Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
I read "The table includes ‘live’ cases yet to be determined and also recently determined cases. Only cases that have been determined within the past 6 weeks are included." as all live cases should be there alongside 6 weeks worth of determined ones.
Unfortunately I only remember seeing it around the first official press release. I guess it's probably just a bureaucratic error.
Glad you had a good time, I do normally lurk rather than participate it's true, I've never quite understood the "long time lurker, first time poster" opening; maybe that would have been useful here. Never thought I'd be labelled a shill, certainly interesting to see how easy it is to come across the wrong way.
I generally agree, there's lots of assumptions I had to make which means the investment is highly risky. I'm a fan of toy problems, so I was hoping to generate some discussion around those assumptions to help me work out which ones were reasonable and which don't make sense.
I guess it didn't come across, so for clarity my position is neutral at the moment. I own a stake and I'm undecided on whether I should keep it or take the loss.
Do you think each of the Auditor's concerns are likely to fall the wrong way?
Is it just me or has the planning application status for Uskmouth disappeared? It was definitely on this document previously..
https://gov.wales/planning-decisions-being-considered-welsh-ministers-called
I guess the concern is around SAE's ability to get access to capital via SUEH and potentially other places since they're tied up with the share price. That seems a reasonable thing to be worried about to me.
I agree though that if we discount that risk then this seems highly undervalued. Positive movement on access to capital, fuel pellet partners, Uskmouth, or tidal CfDs would go a long way to derisking the investment in my opinion.
Contrary to EricThe7thKing, I think rough calculations are very useful and I'd be upset if my auditor didn't make use of them. At the end of the day, a Discounted Cash Flow model is effectively a glorified back-of-the-envelope calculation since they rely on a multitude of assumptions.
That said, I've always found more conservative estimates to be the most useful, this is largely based on the Final Report:
- I'll base costs on "Total operating expenses before non-recurring items"
- It increased ~9% 2019-2020 which appears to mostly be Subcontracting expenses, but it's not obvious what that translates into so I'll assume that cost remains similar or gets picked up elsewhere in the future
- Assume a similar increase year-to-year, round to 10%
- 1.1 x £29M ~ £32M
- Revenue
- MeyGen @ £3.2M
- Assume this ticks over
- Green Highland Renewables' @ £2.6M
- Assume this is similar
- ATES (Japan)
- "The tidal turbine clocked its first 10MwH of generation within the first ten days of operation": appears to be providing about 1MWh each day
- At CfD-like prices of £300/MWh @ 365 ~ £0.1M
- Currently puts us at £3.2M + £2.6M + £0.1M - £32M ~ -£26.1M
This leaves the shortfall to be picked up by:
- Further ATES projects
- We could assume similar revenue of £6.5m
- That would leave a ~ £19.6M shortfall
- Uskmouth if approved
- Clearly this would be a large boon, but I hesitate to estimate it's exact value
- For my 2 cents I think they're more likely than not to get their approval
- I mostly base that on the fact that they have a route to carbon negative and the area needs power from somewhere which seems a fairly easy sell if I'm Energy Minister
- That said there's a very real chance of rejection
- Improvements to MeyGen
- This is the most interesting one as pieces are unclear
- The expansion to 86MW won't happen this year, but I'll work from it as an anchor as I can't find the current specs
- The key is utilisation time which I'd love for someone to weigh in on
- £300MWh seems to be the number from the last CfD so I'll use that
- 86MW @ 24/365 @ 100% @ £300MWh ~ £226M
- Obviously this is unrealistic
- With an additional 1/10 of that capacity (whether in terms of utilisation time or power rating) SAE *could* be turning a profit
- Note "additional" since MeyGen is already accounted above
- Whether that's reasonable is outside my expertise
I don't have a real conclusion, but those would be my estimates. Honestly between the above and the other noted uncertainies around coporate financing I'd probably stamp a disclaimer of opinion on it too.