Member Info for SloppyG

Well think I have answered my own question. Fully expect now interims to show opex is still out of control and they will have lost c€1.5 - 2.0m in H1 (Cash & profit). Consequently the logic net 1.5m will cover H1 losses and this raise pays their salaries for H2.

As said DP cannot lose. Each subsequent raise covers his package and allows the company to get their ducks in a row for an almost inevitable MBO at fire sale prices imo. Easy to cite macro economic environment when the RNS lands saying cannot meet their liabilities hence....

Those interims will be absolutely key to understanding the current state of the business.

If Opex is still at or around a run rate of c.€4m p.a (€2m for H1) then they have serious problems and will be tapping the market sooner rather than later irrespective of the 2m landing imo.

Re. logik 2m does not quite feel right. It feels like logik are stonewalling them given they are now getting their info from the buyer and not logik themselves. The big question is do logik have that cash in the bank and are smelling an opportunity given the precarious state of EQTs financial position. One would hope not given the settlement agreement but nothing ever seems to play out here as expected.

The next few weeks are absolutely critical to determining the investment case. Personally I would be more bullish if some cheap options were granted to PDMRs since , as much as it is a reward for failure, it at least aligns interests with SHs. The biggest risk here for me is DPs fall back is a PE backed MBO for pennies after further trashing the SP with confetti. He cannot lose either way so at least attractive options package would signal an intent that we are in it together.

Copy paste Q2 update I would imagine.

Work streams mothballed. KMP feasibility testing continues. Priority for Q4 is to obtain EIA. Still confident/hopeful. Will update as soon as we hear anything .

The only consolation here is that neither CRUI nor National have killed the project. If they are playing the long game waiting for administration and the problem to go away it could take some considerable time. We know the company in theory has cash to Jun 25 (given 12m cash from date of Annual Report) + the backing of GSM (for now) with significant skin in the game and deep pockets.

To be honest however one looks at this it does not make a great deal of sense. I do think however excluding OCP from those MOU offtakes was when this turned. Not the time for a show of strength.

Still a flip of a coin for me.

Indeed everything they touch is so convoluted.

What intrigues me is originally it was logik that informed in writing of the conditional exchange of the sale of the land and long stop dates. It is now however the "buyer" whom they are having dialogue with regarding amendments and new dates etc. Logik playing the long game and EQT putting out an RNS to say we know what is going on perhaps.

The safe play here is to wait and see if the £2m lands and for the interims to be published in order to better understand the new opex run rate, operating losses and the cash position etc. Then can make a more informed call at in all likelihood a similar SP.

It is farcical to be honest. What is the day job for Graham and the PDMRs at present. Amazed GSM did not insist, before stumping up more cash, on some sort of package deferment for PDMRs/equity in lieu whilst the project is effectively mothballed. If this carries on for a few more months then cash will once again become a talking point.

I remain of the view that the KMP scoping study results were rushed out as leverage in discussions with National through fear that the project could be killed. We are now, in their own words, in the feasibility stage and CRUI will simply wait on evidence of KMP commercial viability before even considering issuing the EIA.......no incentive to rush etc.

How long all this takes is anyone's guess. Looking forward to the Q3 trading update "the priority for the rest of this year is obtaining the EIA from the CRUI and we remain confident/hopeful it will arrive in the not too distant future"......

Fair post IPA.

I think Interims will give us a better steer next month.

Let us not forget that even after 20% cut in costs annual opex is still running at c€4m per annum.

They need to invoice and bank c€13m p.a. to break even at 30% gross margin. We know they were expecting Q1'24 revenue of 600k so simple maths and way short of b/e.

Interims out end of Sep I believe will show min. Op losses of €1.5m. Finance costs on top of this.

Logik 2m, if and when lands, 500k straight to Riverport (this covers annual interest element only of the 5m debt). Remaining 1.5m covers H1 losses and possibly some of H2 losses.

DP taps the market start of Q4 or possibly earlier. No doubt setting the wheels in motion already post AGM.

SP trashed further and DP and private equity chums mop up the left overs in due course.

Simples. Great work if you can get it.

We are at that stage where if one believes the EIA is forthcoming then this is crazy cheap. The risk however remains c.100% of capital invested so its a Catch-22 and no doubt why there is almost zero interest here no matter the current SP.

I genuinely think that if the CRUI were remotely close to awarding the EIA then we would see a bit of insider action as it would be too hard to resist at these prices; current SP action suggests otherwise unfortunately.

Commercial viability of KMP will be the next key milestone imo but absolutely no idea how long that takes.

This wording from the recent Q2 trading update gave me the impression that KMP is still at the pre-feasibility stage; although admittedly given patent application one would like to think they are reasonably confident of it being so. The question for me though is do CRUI wait on this testing given it is fundamental to the assumptions inherent within the revised EIA. They certainly have not been in a rush to date so why change now !

"The funds are to be used by the Company to advance its studies in respect of KMP towards feasibility level

alongside the progression of the EIA process in Morocco, as well as for general working capital requirements"

Well its abundantly clear it's not a simple case of rubber stamping National's kick back or else it would be in by now.

I am still of the view that CRUI will await definitive confirmation of KMP commercial viability before issuing the EIA. Emmerson have stated themselves that further testing is ongoing to determine this and to optimise so why not wait for these results to come in; that way realistic covenants can be attached to the EIA based on empirical evidence. This will also facilitate the funding as I cannot see investors risking millions in case the project fails further down the road due to unrealistic KMP assumptions.

It would not surprise me if these sort of conversations are already happening with CRUI as it surely cannot be a case of complete radio silence for the last 3 months and we seem to be drip fed the bare minimum of information.

