The next focusIR Investor Webinar takes places on 14th May with guest speakers from Blue Whale Growth Fund, Taseko Mines, Kavango Resources and CQS Natural Resources fund. Please register here.
Fira,
I agree with your opinion on the situation that the company finds itself in, 100%. There is absolutely no hope of them getting any funding to kickstart operations at LCCM and the following backs up this assertion;
1. The bank, as many of us predicted, walked away
2. We have previously made attempts at getting a JV partner and despite being assured by Peters that there were interested parties queuing up to jump into bed with us, it has come to nothing.
3. The PEPR fiasco has brought us to a situation that we are now looking for a 'watered down' version that doesn't allow us extract the full value from the project without having to make a further application at some point in the future - evidently, we're not in position to overcome the obstacles that are in our way to getting a full approval right now despite 3 years of work having gone in to the application process - any JV partner would have to be sceptical about promises that our BOD may make about their confidence at getting it over the line.
This now brings us to the question - so what happens if we get the 'watered down' PEPR approval (and I believe we will be granted approval on the latest application)? The BOD will very quickly run out of hiding places when they don't deliver the necessary finance to start operations.
I'm coming around to the idea that they may be looking at selling LCCM if and when they get the watered down PEPR - it has to be worth book value plus a premium to a potential acquirer who has the resources to pay the deposit and the start up costs. The BOD could then 'sell' shareholders the idea that we're now going to use the funds received from the sale of LCCM to concentrate on the juggernaut that is Redmoor.
How much could we get for LCCM? Am I barking up the wrong tree? Would it be such a bad course of action to take?
Thoughts?
So the bank have walked away as many of us expected and probably did so weeks ago. The BOD are back singing from the JV hymn sheet even though they've previously admitted defeat to the possibility of securing a JV (they've danced that merry dance before and at one point when Peters used to give interviews he informed us that there were a number of suitors lined up to join the venture with us - nothing came of it then and nothing has changed since, except that a large global bank took a look and walked briskly away). Finally then, the PEPR resubmission that was due to happen this year has now been put off until next year - evidently the 400k recent raise, urgently required to finalise the resubmission didn't do the trick. Merry Christmas everyone.
DVH, I believe that our valuation is a very good example of the market operating at the semi strong form efficient level. A semi strong form efficient market incorporates all publicly available information into the share value. Let's consider what information is in the public domain:
1) We've been 3 years trying to secure a PEPR for LCCM. The process, we were told, would only take a number of months.
2) We bought LCCM - an asset (and I begrudgingly use the term asset) that had previously been given away for free. The due diligence on said purchase was carried out by our Chairman who was the same Chairman who did the due diligence on Brenda ( a now jailed con artist who evidently had no operation requiring output from Cobre, a minor point overlooked by said Chairman in his due diligence endeavours)
3)Even if we get the PEPR approval, we still need to secure a $10m loan from a global bank in order to start operations- the due diligence by the bank has been ongoing since October (at least). We are now in December and the silence from Peters on progress with the bank is deafeningly screaming 'the bank have walked away and if I say nothing maybe everyone will eventually forget I even mentioned it'
4) We hired a mine manager 4 months ago and have him on payroll even though we don't have a license to mine - it was a good ploy though as it allowed us 'demonstrate' how confident we were that the PEPR and finance were about to fall into place - then, two months later, we needed to dilute to get our hands on $400,000 to allow us advance the PEPR resubmision...
5) We're a year on from PW's 'near term value' and 'newsflow' interview and all we've heard from him since is some drivel about excellent data from Redmoor - the management at Redmoor by the way, left us since that drivel was published so I imagine they're not as upbeat about the prospects as PW is.
6) We raised $700,000 to replace equipment at Cobre - I don't believe for a second that this is what the cash was used for. There was a song and a dance a couple of years ago when we spent $100,000 moving offices at Cobre and this was hearlded as proof positive that the annual contract would continue to be rolled over - surely we'd have secured some assurances from the mine operator on contract rollover before we'd sink $700,000 into equipment and then inform the market of the reasons why we were confident enough to make such a large investment?
