Member Info for Simon_Said

Thought I'd share a post I just made on ADVFN regarding Wick which I've just started reading up on. If anyone has any corrections please let me know.

Wick was an exploration asset that Reabold got indirectly by investing in Corallian. The Corallian investment was likely primarily to gain exposure to the Colter prospect, which is appraisal stage and a better fit for the Reabold business model.

All this said, Reabold have zero cost obligations for Wick, or Colter or any other Corallian wells, as they are investors in Corallian, not partners in these wells directly. This means if Wick does not strike oil, the downside risk for Reabold is extremely limited. Reabold have a 32.9% interest in Corallian, which has 40% interest in Wick. So a miss won't have much impact on Reabold.

If it does hit though, and the structure they're going for is as indicated, it's a big hit, and will disproportionately benefit all involved due to the low costs. Over 50 million barrels recoverable by Corallian's estimates, due to the high relief of the structure, 5 kilometres up-dip from the Lybster field, which has been developed from onshore. It is also de-risked somewhat by 3D-seismic and the presence of several nearby discoveries. The drill will cost Reabold nothing, and as a shallow offshore jackup will only cost the direct investors £4-5m which is extremely low for a chance at this level of OIP.

Also worth noting that the principle company involved in Wick is Upland (UPL), whose well-respected CEO Stephen Staley has shown considerable confidence in Wick and placed £3m of shares in his company toward spudding it. Staley is a 30-year veteran in the industry and alongside various very successful juniors, has also worked for BP and Conoco.

Super list, thanks Chris. I have saved those to a document which I'll keep updated and periodically share.

The key here is that even a low barrel count will provide meaningful financial return, and this is just the little workovers that were a little 'bonus' with the Gaelic deal, which was really about the main fresh wells (at Monroe Swell, West Brentwood and Grizzly Island).

The fact that the economics are so favourable even on the 'bonus' project in California, before we even get to the proper ones there, is very pleasing.

Wow, what a typo that was. Combined total from 4 workovers of *40-400* BOPD. Lol.

That is, 10-100 per well.

Brain not in gear today...

I have given up since I realised the troll questions, both here and on ADVFN, were basically amounting to 'BUT WHAT IF THERE'S NO OIL IN'T'HOLE'. Welcome to E&P companies! No point just coming to a forum having done insufficient research and then 'challenging' forum posters to explain what will happen if there is no oil. It's facile.

Apologies to anyone who had to scroll through the back-and-forth. Back to business.

Meanwhile the dewatering of the workovers continues. Expecting a combined total across the 4 workover wells of 10-100 BOPD total (estimated oil-in-place 1 million barrels), but with the tiny capex to bring these existing wells online, and the tiny opex to run them due to their shallow depth, these become cash flow almost immediately, and completely cover the running costs of Reabold and then some. A nice gentle introduction to the drilling campaign.

I did warn last week that I felt the dewatering was going to take longer than some here were guesstimating and so it has proven to be. They have to inject a lot of water to clean up old wells and getting it out and transporting it away is a more complicated job than some realise. I expect it to be complete by the end of this week.

Today's interview with the CEOs. Only 3 and a half mins, well worth a watch.

https://www.brrmedia.co.uk/broadcasts-embed/5b718ed07e92fe237b0e3e4e/?event&popup=true

1) Cash burn is almost nothing because Reabold's only 2 employees are the 2 CEO's and they don't even have an office, only a registered address.

2) The investments have indeed been mostly larger than £1.5m but that doesn't change the fact that it remains the phase 1 target as described by many investor presentations and interviews. They can find more at that level and keep hinting in interviews and at the investors drinks the other week that we should expect to hear about more investments soon.

3) Stop talking about 'commitments' in the 'Gaelic deal'. Read the acquisition RNS. They bought Gaelic wholly, and thus have total control over what they do with its interests.

The irony of all this is your latest point I actually agree with. It definitely makes sense to wait for the West Brentwood spud before deciding on the next asset acquisition and I strongly suspect that's the plan.

But to be clear, there is no shortage of cash, and the plan for California can flex according to needs and results.

"Who are Gaelic"

Right, so you didn't read RNS's then. And you don't understand the California deal at all, as you've already demonstrated.

It's not about 'pulling out of the deal' - they bought Gaelic Resources in its entirety, so can choose what to pursue with its interests. This isn't a JV or farm in.

Once again... ****They are not committed to $7m in California****. They do not have to drill all the wells. I am not repeating it yet again, it's getting ridiculous. The wells are low risk shallow plays in previously producing areas, but if they don't get good results at the off, they are NOT, I repeat not, and once again NOT obligated to drill all of the wells in this play.

And if they do go ahead with all of the wells, there is cashflow from the earliest ones (Monroe Swell workovers and the first West Brentwood well) almost straight away which will have been piling up for quite some time by the time it's required, and other projects in the Reabold stable may be either producing or sold off by then too.

Cash from the placings is £13.55m (£3.96m + £1.76m + £7.83m) . I have spoken to some other Reabold investors and we estimate the available cash for them to still invest, allowing enough for operating expenses and their additional Corallian investment a few months ago, is around £4-5m. Their target investment size is £1.5m at this stage (see investor presentations), so one more project is not only very reasonable, but the CEO's have publicly stated their intention to do this, many many many times, as recently as last week!

A £1.5m investment in a further asset leaves enough cash in the bank to account for whatever may be. There is no controversy here.

I didn't hear him say 'a couple of months'? Think it'll be much sooner than that.

However maybe sooner isn't better here. They have the £25m now to get the long-lead items ordered, and the lithium pricing wobble will likely stabilise now plenty of commentators are weighing in to dispute the 'oversupply' myth.

