We would love to hear your thoughts about our site and services, please take our survey here.
Something does not quite add up here.
If they had previously revised the EIA (as we were led to believe) to use only grey water then why was the permit not approved by Regional/National. The company also keep stating that they believe they had addressed all the issues raised which is consistent with the grey water hypothesis.
Incorporating KMP does not therefore reduce fresh water consumption if it was already assumed to be zero in the revised EIA !
Raises the question therefore as to whether it is other material items that are contributing to the hold up.
I remain convinced this will delist in due course and end up in Altair/DP hands.
ETX a biotech I follow announced yesterday a raise with its major shareholder along with a delist from AIM at the same time; citing dire UK small cap markets and no risk appetite.
Read across here in my view. DP will blame the markets and get this for next to nothing along with interested parties.
Pretty much as I called in that they were forced into an April raise to satisfy the auditors that they are a going concern and to also provide some cash runway beyond the next few months: as they clearly have no idea how long CRUI will take to make a decision. Also those large sells in recent weeks smack of some insiders forward selling ahead of this raise.
2 x key takeaways for me:
Firstly a positive in that they were able to raise some funds from our SI even without the EIA in the back pocket. Clearly this removes a major risk and provides us with 12 months cash minimum. However the cynic in me thinks GSM had no option other than to support Emmerson or else risk losing out on their entire investment to date.
The other point to note is KMP is clearly in its infancy and requires a lot more cash to determine commercial viability. Instincts are scoping study results were rushed out as the company sensed National would outright reject the EIA in its current guise; hence this provided a stay of execution with the all too convenient timing of its release. The challenge now is what will CRUI require to satisfy themselves that this is a game changer and how long will this take. Yes they could issue the permit with a shed load of conditions but that makes a mockery of the process so I suspect they will want to see some fairly robust evidence as to KMP's viability - could be months therefore.
Frustrating as it is I still think this has a long way to play out yet and we could see the SP drift back to circa 1.5p if the days become weeks become months as is typical here. At that point it becomes a very interesting level for a top up/buy in.
They cannot escape some sort of update in April given Q1 report due plus Annual Report to be published by EOM.
Crucially we will better understand cash runway and if they can indeed avoid the need to seek bridging funds whilst they wait this one out.
The frustrations, as this continues to drift, coupled with a shot small cap market where any positive news gets heavily sold into is what SP if the permit lands tomorrow; instincts are one will be able to pick up stock for no more than 5p initially.
Suspect are lot are therefore sitting on hands waiting for AR and preferring the ESIA in the back pocket given risk reward.
Agree Kim herein lies the issue when one provides the bare minimum of information to S/Hs and intentionally confusticate with ambiguous wording. Were they really "pleased" about the referral being upheld or damn right miffed it's back to CRUI as National could not approve the EIA in its current guise.
We were led to believe that they thought it was in the bag (confident) prior to KMP; now it transpires KMP is the White Knight so which one is it.
Do CRUI actually support this project, is OCP still hovering, how much more testing does KMP require to validate, have they exhausted right to appeal hence this is last chance saloon, cash position etc.
The market reaction to pleased "upheld the referral" I think says it all to be honest. If this was to be believed then there is no way we should be heading backwards.
BTS - they had $3.5m @Sep 23 as per interims. Cash burn (admin costs) is circa 300k per month before any on top costs (scoping study etc). So yes I agree they have cash at the moment but it runs out in 5/6 months according to my calcs.
This raises 2 x issues. They need 12 months cash run way as at end of April in order to get annual accounts singed off as a Going Concern by auditors. This in itself may force their hand to complete a raise in April.
The other issue is they cannot simply drift close to the point that they run out of cash so will need to start putting in place contingency measures very soon to avoid this. They simply have no idea how long this next phase will take given it took CRUI 3 years previously just to get to the point of referral.
So not saying they will definitely have to raise but I believe it's much tighter than you think - unless they are extremely confident EIA lands within a couple of months......."Imminent" shall we say !
