Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
And here's *my* summary of a few selected points:
I think Graham has to put a brave face on things but I he understands that Calvalley has become a serious risk as the conclusion of the deal drags on. It couldn't really be otherwise. I agree with him there's no reason for Calvalley to string SOU along. However, there was an odd-sounding statement that "the delay is getting a fully binding agreement that both sides are able to sign". We can't expect all plain sailing, but is there some sort of serious tension there? He and GD were at pains to point out that it's their job to ensure that there's a plan B. That's no guarantee that there *IS* one. Same with plan B for the LNG storage. The best laid plans can go awry -- the current delays are proof of that.
There were a lot of the usual platitudes: everyone is working hard, it's not going as fast as hoped, all elements of Phases 1 and 2 are complicated and interrelated. It may all be true but it's not very reassuring.
I thought GD's answer on how the bond was going to be paid was a bit evasive. We have to "look at revenues from Phase 1 and 2 together". But Phase 2 is very unlikely to be bringing in money when the bond falls due. We have to take his word that it'll be sorted out by a "corporate debt strategy". Overall there's a lot of stuff that has to be taken on trust. Everything will be fine until it isn't.
Anyone pinning their hopes on successful new drilling is being very optimistic. There's no evidence that SOU will have the money for it under their own steam before 2028 or later. And no sign of anyone rushing to farm into Sidi or anywhere else despite years of "talks".
Here is ChatGPT's summary of Graham's presentation and the Q&A:
1. Year-end results disclosed
2. Recent progress at Tendrara
3. Approximately 65 people on site
4. Safety measures in place
5. Two layers of tank construction complete
6. 11 layers in total planned
7. Jacking system in place
8. Well rig activities pending
9. Special metalogy for completion tubing
10. Safety and control system installation ongoing
11. Equipment awaiting rig arrival
12. Phase two work focused on office-based activities
13. Bank debt negotiations ongoing
14. Equity partner search in progress
15. Gas sales agreement modifications underway
16. Questions addressed in investor meetings
17. Recording and Q&A available post-event
18. Company directors unable to trade during closed periods
19. Cash flow management a priority
20. Placing to raise funds not confirmed
21. Share price improvement desired
22. Gas delivery targeted before year-end
23. Confidence in meeting development targets
24. Supply delays addressed
25. Temporary storage options explored
26. Customer readiness assured
27. Funding and debt obligations managed
28. Potential alternatives considered
29. Moroccan state support acknowledged
30. Funding adequacy for production assured
31. Project complexities causing delays
32. Partnering deal delay addressed
33. Corporate debt restructuring strategies explored
34. Director trading restrictions explained
35. Calvalley deal negotiations status clarified
36. Interest in City license discussed
37. Phase one cash flow projection discussed
38. Feed process not yet initiated
39. Calvalley deal closure timeline uncertain
40. Continued efforts to finalize deal with Calvalley
Video is here: https://www.youtube.com/watch?v=kJhxgBBjHP4
I fed the video to ChatGPT to summarise. Here is Gary's piece:
Gary Dempster presents an overview of the company's year-end results, emphasizing the strategic evolution since 2020. He discusses the company's shift from an exploration-based model to a monetization strategy, focusing on developing discovered resources in Morocco. Dempster outlines the challenges faced during this transition, including restructuring corporate debt and resolving a legacy tax issue in Morocco, which affected investor confidence.
Despite these challenges, the company has made progress in securing funding for its projects. Vendor financing and debt financing have been obtained for phase one of the project, with negotiations ongoing for phase two. Dempster underscores the time-consuming nature of these endeavors due to complex transactions and interrelationships with various stakeholders.
Despite being in an investment phase with no revenue generation, the company has maintained capital discipline, significantly reducing corporate expenses over the past few years. This disciplined approach aims to optimize working capital until revenue generation begins from the phase one project and subsequent phases.