LOL ok now I see how you got into this pickle. You really don't seem to understand Reabold's business model.

The Corallian and Danube (not 'Danude') figures you're quoting are what has been *already spent* on acquiring equity in those companies months ago. You are subtracting that out of *current* cash reserves! It's already spent and they have no cost obligations to the operators as the wells are drilled. If you can't understand why you're wrong here I can't help anymore. You have totally misunderstood the business model.

As for California, the initial costs are much lower than that, the total figure there is over time depending on how successful the field is and how much of it they open up. Either way this is a shallow play, so it's not particularly expensive (hence $7m for 5 wells which is a pittance in this industry), and they have said that part of the cost will come from production along the way. If the production is weak, they are not obligated to drill all of the wells.

*6-8 weeks

Do not understand all of you accusing him of being 'vague'. What did you expect in a conference call? News has to be RNS'd. He couldn't reveal anything significant there, that was never going to happen. This was about taking some questions and painting a fuller picture.

The lack of deep comment on the financing plan is very obviously because they're in talks now and working it out. What did you want him to say, that would not require RNS?

They got the initial £25m debt drawdown so they can get going, and Secker talked quite relaxedly about using that to order long-lead time items such as the kiln and the crystalliser evaporator circuit.

I expect the funding strategy going forward will be revealed in the next few weeks. There is also the vital engineering work all finishing in the next 6- weeks which will provide a total cost to complete figure for the plant and possibly reduce further the processing cost projections. That's all obviously vitally important to the bottom line. I think people often skim read over front-end engineering etc but it's all in flux and crucial to making this mine make economic sense.

He underscored a lot that UK support was significant. My notes from while he was talking (not direct quotation!!):

'Surprised how strong uk support was, significant equity support from some of the larger and smaller funds, and retail investors. UK strong. Problem was lack of support for lithium in general in Asian and US markets. As they were marketing, prices in AUS, Can and Sa were falling. Significant softening in whole market in last 3-4 months, they were caught up in it. Also lots of shorting among all of them. 60-70% in market at time of all transactions were short, betting on falling equity prices.'

Overall it sounded to me like they've been having a lot of closed-door discussions with UK equity investors since the placing failed. He really seemed quite unconcerned about funding and was full of details about construction and the future. Charismatic he is not, but Secker is a very sober and rational man and he certainly did not come across as somebody concerned with existential matters when it comes to Sonora.

He referred repeatedly to the $4k/tonne cost and advanced permitting situation as Sonora's key massive advantages. I always come back to these too.

He also made clear that the next funding package will include a PI element like the last one, so PI's will be able to participate.

I have loads more in my notes that I'll bring out as it comes up.

I am not going to go through each of the 6 drills with you, but they are all fully-funded without using current cash reserves. This is because Reabold is in most of them as investor, not farmor. The only one with cost obligations is the Californian operation, but the costs are extremely low and already accounted for in current figures (see the RNS's from around that acquisition).

The fact that you thought Reabold had drilling cost obligations for the Corallian (Colter and Wick) and Danube (Parta) drills, and the fact that I now learn you're a spread better, suggests you are saying more here than you probably should given your level of knowledge about this company. Perhaps do some RNS research before asking people on forums to do it for you.

There is no question that they are looking to use cash for another asset, as they talk about it all the time in interviews and RNS's. Not much point challenging that!

Everything else you said is just dreary speculation, not much I can argue with if you just take worst-case scenarios. Sell your shares?

'A track record involving failure to raise capital for a lithium project is always a worry.'

Really need to be clear here - that is not specific to Bacanora. It's been hard for everyone. The sector is being challenged by wide ranging sector forecasting and generally turbulent commodity pricing. Sonora just happens to be further ahead than most of these projects, right at the point of full-on construction funding being required. The same problems would affect any of them if they were this far advanced. More so perhaps, given most lack Sonora's key strengths (already permitted and offtake already agreed).

I really didn't expect all 4 workovers to show good oil, so I'm very encouraged to see that. The NPV for the workovers is £10m (a third of the entire market cap!), owing to the low costs of development capex and production opex. So despite the low BOPD numbers, still very lucrative.

Also very happy to see the drill site for VG-3 at West Brentwood is already prepared and the rig mobilised ready to spud this week. US oil service companies are well-known for their rapid speed, and the RNS says just 2 weeks anticipated for drilling after spud. May get some RNS updates as the drilling progresses if they plan to analyse the drill cuttings. This well is updip from a previous producing field and identified with 3D seismic, so chances of a strike are good.

This is all with Wick now only a few weeks away, and the money still burning a hole in their pocket that will likely show up shortly as a new asset acquisition (the last of 'phase 1').

Clearly some traders have taken the 2 weeks drilling time as an opportunity to sell out and chase other stocks, but there are so many ongoing projects here which could express news during that time, I daren't sell any myself.

Cheers all.

Cheers Earache, all understood.

The article: https://investingnews.com/daily/resource-investing/energy-investing/lithium-investing/simon-moores-challenges-opportunities-lithium-market/

The part I quoted was at the end. It's the same opinion I've seen attributed to Joe Lowry and I think KC and PS have alluded to before. It seems those that understand the lithium space understand that simply taking headline figures from major resource firms (especially in China) about their maximum capacity and using those to forecast oversupply is a simplistic way to make such a calculation. It led to the Morgan Stanley report among others. The reality is that firstly, those numbers are likely wildly inaccurate. Secondly, there is no one 'lithium', the reality of mining this is that the industrial chemical processes involved in processing the ore into the products actually needed have limited throughput, and much of what is being sold is of low quality.

Worth reading around as there are many voices in this discussion over lithium in the future, but all the ones I can find who actually understand the sector are baffled by the Morgan Stanley report and it's simplistic basis.