For me the entire project now rests on whether Emmerson can convince the CRUI as to the viability of the new KMP. In the absence of this they have clearly been unable to get the EIA over the line at either Regional or National level; hence the requirement to update the EIA with this new process.
The question however is can the CRUI reasonably sign off on the permit on the basis of a new revolutionary process not tested in a commercial environment and where the company themselves state that further testing is required to optimise. Will they require further independent analysis and what does this look like.
This still has a long way to play out in my view and the outcome remains very finely balanced. The market is seeing this news as fairly neutral which I think is about right. POS maybe improved marginally.
What happens if CRUI reject (cannot approve !) again on the basis of an unproven process in practice (requires further work); presumably the right to appeal has been used up now leaving the company back in a holding pattern, seeking funds. National can then say we did our best to support you.....
As said the lack of detail from the company make it practically impossible to make an informed decision as to likely outcome.
First the positive they have not killed the project. This may allay some fears of underhand activity behind the scenes.
The big issue however for me is we continue to be drip fed the absolute bare minimum of detail with increasingly ambiguous wording. This can equally be read as National could not approve the EIA in its current guise so they are giving the company the opportunity of another shot.
In my experience if they are genuinely "pleased" with this news then we get a lot more flesh on the bone as to conversations, the process, next steps, timings etc. If unsure one obfuscates with ambiguous wording.
The other issue it raises for me is we were assured that all the water issues had been resolved and they were confident of permit approval. The inference with this news is that they had clearly not addressed those issues hence the EIA could not be approved as it stands either by Regional or National. Presumably the EIA now needs to incorporate the new KMP to get it over the line which in itself raises further questions. Does Regional accept KMP at face value, does it require further independent opinion/testing etc.
I am also of the opinion that they will need to raise some more cash in Mar/April in order to get the Annual Report signed off as a GC and to provide some further cash runway. The question is how are they going to do this and at what level of discount. Was the recent broker note a prelude to this.
All in all more questions that answers for me so we are left trying to fill in the gaps. The company are not helping themselves with providing the absolute bare minimum of information to SHs. Cynically is there a reason for this ?
Finally if BOD are genuinely "pleased" with this news lets see some deferment of remuneration pending permit. They could even take equity in lieu as presumably they consider this a fantastic entry point given its just a case of rubber stamping by Regional !
Cash is going to be the next challenge at this rate.
We know from the interims that they had sufficient cash to see them through to around September (assuming the scoping study did not incur significant additional expenditure).
They cannot however drift along until they run out so will need to put in place contingency measures pretty soon. The question is do they realistically have any options in this regard (without the permit); unlikely one would presume
They also have the small matter of needing to publish the Annual Report by the end of April. As it stands I cannot see the auditors signing this off as a going concern as they simply don't have a further 12m cash in the absence of the ESIA.
One way or another this all therefore needs to come to a head pretty soon. Its pretty clear the company have been tip toeing around the authorities through fear of upsetting the applecart. Understandable post earthquake but its fairly clear now that "National" operations are back to BAU hence at what point do EML need to get on the front foot.
Sense April could be a defining month here with the AR due to be published and Q1 trading update. If still in a holding pattern at this point then fearing the worst to be honest.
@Aghmir - have you already asked then about the permit ......any response etc ?
Trying to square the circle here. Lots of "National" meetings happening so how is it possible that the last documented meeting that ruled over investor appeals was Nov'21 ? Must be a huge backlog or are they being reviewed offline.
Additionally the audience is broadly similar re. Investment & Ministerial committee which is why previously they just rolled one into the other to hear appeals. Investment committee has met 3 x since EML "appeal" so surely once you have the guys in the room you just knock them out afterwards.
Did ask the company for thoughts but no response.
Honestly not a scooby what is going on here....."When you have eliminated the impossible, whatever remains, however improbable, must be the truth" Big Foot ?