In summary, we have very little to give any indication to the market that we're worth anything more than £6.6m and my fear is that with the AB's, JP's and PW's of this world running the show, maybe £6.6 is overvaluing the operation!
If the bank, after carrying out their due diligence, decides that they're not advancing the debt finance, is the Company duty bound to notify the shareholders via an RNS?
Just wondering as, if they are bound to notify the market via an RNS then no news to date is good news - if they're not required to tell us then for all we know the bank have already walked away and the chances of Peters admitting to another failure in a timely manner is somewhere between slim and none.
I think Peters has finally backed himself into a corner. He's officially advised that a major bank is performing a due diligence on a loan application, the proceeds of which will allow us advance to production at LC.
The bank won't waste any time in coming to a conclusion on whether or not there's a business case here. If they agree to advance the loan capital the SP will rocket, if not, our worst fears are confirmed and we've proof that LC is a dead duck that we should never have invested in.
If we have no official word on the loan application by the end of November then, in my opinion, we can take it that the bank have walked away and Peters is doing his usual communications blackout.
If only we could have a chat with our new mine manager to get his take on where we're at - employing a mine manager when we have no mine to manage is either a sign of incredible confidence in the future or a 'ruse' to mislead investors - I'm sure at this stage (if he's still in the position) the new manager knows which case it is!
The only way out of that corner for Peters et al is with news of loan approval.
I'm wondering if anyone has any experience with regard to how long the due diligence should take for the $10m loan application?
I'd suspect it shouldn't be any more than 4 weeks before a loan offer would issue or before the bank decides they're not interested in progressing.
The problem here is that we may already have been given a definite no but the BOD would keep that to themselves so unfortunately, no news doesn't mean that we haven't received a no!
Still can't imagine how a bank would advance $10m against LC considering its history and considering the capabilities of the numpties we have running the show. I sincerely hope I'm wrong though!
The last we head from Wale regarding the fortunes of the company was in an a proactive interview towards the end of last year where he spoke about 'near term news flow' that was going to highlight the extent of the market's undervaluation of SML and it's projects - that was 9 months ago! Since then, we've been informed that we have no PEPR and no finance - I'm glad he didn't feel that there was bad news on the way!
He appeared in what was to be an upbeat advertisement for our asset in Cornwall in advance of the G7 meeting earlier this Summer - the interview, if it could be bottled, would serve as a useful remedy for ADHD! This remember is the genius, who with the aid of his charts, justified the bonus paid to Peters!
At this stage, the only possibility for value being extracted from the assets is if they're being managed by a different management team, and, as our motley crew of Wale, Peters and Broome are unlikely to get their snouts out of the trough and resign, we're probably better off to just sell said assets to someone who can plot a course to production!
Peters wasn't sure if it was three or four parties that we were in detailed discussions with regarding a JV - the only thing he did know was that only one of the potential partners discussed it at board level, just one, and they decided that it wasn't worth pursuing!
The reason he advances as to why the potential JV partners weren't interested in partnering with us is down to the fact that we are not an exploration business - the solution to this is for us to raise a $10m loan to become an exploration business.
However, if we were successful at that then we'd not need a JV partner as we'll have $27m in the bank (his words not mine) at the end of 2023.......notice the nice shiny chart with all of the exceptional NPV calculations discounted at 8% which is patently too low a required return for a business such as SML but we'll let that slide for a moment. The EBIT expected at the end of 2023 is $35m - 'we didn't consider the potential interest expense because we didn't want to give the lenders a bargaining position on what they'll charge us on the $10m..............' (you'd be forgiven for thinking we had the loan approved and we're now negotiating the interest rate that the lenders are going to charge....)
The sole purpose of the listing on the ASX is to allow the asset be valued so that we can dispose of it as that's our strategy now? Talk about mixed signals - it's not that long ago that the FCFF from LCCM was to fund further developments at Redmoor? Even the interviewer was confused about looking for a listing on the ASX!
