Ryan Mee, CEO of Fulcrum Metals, reviews FY23 and progress on the Gold Tailings Hub in Canada. Watch the video here.
The delay in the VAT rebates certainly hasn't helped matters and I would hope that these can be collected this year.
I agree with you re: the share price and I don't see the Poddar's as being malicious in their intent for the company. They want TGR to succeed but the last twelve months has seen a litany of management errors and they need to regroup ASAP and start delivering.
They've got more cash now than they've had since mid 2022, so we just need 2024 to be a year of steady production and no major missteps. I feel like they stretched themselves with the Suni acquisition and I'd like to see a period of consolidation and focus on Madagascar. Cashflow generation is key and this should be their number one priority.
Time will tell and GLA.
Agree with you Gallmat - it would be helpful if Shishir did a media round to provide an update on the use of the equity.
After paying the January coupon on the CLN's (~£166k) the business will be left with net proceeds of £879k, which is in addition to any cash on hand prior to the raise. Assuming they already had ~£100k in the bank, then they have roughly £1.0M to ramp up operations and get things going. What they do with that money is key and I'm not going to make any decisions on my position until there's more clarity on that.
I hope Shishir has learnt a valuable lesson from this and that he's smarter with his financing decisions going forward.
I'm sticking it out given it's a long term hold for me and I don't have a huge position. If they can sweat this £1.0M and get production up to 1,500tpm, then the outlook will be completely different and the SP will react accordingly.
Also, in terms of dilution I don't mind future equity raises once output has stabilised at that higher level and if it's used for further increasing production. They just need to get over this working capital bottleneck and get the business to a level where it is profitable (above 1,200tpm) which the £1.0M will obviously help with.
Took some time to digest the placing this morning and my thoughts are as follows:
1. I'm glad they've bitten the bullet on the placing but it took far too long and should've been done last year when the SP was 30p+. Shishir should've considered the risk of the BAT consideration shares being issued into a low liquidity stock, and made a play to raise equity before they hit the market. I've said it before, but having a competent CFO could have helped to prevent this issue.
2. With near term working capital sorted, they have to hit 1,500t per month this year and sustain it. I suspect the reason they chose to raise now is that the ex-China market is growing and they have to be able to take advantage of this. If they tried to keep managing within their resources there is no way they could meet the increased demand from Western graphite consumers.
3. If this raise unlocks 18,000tpa then the business should be profitable after tax and can reinvest for CAPEX and new PCU's. They have some tax losses to carry forward so this will also help with free cashflow over the next few years.
I'm going to continue to hold and might open a smaller trading position, as this has the potential to be an inflection point for the business. However, if they burn through this cash without a meaningful increase in production then I'll have to reconsider my investment thesis.
100% agree and I was just about to say the same thing. Hard to see the company taking the full amount now and I expect this will be progressively drawn as and when required. They might only use a small amount initially but then keep the facility available for CAPEX in Mozambique or to increase production in Madagascar.
I think he realised that holding through the second half of last year wasn't going to generate him a positive return (largely due to the tight liquidity and BAT consideration shares) so he sold out and is now sitting on the sidelines waiting for updates.
He mentioned on Twitter recently that he has substantially reduced his holdings and is now more focused on 3-5 short to medium term holds (Avacta aside).
Once TGR starts to move he will definitely buy back in. From his Twitter posts, he remains bullish on the company but not the near term technicals/SP momentum.
Genghis - I really don’t think most on here have blinkered thinking. Many understand the risks involved and have done their research. If you think TGR is a terrible company then why waste more energy on this board?
While Shishir hasn’t made the best decisions in terms of corporate governance this year (I.e. the CLN interest payment) he has overseen the construction of two producing graphite mines in three years which are now on the cusp of a turning point in terms of production and cashflow. In addition, TGR have acquired Suni which adds a significant amount of reserves and includes battery grade flakes. So it’s not all doom and gloom.
This was never going to be a linear journey upwards and the Poddar’s will need to learn along the way. Things could all blow up or it could be a massive success; however for me I believe there is value in the assets which is above my average (18p) so therefore I feel comfortable holding as I do think the whole business (including Suni) is worth more than £20M.
Just my thought process and I do appreciate that many holders have an average higher than that. For what it’s worth, I think the business will be successful and there is huge potential here longer term.
Well said HarChris and I fully agree with your points below.
The business is doing its best to grow within current resources but it's clear that some dilution will come along the way. However, if that dilution results in more production and more profits/free cashflow, then that is more than justified in my books.
I've seen many companies dilute themselves into oblivion and this is clearly not happening here (arguably to the detriment of the business this year).
Key for me going forward is seeing how the Cost of Production evolves as volumes ramp up (i.e. will they achieve an improvement in gross margin back to ~40%). The third party of valuation of the Suni assets is also important as this will determine the state of the balance sheet going forward and what the new NAV per share is.
Lastly, news on a debt facility would obviously be welcome and hopefully this can be secured in Q1. I fully expect this to be convertible and can live with that if it gets us to a consistent 30,000tpa.
GLA and hope everyone had a great Christmas.
Downward pressure? There have been nine trades today for a whopping total of £5,843.54.
The volume has dried up and I can't see the SP going anywhere unless we get a Christmas RNS. Time to knock off for the holidays I think!