Once can just picture the line of questioning:
PJ: "So you are telling us that the Ministerial Committee has not ruled over an investor appeal since Nov 2021 but that you are very confident you will get your permit soon. Do you not stop and think that just maybe they are playing the long game waiting for you to run out of cash so can get their hands on your assets on the cheap ?....Its not for me I'm out".
GC: "Trust me it's imminent"
Some interesting snippets in here re. the role of the ESIA.
https://www.iisd.org/system/files/publications/igf-esia-background-en.pdf?q=sites/default/files/publications/igf-esia-background-en.pdf
What is more damning than anything here is how quickly they have to refinance the previous re-finance. The gaps are shortening which is never a good sign.
People were questioning why they were effectively giving the business away when Italy MDC refinance was imminent; well here is your answer it is fairly clear hardly any of that 2.9m found its way back to them. They have never, as far as I can see, managed a single scheduled debt repayment.
The financial mismanagement here is simply staggering.
They were "confident" when submitted the appeal last July. Perhaps next RNS we need to see an upgrade to "Uber confident" !
I think we would just take a hearing date for now. Are we to believe this committee has not met once in the last 7 months and there is nothing yet scheduled in for 2024. How does it work .....send out a Group WA with morning coffee saying fancy meeting up today its been a while.
Nothing passing the sniff test here at present.
Back to holding pattern and a drift back I suspect after a relative flurry of activity.
The more I think about it I just cannot envisage a world with 2 x independent operations which rules out an EISA anytime soon.
The time required to either establish some sort of formal partnership agreement or tactically push us to one side has to be considerable; even what with has gone on before.
Maybe licensing revenue from KMP will land first !
The recent RNS is indeed overwhelmingly positive and the SP appears to be reacting accordingly. It does however pose a number of questions with regards to both the convenient timing and content.
For starters we have the Technical Team who, whilst twiddling their thumbs awaiting the permit to land, have knocked out a new, ground breaking, industry changing, patent pending processing route (KMP); not to belittle this achievement but can the MA, if and when the KMP hopefully lands on their desk, just accept this 60% water reduction at face value. Is it definitive or still unproven in practice and hence requires further testing etc. Can the ESIA simply be revised and subsequently approved (mid-appeal) off the back of a scoping study in the absence of any further information.
We then have the timing in respect to noises coming out from OCP. Is this a nudge RNS to National to say we are still here and by the way we could be of huge importance to you one way or another.
Final point is our provisional funding from Singaporean investors was based on an IRR of 40% in the PFS. This would have fallen to circa 25% based on inflationary pressures. However, conveniently it is now back at exactly 40% by incorporating the KMP !
Not going to complain about the recent SP rise nor indeed the recent RNS. However trying to intuitively predict how this all plays out is nigh on impossible; far too many moving parts and left wondering how much is being held back in terms of "informal" discussions with National/OCP.
Admin expenses (excl. Uganda one off tax) are circa 800k for FY23 of which 150k were salaries.
It is inevitable that the DFC grant will be used to cover some admin expenses going forward as the company cannot conduct the work required to hit the DFS milestones without paying people, consultants, travel etc. The two go hand in hand.
The Annual Report has clearly spooked a few but the risks detailed here should be apparent to all. It is just when written in black and white in formal audit language that some get twitchy. We always knew there was a DFC funding gap and that is the potential raise they allude to in the AR.
To be fair though the wording perhaps strikes a tad too much of a negative slant in places.
I think that's our issue. Someone would like to take a big chunk of this at knock down prices.
If they can keep the price low, well away from the strike price for warrants, it may force Bres' hands to place low for their share of the DFS in due course. If this is the case then lets hope Mike can throw them a curve ball with alternative ways to fund any gap.
Nothing else makes sense even with dire small cap market. Every RNS has been near word perfect for a couple of years and yet still struggling to tread water. Imagine an RNS with a neutral/negative slant. Would get hammered.