Key financial metrics for 2023 include a pre-tax loss of £7.2 million, primarily attributed to the ongoing investment phase. Administrative costs have decreased compared to the previous year, reflecting the company's efforts to streamline operations while maintaining project development activities.
Additionally, Dempster provides details on the company's financial structure, including its market capitalization, cash position, existing debt obligations, and financing facilities. Notably, the company has managed to secure funding through various instruments, including a convertible loan facility.
In summary, Dempster emphasizes the company's strategic focus on project monetization, despite the challenges encountered along the way. The presentation provides shareholders with a comprehensive overview of the company's financial performance, strategic direction, and efforts to unlock long-term value.
"It's been half an hour and there's not been a negative spin put on it. Come on guys you were all fingers last night."
Well, it's only half an hour since I got out of bed. Does that count?
Yes, this RNS is a sign that SOU is gearing up for exploration and Graham will be announcing the drilling plans tonight. I'd expect to see a large bounce in the SP today. NOT!
I am quite literally speechless how clueless some of the people on here are. SOU have missed a bunch of work requirements on their permits. Or, rather, they WOULD have missed them had ONHYM not conveniently kept extending them or altered the terms. I predicted here a couple of months ago that we would be getting an RNS about an Anoual permit extension, if only the for the obvious reason that SOU had no chance of meeting the terms and ONHYM seem to have nobody else to turn to.
Did anyone even bother reading the RNS in conjunction with the December 2022 one? Because if you didn't, you probably didn't notice the stunt that was pulled. Today's RNS says that all the terms of the initial period were met and SOU are entering into the complementary period. The initial period was supposed to finish around the end of 2022 and the work requirement included the drilling of one exploration well with a Triassic objective. SOU obviously missed that by a country mile. They got a 12 month extension to the start of 2024 and missed that deadline too. Now the extension has itself been extended to July to keep them legal, and the well commitment has been quietly dropped -- you didn't see THAT mentioned in the RNS.
In fact, the RNS could be read by a sufficiently gullible person (which clearly includes some on here) that it's all about SOU's plans to move ahead with drilling M5. But that reference is merely to the aspirational farmout program announcement in a nearly two-year-old RNS, for which SOU got no takers for the drilling part.
Calvalley clearly saw an opportunity to make money by gouging a large chunk of the Tendrara concession from SOU while they were strapped for cash. And they still haven't even fired up the engine on that piece. Assuming they do, it's no guarantee they have any interest whatsoever in going wildcat drilling in Morocco's calcification-prone Triassic. This is just another can kicked down the road. There will be plenty more over the next 2-3 years during which SOU have no money for exploration.
I think we could WRITE Graham's presentation for him at this stage:
1) There will be no new material facts. The RNS already told you that.
2) He will say SOU is in a great position and everyone is working really hard, but it's not going as fast as he'd like.
3) He'll mention all the wonderful things happening on site, without acknowledging that they are many months behind schedule.
3) He won't mention the company's current cash position.
Adam2911: "Right girls and boys...I'm putting my reputation on the line here.. Cavalley is a done deal.clues were on the last rns..if its not then I will stop posting.thats a promise..."
An empty promise unless you give us your drop dead date. On what date, in the absence of an RNS, will you stop posting?
Lyndondavies1: "Looking at the progress on site at Tendrara ,this must be costing a lot of money,but going strong. How will we manage to keep that going without the deal?"
The Phase 1 work is being covered by the ongoing drawdown of the Afriquia Gaz loan. It doesn't cover G&A and other SOU expenses, which must be a considerable problem at this stage. Also, it's hard to imagine the lengthy overruns are not causing cost increases on Phase 1. Calvalley will pay back costs to SOU and also provide a loan facility to cover cost overruns. That would dig them out of the hole they are in now, albeit with additional dilution. I imagine there is no immediate threat to Phase 1 work, but SOU themselves must be running on fumes and desperately in need of the cash injection.
