Tomboys AGM Report

Tomboys AGM Report
I attended the MBN AGM today, took notes and met the CEO Maryse, CFO Milson, Directors Ross Griffiths & Dr Linda and asked public & private questions. I met with HC members Maffsmark & golfbravo.

I asked 2 questions and started by stating
"My name is tomboy from hot copper, I am one of the numerous shareholders who collectively have disclosed on hot copper that they own 52M shares or 5.5% of this company and they have asked me to ask you"...
- status of the offtake & shipping agreements (partnership development)
- update on the licence renewal and was that minor shutdown part of this process...

I detail the various information provided today, here is my report.

CEOs statement highlights
"Its all about making money"
"first time since October 2014 that the whole team is here from Brazil"
"recent shutdown was a minor routine maintenance of guard rails on the conveyor belts"
100% safety record and no injuries or stop time at all
Its "boring & cliche" to focus on operational efficiency, financial discipline & partnership development
"stable & safe" production
"stable & safe" financial performance

CEOs Financials comments at the AGM:
- MBN is "safe and stable" with growing production and lowering costs
- MBN is cashflow positive with rising free cashflow
- MBN is cashflow positive from operations
- MBN has "sufficient liquidity & free cashflow for all of 2015"
- we have financial discipline esp cash management & costs reduction,
- "numerous long list of cost cutting initiatives" inc retendering of contracts
- COP guidance stays at 4.50-5.00uslb
- production guidance stays at 16.500T - 18,000T for 2015
- 2015 production 30%-50% higher than 2014
- 2015 COP 30%-37% lower than 2014 (7.16 to 4.75uslb) - in report/slideshow
- verbally stated a 47% improvement on COP, being a "significant reduction"
- BRL drop of 12% has substantially offset the NP drop
- a deficit of Ni supply is coming
- the changes are sustainable, driven by process recovery & lower costs

Operational comments
-partnership development is focused on our buyers [offtake] & workers
- sales continue with our "offtake partners"
On my questions as to status of offtakes & shipping deals
- offtake negotiations are confidential
- our focus is on operation & production
- operational improvements are sustainable, more optimisation
- licence to operate approval is progressing normally, no huge gaps identified, temporary licences in effect
- MBN in full compliance with licence and saftey requirements, no casualty incidents at all
- the "plant shutdown" was a "routine inspection, minor maintenance of railing on conveyor belts, not caused by any incident" and was "fixed in a few days and stop work order lifted as inspectors satisfied with measures taken",

- "they inspected everything" and we fixed those items, by July they want some dust cleanup/machines
(seemed very insignificant by her words now), unrelated to licence renewal.
- remaining OHS issues are minor "dust" related and measures also taken for an even safer setup.
- the change has not happened by miracle but by hugely effective team & contractors doing right things


Private statements to Tomboy from CEO Maryse
I asked her about the offtake & shipping, I said i presume the chinese offtake is with Dongfeng as the COtinga Arrow docked next to its smelter, she replied
- how did you know about the Cotinga Arrow, the ships crew told me they didnt tell anyone and they have no communication access on the seas, how did you know where it went & docked
I replied several of our HC holders are experienced merchants who follow all recorded port arrivals/departures from port records in Ilheus Brazil to China so we know exactly when these are
- "Oh i see. the internet is very powerful"
- we appreciate your involvement
- we are working very hard on getting LT offtake contracts, but its confidential
- all of 2015 is committed, we are hopeful there is news soon"
I asked her "maybe you can do a deal like those of Vale in IO signed with the Chinese President who was just there?"
- she smirked and said we will try

Private statements to Tomboy from Perth based Director Griffiths
I asked whats the LT plan for the cash at bank & rising cashflow- dividends, buybacks, retiring CNs? he said:-
- "I am very conscious of returning cash to shareholders, Im a shareholder too you know"
- its all going in the right direction
- I want to see these things too [dividends, buybacks]
- im not worried about the ConNotes as we will be able to buy them out with cash before they exercise them (sounded like a plan), the cash will allow us to buy them before they exercise them
- I said to him we as shareholders want to see ROI, cash dividends, share buybacks, CNs retired
- I said to him "you will start seeing pressure from LTHs esp the NHs on these things just like Carl Icahn did at Apple Inc and resulting in a 3 fold SP rise. Investors want to see returns.
- he replied "yes, i want to see these things too esp SP rising"

