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The statement on Woodsmith is no further capex for the next 2 years, save for £200m in 2025 for "critical technical studies", followed by "syndication". First, how could such level of further technical study possibly be required this deep into the capex process? The statement today is just clear code for, "it is in the bin now unless someone else wants to come in and put their money down the hole to take it any further". How on earth do you buy the asset in the first place, let alone commit the further capex AAL.L has done since, only to arrive at that decision? It is astonishingly poor business leadership in my view.
My description of it as a "money put" is not intended to be disrespectful to anyone, especially former Sirius shareholders. It is in my view fair and apt description for a project whose required capex and timescale to production have been proven so wrong, so many times, and by such magnitude. And which now arrives at this decision.
Sorry but I profoundly disagree there was anything clever about today's overall announcement - it was amateurish, panicked as regards timing and reeks of desperation by people trying to save their own skins. AAL.L made an utterly disastrous announcement last December on reducing output and capex. The Board clearly perceived that that would be received by the market as a positive, instead it caused the share price to plummet 20% in one day. That is an utterly intolerable event for an FTSE 100 share; you just cannot ever have a company of that standing give an update to the market intended to be a positive and it instead induce that level of instant sp fall. It left the company a sitting duck. The CEO should have resigned immediately.
Polyhalite is a low grade fertiliser that was always going to struggle to find a mass market.
Unbelievable that AAL did not see beyond the "Sirius" spin.
So, the many crop trials proving otherwise were hogwash and the off-take agreements are worthless?
OR
I do not agree with the 'low grade' assumption.
The point is, that it remains in the soil longer than the competition.
I think the value of mothballing is it is an admission that the board made a gross error in taking the development on without the funds to do the job. They now recognize their incompetence and are pleading for someone else to buy the company before existing shareholders give them the push. The sooner the better, either way.
My view is that AAL didn't complete adequate due diligence on SXX or were swayed by Fraser on his spin. SXX Standards were probably significantly less than AAL (along with some errors?) in their design. AAL takeover resulted in the imposition of their own standards increasing Capex but was this estimated adequately?
I find it difficult that they didn't specify and/or estimate correctly and as part of that process they will have developed a detailed cash flow forecast and agreed that with the board. On that basis what happened since those approvals?
Share price collapse and with increased energy/materials/resource costs along with borrowing costs greater than originally forecast.
This ultimately means increased costs for the project and the need to reassess the project. It happens in businesses where circumstances change. The answer I'm puzzled about is, why the strategy to delay if the product is 'that good'. What is an accelerated completion date and income generation v a slower approach to completion. Is the RNS a holding statement to test the market place or wait until they have a partner.
It's a watch this space for me.
I think the mothballed option is to appease shareholders by increasing dividends.
Interest rates have risen sharply since AAL bought Woodsmith. Investor expectations have risen too.
Had Interest rates remained low for a few years longer, there would have been no thought of mothballed.
Having given it due thought, I don't think Woodsmith will be mothballed at all. Talk of such nonsense is just AAL attempting to raise BHP's offer price to better reflect long term value of the business.
OR
The costs involved of completing Woodsmith are significant, and it would be easy to argue either way regarding whether to pushback or accelerate completion.
what cannot be disputed are the fact that the crop studies have proven to be superb, the mine has been designed to be extremely efficient, there’s at least 50 years production at 13mtpa and there’s little more involved than pelletise and sell the raw material.
De Beers may be a greater risk than Woodsmith. Diamonds are something that we can live without and better diamonds can be produced in a laboratory.
Fertilisers and soil conditioners will be needed in increasing quantities as we try to feed a rapidly expanding world population.
I know which asset I’d prefer to invest in.
OR
Lab diamonds cost about the same to produce as natural ones. When it comes to industrial diamonds there probably isn’t much difference between the two . Natural diamonds will always attract a premium, especially from high end jewellers, who would not be seen dead using lab grown diamonds.
I agree, whether a strong enough market is there is a question but there will always be a demand for 'real' diamonds.
On the fertiliser mine, am I correct that currently there is no demand for this kind of fertiliser and the bet is on it being required in the future?
That BHP and now Anglo as well seem to see it as a luxury to build rather than a necessity would make me feel the importance of it may be overstated and the money may be better spent elsewhere.
I know people on here hve come across from the first collapse so hoping it works out but how much is faith and how much of a reality is it that this could/should add a big benefit to the company?