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(Just realised in my recent posts I made a type betwen WCP A and B regarding the one that is moving - apologies for any mis-comm. on my part).
BF - if you take your 150kt and last year's ave FOB of 229/t you get to 35M contribution to revenue. Would hope FOB is a bit higher this year. June presentation refers to WCP B producing 900kt p.a. (~225kt p.q.), albeit this if after benefitting from higher grades after the move. All in all we are chewing over similar numbers. Not overly concerned by any of it. It is all planned and plus WCP C will start to contribute.
Yes, it is a 106M capex cost, some of which is in 2019. I'm also considering that WCP B's production will be suspended for upto 12 weeks (ref June Presentation, pg 8). KMR's monthly revenue is 20-25M/month, mostly generated by WCP A, so I have taken an arbitrary 50M disruptive cost in addition to the capex, to reach '150M' in round terms. Yes - they build up stockpiles to manage revenue. Yes - it will all be mined eventually but in my experience lost production time is lost production time and ultimately has a cost.
The point is valid that by Feb 2022 the debts would have been paid off and under the new scenario the USD 110M term will only start to be repaid. So indeed, what has changed and why?
KMR set out their plan to do 3 projects - WCP B upgrade, WCP C and WCP A - ambitious plans but with excecution risk and uncertainty. Were KMR in a position to request deferring debt repayments but a few years with all this going on and their past history being poor.
Roll forward to now. Timing of new facility is instructive, coinciding with completion of WCP C. KMR now have 2 of 3 under their belt and have been 'rewarded' with a new debt arrangement. 'Rewarded' as they can start a 150M project knowing funds are guaranteed to be available and allowing them to up their return to shareholders, paying a marginally better interest rate. It is all part of the progression and shareholders are probably better off with the new debt arrangement then without it due to the de-risking and returns.
Wonder how they are going to launch her. These types of dredgers are pontoons bolted together so not lifted once assembled. Assume they have to dig out an access channel to float her... Can't be long now until she is put to work.
My first reaction was the same but after a few minutes, I formed the view I have. This time around, production is on a different level (1M MT rising to 1.3M MT), fixed costs are more widely spread giving lower unit costs, KMR is much more recession proof and the supply/demand charatetistics look very favourable (as they did last time), but starting with sales prices not in bubble territory and at a level that is not encouraging new entrants as yet. So think the situations are different.
Valid points and we shall see. At least from a shareholder's perspective there should be much greater certainty that the 20% payout will indeed step up as promised to either 60% or share buy backs which will support the SP. This ultimately is what matters to us PIs. and is why I am positive on this financing.
Nosir,
I still believe it will be financed through cash flow - no change on my part.
Anyone with experience with these things (as I am sure is the case with your goodself) will realise that upgrading an existing bit of kit (WCP B) or buying a new bit of kit (WCP C) is very different to moving a very large piece of kit down a new 20km road and reassembling. Not only is there execution risk of cost overruns but more importantly the disruptive cost / risk of not having the main item of kit not producing for a prolonged period, especially is something goes wrong in the process.
This financing package is more than is needed but is effectively an insurance policy costing USD 5M a year to ensure finances are in place during this high risk phase. I am not keen on paying for a facility that is not needed but if you regard it as insurance, your view may be a little different.
I am not as negative as you lot. Seems ok to me. Almost a year ago, at time of Y18 results they stated they were considering new more flexible facilities so not a real surprise.
Interest rates are marginally lower than existing arrangement, although fees will be more than the saving.
Net cash at H1/19 of 3.5M, plus 110M term loan, plus whatever they are producing as they go along means they have bullet proofed themselves for WCP B's move which is a 150M project afterall.
Repayments start after 27 months (Feb 2022) and then 7 equal parts every 6 months to Feb 2025 by which time WCP A is coming and they may want to negotiate something else or have accumulated sufficient cash.
This de-risking will further secure shareholders the 60% payout or share buy-back from 2021.
Yup. Also perhaps uncertainty as time of 6 monthly rolling contract negotiations.
Last report, KMR maintained guidance for year which means Q4 will need to be / they expect it to be a good one in terms of sales volumes as they catch up from earlier in the year. Hoping so.
The market dynamics descibed in #1030 look v encouraging for KMR. SP has been going the other way. In my view, a bit of a disconnect, so I invested again this week. Also hoping WCP C gives a postive news story in the coming weeks, even if already well flagged to those that count.
Big Earl - you are correct of course. If you compare Y17's or Y18's HMC : production ratio, in both years the ratio was above 75%, Q1/19 was 73% so if you use any of these %s you get to the 110kt referred to and beyond. Think WASP will rise in H2/19 as well. Kept my figures deliberately a little lower to remain conservative and not ruin the basic point that WCP C should be a good investment, realised in a short period.
Taking 150kt p.a. HMC @ 70% being converted to final product is 105kt p.a.
Taking USD 239/t FOB average selling price in H1/19 gives additional revenue of USD 25M p.a.
vs investment of USD 45M and annual running costs, it should pay for itself within 3 years.
Iluka's presentation had a bit more information on market outlook.
https://www.iluka.com/getattachment/05f17d9f-def3-4e98-a2e0-900f41e2bd42/presentation-tzmi-congress-2019.aspx
This year Kenmare (J. Dibb) was one of the speakers - nice to see them get involved in these type of events, having kept a lower profile in past years.
Copy of presentation available at: https://www.kenmareresources.com/investors/reports-and-presentations
For those whose glass is half full..... ilmenite up, rutile up, zircon down....
"The emerging ilmenite deficit, created by strong demand and supply restrictions, continued to support a strengthening ilmenite price through the quarter. Demand for Base Resources ilmenite from existing customers remains greater than the Company’s ability to supply and enquiries continue to be received from potential new customers globally.
Ongoing constraints on high grade feedstock supply has continued to support price improvement for rutile. Prices for Base Resources rutile strengthened again in the quarter with further improvements contracted for the December quarter.
The zircon market came under renewed pressure through the quarter due to ongoing global economic uncertainties. Major global suppliers of zircon are reported to have offered price rebates and discounts to some customers for the remainder of the 2019 calendar year. As a result, the price for Base Resources zircon in the coming quarter has been contracted at a slight discount to September quarter prices"