1/6 The market is questioning #I3E ability to fund its 3 drill programme.
The market assumes that the cost is $41m for a 94 day programme.
Nowhere are these 2 figures presented together.
2/6
#I3E c.$41m figure (inclusive of considerable contingencies) appeared in 10th Jan RNS when the 3 well programme included a horizontal development well at L2 location.
The 94 day programme appeared in 9th April RNS when the L2 pilot well was introduced.
3/6 Vertical pilot wells dont take as long as a horizontal well.
What happened in between those 2 dates, was the junior debt facility negotiations, post the term sheet sign off on 25th Feb. Actual closure came on 3rd June.
Between 25th Feb/9th April, #I3E pilot well came about.
4/6 Proactive June presentation slide 6 states the cost of the revised 3 well programme as $36m (same contingencies will apply).
3rd July #I3E agrees $3m deferred payment with BGHE.
Total cost reduces to $33m
5/6 #I3E have raised over $49m in 2019 through junior debt, placement, open offer and I3E management/directors.
Summer drills at 120 days inclusive of contingencies are costing c.$33m
Misread born out of change from development to pilot well & failure to appreciate contingency.
6/6 The same change to the drilling campaign has driven the perceptions associated with the failed L2 well, and its COS.
#I3E could have communicated better but that doesn't change the facts.
I3E is massively misunderstood right now because of a drill change.
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1/16
It's difficult to call this market but my view is that assuming no more operational glitches #TGR now steadily re-rates as the operations sign off the various stages to 30ktpa.
2/ Front-end valuations should depend on where graphite prices go but as Syrah demonstrated yesterday (graphite fines not large flake) orders are buoyant.
Forward orders there running at 90,000 tons which are 50% of their current yearly output. So substantial.
3/ Note also Syrah cannot produce for less than FOB C1 $543/t even at 15,000 tons per month output and that's fines.
It is clear after last night's presentation that TGR C1 costs have also risen but this is to be expected in this current market.
1/12
Here are Verde Agritech's expected sales targets for 2022 which were revised in May and offer a significant read across to #HMI and what it can achieve this year and also.
1/9 In a previous #HMI thread, I highlighted that the $600k write-down in the FY2021 accounts meant that trade debtors (so effectively trade receivables) almost doubled between YE 2020 and YE 2021.
1/18
I've been running an extensive exercise on Verde Agritech also a relatively new but expanding fertiliser producer based just c. 70km from #HMI in Minas Gervais in Brazil. The results to date are rather fascinating and certainly worthy of review.
2/ Verde is a TSX-listed producer with a current plant capacity nearly double the size of HMI (0.6Mtpy) but with a phase 2 expansion due to come online in 2023 which would take output to 2.4Mtpy.
So a much bigger operation to come and soon.
3/ Those that remember my 5th July numbers on #HMI sales prices will perhaps remember that they demonstrated a $53.20/t average sale price for 2021.
At the average achieved AUD/BRL for 2021 of 4.054, this equated to an average price of BRL216.
1/7 Based on what I have just talked about if #HMI had received all the monies from its sales in 2021 then this would have amounted to $4.52m and the business would have been profitable at the operating level in 2021.
2/ What's more, the $4.454m paid out in 2021 reflects more accurately the true costs to run the business over the course of one year.
One cannot conclude exactly how much HMI produced in 2021 because the cash receipts reflect payment dates and not when the goods were received.
3/ Inventory was fairly minimal which reflects an operation that leans towards producing to order.
However, the costs associated with administration clearly eat up the vast majority of this with the consolidated statement accounting for c. $3.85m in the period.