ASX announced Presentation/Report News
- NP predictions altered from Dec 2015 from 7.43 to 7.07 but Dec 2016 from 8.50 to 10.07USlb
(less bullish to Dec but more bullish in 2016, consistent with CEO conf call comments)
(CEO stated this was based on Wood McKenzie research tabled 19/5/15)
- CN adjustments financially engineered to creat a loss when its actually substantially cashflow positive
- impairments to CN noncurrent debt & forex is paper losses only not real loss
- CN liability dropped by US$5M in 3 months to 31 March
- 14 year mine life is still really a 19 year mine life, as the "inferred resources at bottom of the pit taken out...to avoid distraction" as it requires a "conceptual development plan"
- the 20% offtake unsold 2015 has now been fully unsold but again glossed over

Scare Tactic in headers
- the scary headers in the Q1 financials stated "material uncertainties raise significant doubt upon the companys ability to continue as a going concern..see note 2 & 3(e)"
- when one reads notes 2 & 3(e) it states:-
1. "lower C1 cash costs continued"
2. "has negotiated the sale of its remaining uncontracted ni concentrate production for 2015"
3 temporary mining licence in place for 1.5 years now
4. realised NP & production assumptions &licence renewal are the only factors justifying the warning
5. "cash was positively impacted by cashflows from operations"
6. net cash inflows Q1 alone were +US$15M! page 10
7, net loss of $58M was accounting adjustments only ie fair value adjustments to the CN option of $42M ie SP went up
8, negotiations with various parties are well advanced for the sale and purchase of SR ni conc after 2015" [mentioned a 2-3 year deal in process in last presentation 6/5/15

So unless NP collapses, production stops for good or these estimates dont come true or maybe if the world ends then it may be scary but not right now. These parameters appear very conservative
-Forecast NP of 7.07USlb,
-BRL dropping from 2.86 Q1 to 3.00-3.14-3.21-3.50 Q2 right now,
-rising production,
-25% profit margin today
-AISC at 4.75USlb, reducing cash costs, Mine costs dropped Q1 to 3.96Uslb!
-royalty rate increased on the massive sales achieved well above production in Q1, likely in Q2 also,
no surprises here. Its very predictable.

Comments of Other HC posters today
golfbravo states at the AGM
"shutdown" was blown out of all proportion, hand rails over the conveyor belt in a no walk zone ridiculous, 0 casualty rate, safety concerns resolved,
maffsmark states
very good company, going very well, offtake soon
Kapetanios Top3
states he has bought on market substantially more, waiting at 12.5c, our top 3 holder is raising his stake, very bullish for all of us smaller guys
Jacky123 Top2
states, this scare header today was not believable, i will buy more if they try to drop it to 11c, strong buyer in MBN, dont believe the scare tactics just like on the "plant shutdown" day [when we are now told that was "minor few days railing install"]

My analysis of the AGM is that:-
1. CEO very bullish on production, costs, BRL, NP and future "cash management" ie cashbuild
2. no contradiction of cashbuild estimate of the CFO of US$100M by December 2015
3. LT plan is to build free cashflow, production,lower costs, lower costs again, sign LT offtake (very secret right now, eg. wants to know our HC sources for the shipping)
4. "Show me the money" is the strategy they are improving on & impressing right now
5. liquidity, free cashflow, safety & stability is guaranteed with this team in charge
6. returns to shareholders in H2 as i predicted looks like, Griffiths secretly supports this, NHs will soon too
7. Management has overstated the "shutdown" & "going concern" shocks
8. MBN are doing and saying the right things to the ears of shareholders globally
9. scary statements scare the weak hands, yet books show solid, strong cashbuilding profitable production machine
10. Licence renewal & offtake 2016-2017 to chinese looks 100% certain
11. 2015 production and sales fully committed, the 20% offtake signing glossed over was actually big news
12. A great penthouse welcome from Australia to our Brazil management team,

13. Some directors secretly want cash distribution once NP starts rising (only variable out of their control)

I personally shook hands and congratulated the CEO, CFO & Chairman stating "on behalf of the shareholders, keep up the good work, in the interests of the brazil families and Aust investors, please get LT offtake & return the cash to shareholders".