Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
Morning all,
Any thoughts ahead of the results presentation on Tuesday? The share price seems to have lost any momentum we had, which I didn't like personally at least. How has this typically traded leading up to results presentations in recent quarters? My personal instinct with question marks about the chemicals markets outlook, is to step aside for now, and hear what management have to say before reassessing. Thoughts from seasoned SYNT veterans?
In my response earlier I forgot to state that I am not making a recommendation of any kind, just realised my point sounded bearish, which is why I thought it appropriate to point out that I am long despite the challenging situation of the company.
Hi Hopan,
My penny's worth is that Synthomer still needs to stabilise its leverage in a challenging market for its products. As long as there are potential near term covenant breaches and/or debt maturities hanging over companies like these, they will trade like utter dogs. My personal sense is that we should be near the point where the company stabilises, and with a few non-core asset divestments, used to accelerate debt repayments, hopefully they can turn the corner and swiftly claw back some of the lost ground... But, as long as it looks like the creditors might end up having the company by the short and curlies due to covenant breaches, any sustained recovery in the SP feels unlikely.
If you look at the January trading statement they released, they specifically mention the need for resetting the covenants:
"Therefore, for prudence, we are progressing a dialogue with our lending banks to extend the period of temporary covenant relaxation to ensure that we maintain appropriate headroom while trading conditions remain subdued"
A very British way to say they are not out of the woods yet.
Either way, I remain positive and have built a stake here expecting them to make it, GL to all.
An important correction: They have never been 'BBB' rated, which would be investment grade, and indeed a huge hurdle to fall from as many bond funds won't be allowed to hold a junk bond (ratings below Baa/BBB). Yesterday Synthomer was downgraded from 'BB' to 'BB-', which I would say was very expected as the company has done very poorly for a long time, and Moody's downgrade the company from Ba2 to Ba3 already back in June. No reason for S&P to drag their feet as long as they did until yesterday.
Now both ratings agencies have the same level on the company, and in my humble opinion, this was highly expected, but now we have to hope management does enough to stabilise the ship and get S&P to remove the negative outlook status to a stable outlook in 2024.
GL to all, this is a very interesting company/situation.
S&P is a ratings agency, not an investment bank. They are never buying any shares in a million years.
If it would be 10:1, we would be mooning. I have posted along these lines before to temper people's expectations, but there are many key steps Sweden needs to get past before there could even be a debate nationally about mining for Uranium, and even then - Sweden has huge quantities of Uranium, and there is no guarantee still that a polluting alum shale project close to a major river system and a regional capital would be first in line to get an approval. If Beowulf Mining finally get their mining permits for the excellent Kallak Iron Ore mine, it will be the first mine approved in Sweden for 10+ years, and a great general signal against the anti-mining greens/socialists who have gradually amended environmental regulations and the framework for approvals making mining a dying industry. (Greta and her leftie friends are protesting and lobbying hard against the Kallak mine FYI, so stakes are high). After Kallak, we need a change in Government this autum to kick out the left-green Government/supporting parties, and we then need a political decision to restart most, or all of the reactors the left-greens have closed in the past 20 years. Then and only then do I believe we can have a serious domestic supply debate for the Uranium.
Fully agree, I can't see the URA entry being achieved with the ASX SP below A$0.40, and hopefully we'll move further than that. On top of this as we know this year the likely US listing of SPUT should also propel the U3O8 spot higher still. I am out of firepower, but wouldn't have minded to add a few more in the mid teens as there is certainly a 2-4x potential from here depending on how the Tiris start play into the contracting prices, etc.
And today we should be ~12% higher at 19p based on A$0.355 close yesterday.. I am getting increasingly concerned over the liquidity of our London listed shares, this arbitrage is just not normal. Let's see if we get included in all if ther Uranium ETFs and if that will help us with liquidity, because unless this changes, it might get fugly trying to eventually scale down our positions over the years as we progress Tiris and/or the U3O8 spot price keeps climbing.
This would be flogging a dead horse in my opinion. As I am sure you are aware, Aura lodged a claim under the Energy Charter Treaty (ECT) against the Swedish Government seeking $1.8bn in compensation as a result of Sweden's decision to ban Uranium prospecting and mining. In early 2020, the lawyers representing Sweden concluded the claim had no merit as Australia had signed, but never ratified the ECT. Naturally, Sweden's lawyers concluded an arbitration process would be rejected as Sweden has not done anything wrong from a legal point of view. Aura can still try and take Sweden to international arbitration, or sue them in a common court, but I would have expected there to be movement on this front by now in case Aura thought it to be a genuine prospect.
For a small cap like Aura I don't think the costs of taking on a Government justify the potential upside based on the early conclusion with regards to rights under the ECT, and Aura is clearly focusing on the Vanadium prospect at the same site now, a difficult prospect imo, which I am sure won't be helped by suing the Government..
Uranium Mine? Very unlikely in my opinion. I believe the chances of ever seeing a Uranium mine in Häggån are virtually zero, with the chances for a Vanadium mine almost equally slim as the prospects of alum shale mining is controversial in Sweden. Successive Governments have also proven to be anti-mining with no new mining licences being granted for more than 10 years from memory, and the environmental legislation framework is just getting worse and worse every year. In this case, we also have a local council (Bergs Kommun) strongly against it, actively pushing the Government to outright ban any mining of alum shale. There is an ongoing Government investigation/process considering whether to tighten the alum shale mining rules further, which will eventually be voted on in Parliament. If you want to form a better picture of the various stakeholder views put forward to this Government committee, I have put a link at the bottom.
The guy you quote on Twitter is just picking up on loose comments from representatives of a desperate minority Government, which were made to appease people in the middle of an energy crisis, the step to a change in policy is huge. 2022 is also an election year in Sweden, and the ruling Social Democratic minority Government relies on a couple of smaller, fiercely anti-nuclear parties to remain in power. These parties are currently ahead of the conservative (pro mining) block in the polls ahead of the September GE. It is true that the opinion has turned in favour of nuclear energy (thanks to high energy prices), but this does not mean the Swedes want the actual uranium to be mined in country. You should also consider the Häggån location is very close to lake Storsjön, on which the regional capital Östersund is situated, and where the Indal river system flows through. The powerful Swedish environmental lobby should not have much difficulty in presenting a strong case against an alum shale mine in Häggån as things stand.
As always, do your own DD etc., these are my views only. I am personally invested in Aura Energy for the Tiris project and hope the company will be able to add further exploration licences in Africa or elsewhere. I see Häggån as a faint option value until there is a political sea change.
https://www.regeringen.se/remisser/2021/01/remiss-av-utvinning-ur-alunskiffer---kunskapssammanstallning-om-miljorisker-och-for****-till-skarpning-av-regelverket-sou-202071/
I am not sure this is a prime takeover target as it is a one-trick pony, which only has one relatively small asset in Tiris with ~55m lbs, and that's it. We would need more exploration assets (Häggån is worthless imo due to its jurisdiction and location), which I hope we acquire as part of going into production at Tiris. I would see some kind of takeoff agreement with the likes of CNNC more of a possibility as the Chinese really needs more supply secured over the longer term.
Either way - Tiris alone should be enough to see us all rewarded handsomely once the spot (and as a consequence contracting) price starts heading north of ~$60-65/lb, which is hopefully not too far away with Sprott, YCA and KAP (when it calms down in Kaz) all out there acquiring physical uranium.
GL to all!