I don't believe we need board oversight, I believe we need a new board - Peters, Broome and Wale are all busted flushes - they've demonstrated a complete inability to advance any of our assets over the course of the past number of years; they've misled investors on numerous occasions and they're rewarded themselves handsomely in doing so.
I'm still not convinced that we'll get the PEPR - he alluded to environmental concerns on behalf of the South Australian Government and the delays are also down to a flood of applications for licences with the increase in copper prices - leave aside the fact that we've been more than 2 years in the process that normally takes 6 months, long before copper prices spiked! We responded less than 10 days ago with further information that had been requested by the authorities - was this the outstanding information from the government request from December 10th last? We were told in an RNS that all of the required information had been submitted - again, smoke an mirrors.
The biggest fear I'd have if I was a lender is the potential for Peters to reward himself with an obscene bonus for having negotiated the loan if it were successful!
I'd just lime an honest appraisal as to where things are with regard to the various projects that SML are involved in and unfortunately we are not going to get that from this BOD!
In addition, if we're borrowing $10m for the production and further exploration costs, why on earth would we want a listing for LCCM on the ASX - the costs to be incurred in obtaining and then maintaining a listing surely wouldn't make any sense if we get the $10m in debt?
Leaving aside the fact that Peters, the self proclaimed financial deal making whizzkid has had 2 years to get some description of a financing source in place in anticipation of the PEPR approval and we now find ourselves retaining yet another firm of consultants, this time to try and organise a loan of $10m - does anyone honestly believe that a lender will advance a loan of $10m for a project that we couldn't locate a JV partner willing to contribute just $2m to for a chunk of the business? It was hailed as a success that we only needed $2m to get production up and running and Peters was working hard behind the scenes discussing/negotiating with several interested JV partners - what was the outcome of these discussions? We've also taken on a mine manager, to manage a mine that we don't have approval to carry out mining activities in nor the finance to start mining even if we did have said approval! You honestly couldn't make this stuff up!
Lupi, I'm staying because I see long term value in Redmoor if we can get rid of the current BOD - the facts speak for themselves, the BOD have lied to the shareholders time and time again and have consistently failed to meet any targets that they've set for themselves! The Redmoor project is a gem that can be monetised by a competent BOD.
Lupi, there is absolutely no possibility of a lender advancing a $10m loan to SML - absolutely none! We failed to entice a JV partner to the table and JV partners are less risk adverse than lenders! In addition, LCCM has absolutely no value without a PEPR and even then it only has value if we can extract the copper economically. Remember this asset was previously given away, for free! I don't expect the PEPR to be granted, there won't be any loan, there won't be any free shares with a listing on the ASX. The value here is in Redmoor IF we can get a decent BOD together to monetise it for us.
I don't believe we'll even get an update next week - I'm not expecting the PEPR to be granted as in my opinion there's a problem with it and we're not being told what that problem is. I see posters mention that Australia is pro mining which is true but, it's for that very reason that this application would be approved by now if there wasn't a serious problem. It's more than 2 years since we delayed the PEPR application process until after Australia Day because 'nothing happens until after the holiday' - then we issued a draft application and we later received a response to the draft but rather than submit another draft we decided to take our time to submit a full application "because our consultants believed that was a better course of action" - I've lost track of what's happened since except that Peters told us we'd have approval by next Wednesday (pay day for him btw, another $40,000 winging it's way to the part time CEO). I'll be shocked if there's even an acknowledgement of yet another missed deadline next week - the AGM will be held online too with an opportunity for shareholders to email questions and a sample of the censored ones will be answered!
Hi Blacksheep, I don't understand why we'd be resubmitting documentation that we had already submitted. Is it because we submitted in draft form, the authorities have approved the drafts and we then had to submit the 'official' versions?
So more information was requested a month ago regarding the LCCM PEPR application, we weren't informed and it took the numpties a month to respond!! You couldn't make this **** up and only for the fact it's so serious it'd be funny. The incompetence of the BOD knows no bounds!! There's no hope for a SP recovery with them at the helm.