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I definitely agree with you guys. When Tony entered the company it was immediately clear (due to his Fortescue background) that he isn't there to build one lake. He also said that in some interviews. Before he entered the plan was to build a test mine to see if the project is viable. He skipped that plan right away and pushed the project forward with an insane speed. And yes, as we all knew by now that has cost a lot of money. His vision is to create a SOP company with 3 lakes and an annual production of more than 1 million tonnes per year. And that in five! years. I can't tell if this is doable, they will need less then 2 years to bring Lake Way from a scoping study to production (if everything goes according to plan). I personally prefer a company that is developing a project fast which maybe costs more money upfront than a company that needs ages to develop a project (share price will not rise in this time frame too).
And regarding worldwide SOP demand, its currently about 7 million tons, growing at about 3 percent. I think about 2/3 is Mannheim (expensive), especially China Mannheim. Other producers may run into cost issues when the new cheap and more economically friendly Brine SOP is available on the market. For China I'm not sure as a lot of companies there are government-funded. Lake Way is producing about 245.000 per year. Danakali is hopefully producing about 460.000, in year 5 a ramp-up to 940.000. Direct Competitor KLL has a production rate of 164.000 and there are some other competitors in the second row (Agrimin etc). So in theory there should be enough possible supply in the future. The key in the future will be the execution. And in my opinion, SO4 has the best team in the sector today. If you ask the companies, they are saying that demand isn’t a problem at all. Only time will tell. But SO4 has currently the best conditions to become a success story in my opinion.
Informative reading Deepjoy, thank you.
Spencer.. sorry for delay. In the simplest of terms I see there is a long and very profitable future ahead for SO4. The beauty of their model is that revenues from lake 1 will be sufficent to cover debt repayments and costs so it will be self funding from Q1 next year. Any capex requirement thereafter can, in theory be secured by further debt without dilution and so forth. There is enough capital from this deal to progress to lake 2 but i would be surprised if they did that without reporting decent production to the market. This isn't a fast burner it will be a buy at the right price and just hold share for the next few years as incremental value builds and I cant personally see on lakes coming on line. The cost benefit curve may flatten as it expands but I do see four lakes as an end point so my time line is 5-10yrs. The demand will be there for the product as global warming and desertification takes hold of the planet. China, in particular has a big problem with the latter as their rural population ages and younger people move to the cities for work stratigically my take on this is that SO4 are perfectly placed to take advantage.
Unlike SXX the board are aligned to retail holders as well as institutional investors.
Like many I wasn't expecting a large equity raise at this point, but apparently the institutional broker notes did all factor something of this quantum in (eg Macquarie, with a target price (for now) of cAUS$1), so it's not news to the City, which is the important thing really.
Re the future, I think there might start to be a SOP price issue if all 9 lakes were developed as quickly as possible (assuming they're all viable of course) - the projects due to come on stream in the next 3 years or so should displace all the secondary SOP production from MOP, and whilst the thesis is that demand has been constrained by lack of supply, it's easy to see how a large amount of extra SOP hitting the market could soften the price, in the short-term at least.
Deepjoy, what's your view on SO4 in the future? They have advised they will construct 3 lakes but what about the other 6 lakes? It's not a question for today as a long way off but as a long term holder I will be curious over time what they will do after constructing and mining the 3 lakes.
9% on the loan and loads of shares. Not surprised by the reaction but upside for the patient. Got to be a bid target for someone with the finances to develop the mines more quickly.
Agree with you Spencer. Also as the main bulk of institional level shares will hit the market late August and Retail in mid September I think we will get a chance to see how sticky the share issue is ahead of small holder flipping risk. Also at a time when the company will be well into the project and on the verge of using the evaporation pools. I am more than happy to keep topping up on any weakness but cant see this falling below 30p as the potential is huge and most investors recognise that even ex-SXX like me :)
It might slow down the share price rise over the very short term but believe most holders are in it for the medium or long term as they can see the potential huge upside. I make it a 3 to 5 bagger for every lake therefore with the company already stating they're going to mine 3 lakes then that's 900% - 1500% increase over 4 and a half years. Worse case 2 bagger a year isn't bad at all in my eyes.
Also happy to see final funding.
But anyone expected a capital rising that big and with such a dilution? Looking at the share price from the last week, market didn’t expect that. I’m a little bit worried that this could slow down the shares upward momentum in the short term given all these new shares at that price.
In the RNS read down to indictative timetable and you will see different dates for different classes of investor. Retail investor record date is stipulated as being the 11th.
11th is the record date so anyone wanting the placing shares need to be a holder by close on the 10th
Is 10th August the record date then? Missed it in reading the rns
Spence they actually only have until the 10th to buy as they have to be on the register by the 11th :)
Very clever by the company to hopefully stabilise the share price. Retailers have until Friday 14th August to buy more shares on the open market to enable them to qualify for more 27p shares.
1 for 3.2 rights issue, 16% discount, use or lose.
25/8 cutoff.
GK.
Great to get the funding completed to finish what promises to be a very profitable and sustainable project.
For me this is when the re-rating of the stock begins as we are now 6/7 months away from a revenue generating company with an annualized free cash flow of £43m after tax.
Impressive, with a trade off study for the next lake development in 1H 2021.
Cap raise, finance and trading halt on asx.
https://www.google.com/amp/s/themarketherald.com.au/salt-lake-potash-asxso4-to-rake-in-300m-through-cap-raise-and-finance-package-2020-08-05/amp/