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Sajy is renowned for making things up, he’s previously been reported to the FCA.
Risq - The expectation was finance would be partly funded through cash flows generated from the pilot plant. This was stated numerous times in various RNS’s last year and prior to 2022.
However they are now not expecting any significant cash flow from this plant in time for the financing that will hopefully be signed off in Q1 next year. The CFO states in the investor meet meeting that finance for the phase 2 build will be funded through debt (banking finance) and equity dilution. A change to the expectation that cash flow from the pilot plant will be used.
£40mill per annum max the deal is worth to destiny. Certainly more details required around these figures in terms of manufacturing costs and operational expenses. That is with complete US market saturation, past experience tells me that market saturation is never achieved especially as there are competing products, currently 4 products being trialled similar to M3. M3 also won’t be the first to market. Admittedly M3 is superior in certain aspects to its competition and not all of these drugs will pass phase 3.
They also said discussions may or may not lead to deal
Sajy- I see your post has been taken down, have the FCA contacted you?
I get the reason behind FAR investing in the potential for the higher margin carbon black but realistically what’s the chances of big tyre manufacturers taking this non standard product. For me I’m assuming this won’t progress (and basing my figures on lower price per tonne) however the carbon for smelting at £350 per tonne will generate turnover of $70m. I’ve also assumed there will be no other bi product apart from uranium and obviously vanadium which brings a total turnover of circa $150m, fcf of circa $90. This is all immaterial as everything hinges on profitability of the pilot plant which Nick Bridgen has continuously failed to deliver on, regardless of how much capital investment has been thrown at it. Phase 1 is probably going to require $150m investment and good terms will be based on using the FCF funds from the pilot plant. So many uncertainties currently and with all the inconsistencies with Nick Bridgen I feel he has lost credibility. What is very bizarre is the FS has been delayed a further 6 months when the recent fund raise was required not to delay the FS. My thoughts behind this is that they knew the FS was going to be delayed and the funds are being used in conjunction to funding the pilot plant even further as it’s still loss making. The Things could be worse, the vanadium price could be in decline!
Bridgen will announce further delays in terms of the existing plant, supply chain issues will be the reason for the plant not being profitable. For me the current operational plant generating free cash flow is paramount otherwise further shareholder dilution will occur.
NB has history of talking up opportunities (not just with FAR) for example rare earth materials was expected to hugely contribute to the company’s revenue but has been knocked on the head. I have detailed some current pros and cons of the stock: Pros – 1) Vanadium resource is there and it is very likely this will be confirmed in the drilling results next year. 2) Infrastructure is there (requiring low capital expenditure for a mining project). 3) Skilled workforce are in place. 4) Operating costs are extremely low, based on the type of resource being mined (by products will help this cost reduction further – I see the by-product as a potential risk now as the expectation was there was significant viable by-products). Cons – 1) The company is currently loss making and will require an injection of capital (I estimate share dilution will take place in the next 4 months). 2) Carbon Black substitute will require collaboration with numerous potential customers which need to trial the product which isn’t proven (this is a big uncertainty but obviously if successful will be hugely beneficial to FAR). 3) Directors still holding large volumes of stock (Christopher Thomas purchased circa £160k on 15th March 2021 at an average price of 14p)
For transparency I sold my position a few months ago and now have a large short position which has been open at 16.5p. I will look to reverse my trade when the share dilution takes place (my estimate is around October/November). With the hope that the new injection of funding will help push the company to be more efficient in their operations and produce positive free cash flow by mid 2023. If FAR manages to produce free cash flow of anything over $7million then funding for the larger plant will proceed on favourable terms to shareholders. I believe that if Sir Mick Davies goes ahead with the phase 2 mine then NB and A Kuznetsov will be replaced in 2024.
I haven’t mentioned any macro events that are a potential risk, such as recession, political risk and Vanadium price etc. But with the extra funding being used wisely, FAR should be able to weather any recessionary downturn, with the expectation that we will be out of recession in 2023.
Sold my 80,000 shares yesterday, too much uncertainty around current operations. Coupled with the fact that we are heading into a recession and with FAR providing no significant cash flow for at least 3 years. Also the business will have been impacted by the Russian invasion in terms of sourcing vanadium concentrate.
I have the following time line (excluding the expected news in Q1 2022):
1) Drilling of ore bodies 2-5: Results expected mid 2022
2) Arranging of Financial backing: Completed Q1 2023 (circa 6 months)
3) Building of plant: Completed Mid to late 2024 (circa 18 months)