A quick review10 Jul 2023 19:55
Good idea to change the heading.
1. Let us assume that Pensana just followed the original plan of building a mine back in October 2020 when the share price was 50 odd pence with a tail wind of high NdPr price to emerge just two months later. All their energies would have been focused on proving up reserves, getting a mine build team together and getting around $200M for a stage one mine. The intention was a second stage to built out to deliver up to 5,000 NdPr oxide tonnes a year which still gave a $300M in total. The first stage would have been completed after getting the finance at peak NdPr prices when interest rates were low and we had buckets of money around, to deliver product about now. However, look at the NdPr oxide prices at this time, the company would have loads of debt and delivering mined ore to a refinery at a market bottom prices. For how long that would have gone on for who knows. Perhaps they may have got some hedge, but Pensana share price and the ability to meet debt repayment deadlines would have resulted in China turning over the company and the share price would be under pressure. I conclude what ever the complaints are on word smithing and exaggeration by the Chairman probably did not make a difference. Pensana would have been hit by China's antics and a market not keen on hitting climate change targets for real.
2. The current plan actually goes back to a stage 1 model in which the mine is high graded early on and the cream of production comes out early on for a 4,400 tonnes of NdPr on a lower volumes of ore to acquire it. High grading serves the bank well. but not the longevity of the mine. The new 5 year plan was better and to put debt over 4 years. The inclusion of Saltend was vital to capture 80% of the additional profit value.
3. The company is correctly focusing to get money for the mine first. If acquired it does have a longer build time then Saltend. It takes awhile mining ore and stacking it up and the lead time for components is fairly lengthy and we can see that additional infrastructure has to be linked up around the mine.
4. The company does need to issue an RNS to clarify that Saltend is not off the table and that resources are prioritised in getting one project funded to be followed by the other which is partly justified if the first has funding guaranteed in principle. Such an RNS helps stop the knife falling. It shows the company vision has not changed or its strategy but the first target is to demonstrate positive cash flow arrival to pay debts at the mine.
5. The company also in the RNS should give details about the recent loan and hopefully it contains clauses that make it favourable to the investor market. This puts out a second fire hitting this stock as without detail nobody knows what has been agreed.
6. Finally the company should give a better idea of when news on mine financing is going to arrive at least agreed in principle.
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