addition to the board. Furthermore, given that he holds ~7,000,000 shares, his interests are well and truly aligned with shareholders and he will be able to act as a form of watchdog over the board to prevent anything like what has transpired with the second board from happening again.

The board is looking to appoint a driven, well credentialed and experienced MD with legitimate runs on the board and who is willing to back himself in with on market purchases of shares

Enable the new MD to build a highly experienced team around him who share similar values

Funds will need to be raised in the near-term in a way that minimises dilution. Several strategies could be undertaken here i.e. higher strike price options, renounceable rights issues etc, but I assume the primary strategy will be to minimise the amount to be raised and negotiate the highest price possible.

Anand and the in-country team in Mali are in support of the new board and the work both in Mali and China continues unimpeded.

Re-establish ourselves as open for business to China. Luckily, we have the best man in the business, Anand Sheth to handle this for us. Listen to the podcast below for a couple of minutes from 15:45 where the MD of PLS.ax, Ken Brinsden and lithium consultant, Joe Lowry can’t say enough positives about Anand and his intimate knowledge of China: http://lithiumpodcast.com/podcast/e23-a-man-from-a-land-down-under/

Given the extremely low EV of BGS, it will only take 1 offtake agreement to cause the share price to rocket upwards.

ESIA has been submitted, so we should receive our environmental permits just before Christmas. Following that, we can submit our exploitation (mining) license application. Exploitation licenses are generally issued within 3 months in Mali, often times sooner.

BFS to be delivered which should definitively nail all potential cost reductions, and feature project specific optimisation parameters, to deliver the highest possible NPV & IRR. I am expecting a post-tax NPV₁₀ of ~A$1B for a 2Mtpa operation.

Pending our cash situation, i.e. how soon Anand can negotiate us some lucrative BOA’s with pre-payments, a number of additional activities could be undertaken to further increase value:

- Conducting a small wide spaced shallow reconnaissance exploration campaign to demonstrate the potential scale of the project compared to the current JORC resource and increase the current reserve/mining inventory

- Releasing an optimistic yet acceptable exploration target in accordance with JORC guidelines based upon current drilling, fieldwork, auger results, aeromagnetic survey etc. Something like 270 – 330Mt @ 1.3 – 1.7% Li2O wouldn’t be out of the question and would certainly stoke the interest of investors

- Locking up more of the tenements adjacent to the Goulamina Project

- Conducting a feasibility study on a secondary processing plant to produce lithium hydroxide

The fundamental story behind BGS remains intact and is extremely compelling. Goulamina is the best unmined and uncontracted lithium project in the world. The resource will ultimately end up in the 100's of Mt's, it is high grade, high quality with low deleterious elements, lowest cost of other unmined projects, and the numbers will only improve in the BFS. BGS also currently trades much cheaper on all metrics compared to all of the other lithium explorers & developers out there so provides incredible value.

- Extremely low EV
- Large, high grade & quality world class resource with significant exploration upside
- Lowest quartile OPEX & CAPEX
- Uncontracted large potential offtake

I look forward to our reinstatement to official quotation.