More than enough time for a top-up seeing as the Calvalley deal, even when it arrives, is not the saviour people think it is. There's still a shortfall as far as I can see, even just to pay back the bondholders in 2027. Maybe 2028-29 to see a bit of value if SOU survives that long.
In June last year SOU said they were raising £4m to provide working capital for the next six months. They only actually raised £2.5m, enough for less than four months pro rata. Ten months later they are still going. Is this some kind of loaves and fishes miracle? Indeed, it's of so little consequence that Graham hasn't even mentioned it in his Q&As. Remarkable.
This is very strongly reminding me of another ill-fated company I invested in (yes, I know how to pick them). The would-be farm in partner led them a merry dance for a year and in the end never came up with any cash. There has to be tough questions about Calvalley's seriousness if they have not managed to consummate the deal at this point, and about Graham's competence in allowing it to continue this long. What started out as one suitor among (presumably) several, has become an existential issue now. If Calvalley don't complete, SOU is as good as bust.
Earlier post got truncated. I was pointing out that GL is talking about no more dilution while failing to note that there's potentially hundreds of millions of new shares already baked in from last year's loan note. And while he says that he "hopes to be closing on Phase 2 before having to go back to SH for more money", I take that to mean as soon as he gets a lift in SP from closing Phase 2 he'll do a raise. It is the tried and tested SOU approach after all.
Apart from the cringe factor due to lack of progress, there was also actual BAD news: definitely no hope of LNG tank completion before “early 2025”. Remember, “early next year” for SOU has always without fail turned out to mean “we have absolutely no firkin’ clue”. And the alternative temporary storage is now “only if economic”. So I’m going to predict here and now: first Phase 1 revenue not before H2 2025. Call me on it when I’m wrong.
Phase 2 FID clearly going backward as well. How many times have we heard about the FEED having to be redone? Should probably save the hassle and wait till everything else is in place and then figure out what the hell year it is for the FEED price update. My prediction for Phase 2 revenue: definitely not before 2028.
And finally this absolute howler:
“As we deliver on our work (slower than I want) but as we start delivering on all of these activities that the market will start picking up and recognising that we’re not far from production, we’re not far from sales, we’re closing a large transaction to fully fund us for our project. So I think hopefully the market will start rewarding us.”
So would he at least agree that the market is punishing him for an absolutely catastrophic delivery record so far?
That entire video could have been summarised as: "ABSOLUTELY NOTHING NEW TO REPORT (except Graham's new moustache and a few bits of bad news slipped in surreptitiously)".
Really, GL should proof-read his answers and weed out those in the "pathetic excuse" category. Easter happened? Who'd have guessed it, we never saw that one coming. Also, blaming the wind sock? A quick google against JUST www.moroccoworldnews.com:
11 Aug 2023 — Morocco's tourism hub Marrakech was hit yesterday by a sandstorm that plunged the city into chaos.
19 Oct 2023 — Strong wind with local dust storms of 80 to 100 kilometers per hour are expected
20 Oct 2023 — Morocco's weather office forecasts more dust storms will hit several provinces across Morocco
23 Oct 2023 — Morocco’s Highway Company Asks Citizens Not To Travel Amid Stormy Weather
1 Nov 2023 — Moroccan Drivers Warned of New Dust Storms in Coming Days
15 Dec 2023 — Morocco's Ministry of Equipment urged road and highway users on Monday to exercise caution and vigilance due to strong gusts of wind and sandstorms (for 3 days)
23 Jan 2024 — Morocco's Ministry of Equipment has warned road and highway users to exercise caution and vigilance due to strong gusts of winds and sandstorms
07 Feb 2024 — Strong winds, thunderstorms and snowfall to hit several provinces
09 Feb 2024 — Strong Windstorm Causes Flight Disruptions Across Morocco
22 Feb 2024 — The Moroccan General Directorate of Meteorology announced today the likelihood of strong winds accompanied by dust storms
02 Mar 2024 — Several provinces in Morocco are expected to see strong wind and dust storms
22 Mar 2024 — A new weather alert indicates that strong gusts of wind with dust storms ranging between 75 to 90 kilometers are expected to continue until Sunday
24 Mar 2024 — Morocco is set to see strong thunderstorms accompanied by hail and powerful winds, along with dust blowing on Sunday
08 Apr 2024 — Low or absent visibility caused by strong gusts of wind and dust storms expected this week in several provinces across Morocco.