Who knows though maybe we wake one day to an EIA issuance RNS; chance would be a fine thing.

Very good interview indeed. It is quite reassuring to have a Chartered Accountant as CEO especially from a risk management perspective. A couple of observations:

DFC grant of $5m requires "no payback ever". I was always under the impression it was repayable if and when in production but this suggests otherwise.

SI $2.5m (if and when forthcoming) covers the "expanded DFS" which includes the optional drilling element. Originally the SI committed at 5p when SP was in low 3's hence confirms MR's observation that they are prepared to come in at higher prices. Given they will not likely come on board until after the bulk sampling results and potentially downstream SPG MOU is out, it is not inconceivable to think this could be at levels >5p and for sure not less.

One can sense the complexity of the partnerships MW is having to juggle in terms of the DFC and China. The DFC grant cannot be used to pay Chinese entities hence one would assume that if the DFC get involved in full project funding there will be similar restrictions; casing example downstream SPG plant talk of a Chinese firm to offer consultancy advice, Korean firm to the do the JV with and the DFC in the background in order to try and appease all parties.

It does appear that the downstream SPG plant is business critical now as opposed to the original "optional" in order to make the economics work and to differentiate the project further. In MW own words he does not want to be relying on a future stronger graphite market. Ultimately it will significantly enhance the financials even if that comes with an element of additional risk.

I genuinely think Strategic partners will be lining up for a slice of this pie in the months to come. Potential returns for SHs are no doubt significant especially as the project further de-risks. The main frustration is early bird investors take all of the risk but see little to no returns in the current junior markets: at some point it will change or else may as well all give up !

Surely we must hope it has everything to do with water and/or contamination as at least that is hopefully addressable. If not for those reasons then what are we left with as to why the EIA was initially rejected - nefarious activity ? I don't believe even the soon to be patented KMP can help in that case !

Tend to agree.

All we do know based on what Bres have made publicly available is Total DFS cost is expected to be circa $12.5m and that it is due for completion in the next 6-9 months.

To fund this 12.5m we can bank the DFC $5m and the AI $0.5m. The unanswered questions are then how much have Bres self funded to date, can they still secure the SI $2.5m, how much is optional drilling cost, equity element etc .....hence what is the true GAP.

Timings of activity also. If DFC only funded $3m to date with a further $1m shortly, then still seems an an awful lot of activity to conclude the DFS in the next 6m at a cost of possibly c$7-8m. What exactly is that activity.

To be honest the 5p with the SI was agreed when SP was in low 3s and represented a healthy premium. The DFS has moved forward significantly since then and giving away c20% of the business at 5p feels pretty generous right now. I suspect there are many options for raising that £2.5.

Additionally the downstream SPG plant moving into the "essential bucket" may also be moving the needle. I am sure we find out in due course as frustrating as it is.

It would be nice, assuming factually accurate, that this sort of detail was shared officially with the wider SH community as it feels a fairly material piece of information to me !

A couple of call outs for me.

Large impairment as expected reducing Net Assets to c€21m. A word of caution on that remaining NA value however; 12m is intangible Goodwill which is effectively worthless and another 7m is trade receivables of which 5m is now overdue so no guarantees of collection given their history. Its easy to see why MC is so low therefore given this.

Admin expenses (even after 20% reductions) are still €4.3m. H1 and H2 broadly the same hence reasonable to assume €4.3m is the ongoing run rate for annual Opex for FY24. Given they have said operating margins are now 30% it means the company needs to generate annual Revenue of c€14m to b/e. Consequently i think they are still miles off achieving break even so will need to fund operating losses this year.

Possibly sentiment change will provide an opportunity to make a few quid after the inevitable post lock-in sell off. Remain to be convinced however as to mid term viability especially with the 5m debt accruing interest at c10%. For me the overhead reductions of 20% are nowhere near enough to secure their future and prevent DP tapping the market again in near future.

Must be a nightmare for the auditors having to sign off the accounts. In the absence of the £2m logik payment the company cannot be a Going Concern. Annual Report has to be released by Friday close, possibly get away with Monday 1 July or else entering the world of suspension. Looks like leaving it all to the last minute.

I imagine a serious impairment review as well of the spurious Net Asset value has to be considered. Would not want to be in the auditors' shoes.........

It's uninvestable for the time being with so many shares to wash through. Potentially later in the summer that position may change.

We also need to see the published Annual Report to get a better view on current cash, debt and ongoing losses from operations. We know the run rate was losing c500k per Qtr in Q1 so how many more Qtrs will it take before they b/e. Also 500k of the logik cash goes straight out the door to Riverfort so that 2m will not last long when funding operational losses.

I do think there will be a time here when can make a few quid on sentiment change but for me we are not at that point yet. Entry point/average down here and can be down 30% in a blink of an eye.

Thanks for sharing that Mav.

To be fair it is not a case of misinformation as the company actually stated that the DFC $5m represents "40% of the overall DFS cost" hence the reality is the total DFS cost is indeed $12.5m based on this company statement in the half year report.

It is very useful however to get the further context to provide some clarity.

Any thoughts on the total DFS cost of $12.5m (from last RNS) and how we fund the gap ?

DFC $5m, SI $2.5m (hopefully) still leaves c$5m to find to complete DFS in next 6 months (as per timetable). Possible reduced slightly if have already self funded some of the 12.5m

I am wondering if this in part relates to the hold up on the prospectus as Bres want the SI to come in for more and at a higher SP. The original plan with the SI was for c20% of the business for only $2.5m; hence if they do need another $5m on top of this it would be giving away too much. Perhaps other plans to fund the gap therefore.