Member Info for SloppyG

I must admit the underlying tone was not quite as positive as more recent RNS'.

The market reaction for me is a realisation that Bres need to raise a further c$7m to be able to complete the DFS over the next 6 months. $2.5m was supposed to come from a SI but that has seemingly gone a bit quiet. Even if this is forthcoming it still leaves a gap of $4.5m so where is this coming from and at what price.

Mike has not really put a foot wrong to date but this update did feel a bit thin on the ground re. financing; especially given the 6m or so timelines to complete the DFS.

The counter to that is why award the mining licence in the first instance. Also National could have killed this at appeal but chose not to. My view is they have empowered Regions (CRUI) to be the ultimate decision makers hence have pushed back for reconsideration. What we don't know however is, in the event of rejection again, has to the right of appeal been exhausted.

The other to point to consider is an approval subject to water limits inherent within KMP scoping study could make the cost of obtaining finance prohibitive given the change in the risk profile. My instincts are that either CRUI are going to defer a decision pending further KMP testing or it gets approved subject to..... and then shifts the onus on to the funders to request the same evidence of commercial viability (KMP).

One consolation is that having GSM as strategic partners with a significant stake the MA are not just dealing with a UK minnow but a global operation with deep pockets, contacts and an ability to bring sizeable investment capital to the region; not to mention the willingness to challenge and publicise any skulduggery.

I wonder if the strategic investment of £2.5m at 5p is pegging us at these levels; more to the point do we still think this represents fair value giving away circa 25% of the business at this price.

When announced in Feb it represented a significant premium to the then SP. However it feels like the project and the SP has moved on materially since then.

The refinancing has indeed provided a stay of execution at a time when Riverfort clearly held all the cards. This, along with the placing, should also mean that the auditors can sign the AR of as a going concern due before the end of June; the absence of the refinancing and the raise would have made this unlikely one would presume.

Irrespective of the longer term viability of the business it does feel like an opportunity might present itself to cash in on a change of sentiment. For me though the sensible play is to sit on hands and wait out the inevitable churn post lock; perhaps pick some up circa 1p end of summer for a 3-5 bagger then run for the hills and never look back.

Re. the pool....to be fair was just quoting what had previously been stated on this board by another poster. Not done the maths myself so if incorrect fair enough.

So difficult to call this one.

GC seems to have replaced "confident" with "hopeful" in terms of getting the EIA soon. Learnt the hard way re. wording or a more accurate reflection of current sentiment.

They appear to have spent $1.3m cash Jan-April'24 which is a little surprising given supposedly tightening purse strings; at least with $3.1m cash on hand @April after raise we have no immediate term cash concerns.

Keen to point out that KMP only a scoping a study and requires further testing. The question for me is will CRUI technical advisers recommend that a decision on the EIA is deferred pending the results of this further testing OR simply attach a shed load of conditions to the EIA (not sure how this works in practice)

GSM in town. Protecting their investment as concerned GC and team do not have this under control or just a meet and greet to nudge things along.

Finally water usage. Originally an olympic size swimming pool every 2 hours, now its every 4 hours with KMP. Significant improvement for sure but is it simply a case of 50% of a shed load of water is still a shed load in their eyes.

As said, honestly no idea anymore as to either timings or outcome.

The immediate term risk is how Riverfort choose to play their £5m debt. As part of the refinancing this was converted to a loan secured against the assets of the company last November with repayments of circa £200k per month deferred unit this month (May). The company previously warned of the risks of default in this regard.

It has been agreed that Riverfort will immediately get £400k from the logik settlement plus convert £200k of the o/s debt. Looks like they are covering the first 3 months of repayments due with this set up. The big question is what do Riverfort then do and how long do they leave it before calling in their loan and seizing control of the assets.

My instincts are not long. With the company currently losing c.£500k per Qtr they would be burning their way through c£1m cash per Qtr incl. loan repayments. Simply not sustainable. Riverfort will not want to sit back and watch DP reward himself using the logik funds. I suspect they will give him a bit of time to see if a rabbit can be pulled out of the hat with this new potential funding option before pulling the plug. Deals will be struck and the inevitable ensues.......

It certainly was an excellent interview...... articulate, clarity, on point etc

One thing stood out for me was the fact that building an SPG plant appears to have moved from a potential "nice to have" opportunity to effectively business essential . Mike even added the SPG as the 4th project "success" factor along with Op cost, capex and purity.

Perhaps a subtle change but it certainly appears that this will undoubtedly be the approach given the margin enhancement.

Agree therein lies the issue. Clearly some long term bulls have gone all-in at the eleventh hour to recoup losses which is a big call for sure. The bottom line is the business is still losing circa £500k per Qtr on current revenue. The £2m logik repayment will be in and out pretty quick. £650k straight out the door and the rest to cover ongoing losses from operations.

It still leaves them with over £5m in debt to service/repay with no visibility as to when they can ever achieve break even. For sure MC of £3m seems crazy low given the tech but its only low if one can trust Mgt to deliver for PIs. My instincts remain that with a record numbers of companies delisting from AIM, DP will follow suit in due course. The plan was always to covert the £5m Riverfort debt but SP collapse prevented this. I see a deal being struck with the relevant parties to get to the 75% voting rights needed to take this private for next to nothing. The pivot has come too late in the day for me.

A shed load of warrants out there and lock-in periods ending in June will continue to put pressure on the SP in the meantime.

Some red flags here for me.

£600k Q1 rev is not remotely close to covering overheads. They say 30% gross margin on the rev which is £180k Gross profit to go towards covering oheads + other costs.

Overheads have apparently reduced by 20% which puts them at circa £3m p.a or £750k per Qtr (based on FY23 interims). Possibly a bit lower if run rate was already lower in H2'23 but for sure not by much.

So fairly simple maths and lets be generous and say they lost 500k in Q1 (on 180k GP and 750k opex). For context they require Revenue of circa £2.5m per Qtr to break even at 30% gross margin so currently miles off achieving this.

They have also effectively warned of a large pending impairment review no doubt at the bequest of the auditors. Be prepared for a significant reduction in Net Assets when the AR is published. I note the company say "expect" this to be published in Q2; well actually they have no option if want to avoid suspension !

Personally i don't think they out of the woods yet even with the Logik settlement landing which is no doubt why they continue to pursue the Verde "Strategic" investment. We really need to see the published AR to better understand the latest debt/cash position after all the convoluted RNS'.

Fair enough. Valid point.

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 !

Some forward selling an April raise me thinks.

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 !