We're not talking about freak events here. The dusty Moroccan winds from the Sahara are a regular feature, they even have a name: the sharqī (chergui). Regular events are things you plan for, not make excuses for. And for god sake stop telling us "it's not going as fast as I'd like", it makes you sound like a helpless victim. Ever heard of the concept of "the buck stops here"?
No new update whatsoever on the deal or finances. No explanation for how things run entire quarters (and even years) over time budget. Are you completely unable to learn from past experience? Lots of repeating of stuff we've heard already, but never addressing the question of WHAT IS THE CASH POSITION RIGHT NOW? It's clear there's no plan B if Calvalley doesn't come through but would be nice to know when that will cause serious trouble. Also, no plans for more dilution but fails to mention that there's hundreds of m
"If the Calvalley deal gets completed (it is concerning how long it is dragging) then most of the risk disappears. Then any success with the drill bit and it will be transformational."
Sorry to point this out yet again, but SOU hasn't got a brass farthing to pay for any drilling beyond TE-4. Nor will they have until 2027/28. They also now only own 30% of any wells on Greater Tendrara, and even less should Calvalley agree to carry their costs.
Best of luck Fernan10. I've just passed the third anniversary of selling most of my holding. It was around the time of the first bond restructuring when I decided there was something amiss. Obviously SOU has tottered on, but even I am amazed that the share price was 50% higher when I sold than it is now, three whole years later.
End of first week in Q2. Seriously, WTF is happening? Where's Calvalley? What's happening on site with Phase 1? A time lapse movie of the past year wouldn't win any awards. It would show the LNG storage tank foundations being completed a year ago and a few rusted steel sheets getting installed last week. The 2023 half year report said there would be lots of equipment arriving 2023/ early 2024. Even with the usual SOU overbroadly-specified timelines they are a mile off target.
If the pace picks up, there are months and months of construction remaining, and further months of commissioning. Chances of revenue this year are exactly zero. If things DON'T speed up, it won't be early next year either. Unless Calvalley are writing the cheque for back money right now, SOU will need to go out and look for minimum £3m. Will it be Catastrophically Bad Deal V2.0 for GL?
There is no "last 250k". That's the principal amount remaining on the convertible notes, everything else has been converted to shares. The money itself was paid to SOU in Jun 2023 and is presumably long since burned through. SOU themselves said that £4m would get them through to the end of 2023, and in the end they only received £2.5m. So they should have had a major deficit in working capital in 2023, never mind Q1 2024 which is now over. The SP Angel flash note suggests that SOU have reduced the burn rate to £3m/yr so they have probably stretched the convertible note money out a bit. I can only imagine they are now in serious difficulty for funds and are scrabbling around looking for the next source to tide them over. Let's hope it's less dilutive than the last one. Also, the Afriquia loan can only be drawn down for actual work on Phase 1, not for ongoing working capital.
It's anyone's guess what the hold-up with Calvalley is. For something that was supposed to be substantially done in 45 days from last June, it's inexplicable. Also, the SP Angel note says that first gas has slipped from H1 to H2 2024. All part of GL's creeping deadlines -- first gas was never "H1 2024", it was supposed to be end of 2023, possibly slipping into this year. On the other hand, if we go back to the start of the Micro LNG project it was supposed to be first revenue in 2021 !!! That was according to Mohammed Seghiri, before GL joined. Good thing Mohammed pocketed 13 million shares for his efforts on Phase 1 FID before the project turned out to be more than three years late.