I was also invested above 100p with my first tranche, but luckily I sold at breakeven and waited until recently to buy back in. I'm happy with my current average of 18p and believe the company will be worth far more in time.
The company is only starting to get going now, so in my view it's not the time to be selling but to be taking advantage of the valuation disconnect.
While the SP was up at 140p previously, the two mining sites are far more developed today than they were back then. Plus we've got the Mozambique assets as well, which I would argue are worth the current market cap on their own.
All IMO and GLA.
You do you Astro. Tbh I was thinking of topping up...
The weather is Madagascar has been relatively good recently (which is positive for production) and the graphite controls in China are now in effect. In addition, a trading update is due shortly from the company which will more than likely show their highest production numbers to date.
Western graphite consumers will be laser focused on securing their supply ex-China and TGR is very well placed to meet that demand. The comments from the Fed yesterday should also support stocks in general, which is likely why we are getting a lift today. Let's hope the BOE follows suit...
Genghis - nice to see you back and full of positivity.
I mentioned the gross margins earlier as these are important for when the business will be start to turn a profit, which based on my calculations will be from 13,000tpa onwards.
What would be useful to understand is the cash cycle of the company - i.e. what is the timeframe from production through to the eventual collection of cash from customers. Then you can assess what level of working capital facility the company needs to operate.
TGR would clearly benefit from a revolving credit facility and I would expect this is what they are speaking to financiers about (plus some future capex funding).
In terms of the management of the company this year - I agree that they need to sharpen up and I wasn't happy about the recent CLN payment and missed filing deadline/suspension. I actually emailed the company about this and told them that they have to get an experienced CFO asap, as clearly the current management team are stretched.
They responded quickly and noted my comments, while also stating that they are aware of various hires that need to be brought into the business (i.e. they know they need more C-Level executives). So let's see if we get any news on that in 2024.
It's crazy how much sentiment can affect share prices. Here we are back in the 15p range again at a circa £16M market cap, which is mad considering the business is growing production and generating sales with 45-50% gross margins.
As a comparison, Quadrise (QED) is a zero revenue business but is currently trading at a market cap of £44M after a recent rally. They don't even have a customer yet but are triple our market cap (although they have just completed a successful trial in Morocco).
It's time for TGR to hire an experienced CFO who can take care of the PLC side of the business. Obviously being an efficient graphite miner is key, but just as important is having strong corporate governance which includes expertise from outside of the Poddar family.
Shishir cannot do everything and expect the business to flourish - especially when it's growing quickly. It's high time he started to let go of the reins and let others contribute to the TGR journey.
All IMO and GLA.
AJ - yes that is correct and I'm aware of that.
However, there is always a section at the end of the accounts whereby the auditor comments on matters relating to after balance date. If you go back and read this section (Note 25 to be exact), there is a mention of the 2019 CLN's being extended to Dec-24. Here is the exact quote:
" The Company has in issue 900,900 2019CLN’s in issue as at 31 March 2023. The maturity of these were pegged
at third anniversary from the date of issue and conversion price pegged at £0.45 per ordinary share. The Company
engaged with its Brokers Optiva Securities Limited to agree to extending the maturity of the 2019CLN’s up to 31
December 2024 so that the Company conserves its resources for its business being in formative stage and so that
the investors retain the opportunity to convert for a further period. Optiva has confirmed that it has received
consent from all holders of the 2019CLN’s for the extension and the Company has agreed to pay a fee of 2% to
Optiva for the arrangements. Accordingly, the maturity of 2019CLN’s is now considered extended to 31
December 2024."
As the accounts were issued after 31st July, the auditors would be required to report on the failed coupon payment in this section.
In terms of proof - how about a document from TGR's broker (Optiva Securities) which details the proposal for extra shares in lieu of the July interest payment? I assume you're a noteholder?
AJ - if you are going to make these kind of statements then please provide evidence to back up your claims.
The audited accounts were signed off on 2nd August and made no mention of a missed coupon payment for July.
Topped up at 16.0p. Nothing has changed since we were at 27.0p a few weeks ago so it's a no brainer for me.
Think I'll start trading one position and holding one long term. Until there's more consistent volume the share will be prone to spikes on news and then a drift lower - much like we've seen over the past month.
In more important news, the China export controls come into force on Friday. It'll be interesting to see what effect this has on the market over the next few months.
Lots to look forward to Andii! Let's hope some positive sentiment can also return to the markets next year.
The icing on the cake would be a resolution to the TSG acquisition or the setting up of a new downstream business in the UK. My two cents is that a UK downstream business would be better for TGR and for us as shareholders. It would open up numerous funding pathways (DFI's and potentially UK Gov grants) given the critical nature of graphite for the energy transition and the exports controls coming into force in China.
Plenty still to play for here and I'm excited for the journey.
Agree Skeletor - suddenly the bears come out of their cave when the price pulls back.
On a more positive front, it looks like the weather in Madagascar is clear this week which is good for production. We are in the rainy season from now until April, so it will be interesting to see how the business navigates this period. I believe they were underprepared in prior seasons but have now improved their infrastructure.
Being able to keep production consistent throughout the year will be a key indiciator of the company's progress.