Good afternoon
what a bugger of a day…in the first place, Panoramic severely impacted on my mood…and while I have recovered ( a little bit ) from that, I accidentially deleted my daily report…..
So I fear you need to be happy with a short version of it today…
Panoramic - what a nightmare…another cut in production guidance today, from 7.0-to 7.5kt in the year to the 30th of June 2020, to 5.2-to 6.6kt now. That is a cut by 25-30% and definitely in it´s extend, completely unexpected. Difficult mining conditions in the old ore body, Savannah, continue to impact production, resulting in mine scheduling changes for the remnant ore - pushing out the mining of better stopes into the next financial year. On top of this, the failure of a chiller has impacted the underground refrigeration capacity, which is responsible for a short-terkm reduction in mined volume, until the repair is finished in 4 weeks time. I think this is bad luck!
Impacting for the next few month is also the fact, that the mobilization of the new underground contractor, Barminco, is taking longer than expected. The labor market is still very tight in Western Australia, and Barminco ( which is a large and very experienced mining company ) needs until the 1st of March to start mining, and to the end of March, to fully mobilise people and new equipment, which is coming from Finland. I think Panoramic´s new MD has been too optimistic here in his operational update in December. But again - this has been out of his reach, up to a large degree.
The liquidity position of Panoramic is still strong in the moment, following the recent capital raising - but I am sure, that with this announcement, funds will not last long enough. The company has stated, that they are working on additional debt ( Macquarie has a 20 mill$ loan out to PAN, which has some debt covenants attached - but I think we can be sure, that these covenants will be rolled. Usually, such a situation is being reviewed on a monthly basis, and as the loan should be considered as being pretty safe, I think we will see Macquarie continue to roll ). I am sure, that they will be talking to the largest shareholder, who has provided debt before ( and a few weeks ago, strongly opposed the takeover! ), and probably to Jinchuan, Panoramics offtaker, as well as others. I think it´s very difficult for outsiders to come up with excat numbers - but my guess would be, that PAN will need another 15-20 mill A$ in debt.
Im well aware of the fact, that I have probably lost some credibility here - but I think it´s extremely important to understand, that the current problems are short term problems, and have nothing to do with the viability of Savannah North, and Panoramic´s medium/longer term cash generation potential. After speaking to the MD and several other people today, I am also of the opinion, that our MD is the right man to turn the ship around and make us some money - finally! But no doubt, that it will take a few Quarters to get confidence of investors back!
Graphex - yeah, that´s complicated, indeed! Sometimes I wish, that I would invest in gold stocks only - much easier to come to grips with! Graphex has announced the feasibility study ysterday, and while it´s complicated, it´s also impressive. The MD Phil Hoskins has put so much work into this, alongside his financier, who has been very cloosely involved in the study. The project needs 87 Mill US$ in capex - and probably 30 mill US$ more in working capital, etc etc….But as crazy as it sounds, I think it´s financable. The project ti fully approved by Tanzania - what we still need is confirmation of a few issues like local participation in work, and bank accounts. I think these things are very advanced and should finished within a month or two - but I think the company will take longer than this anyway to get the financing done.
The results of the feasibility are impressive…the copany will not just produce graphite concentrate, but will be a manufacture of high-value , different graphite products - especially Expandable Graphite for flame retardent materials. The reserve of GPX will be able to support production for 18 years - but is far from being finished off. The project has a NPV of 331 Mill US$ to start with . But as GPX will ramp-up production of specific product qualifications, this NPV will actually increase to more than 500 mill US after a few years. Sounds starnge - but the reason for this is, that the highly specific types of grahite to be produced, will be sold at substantial premiums, once endusers have been satisfied with the product. Product acceptance will take usually 24 month - hence the ramp-up of NPV is happening.
GPX have put years of effort into establishing contacts with users, and has validated it´s work with several independent labs as well as research institutes. This extensive effort had partially been required by the financier, who is also haveing a board seat of GPX. Buyers of this material will not only be in China, as concentrated on earlier on in the pace, but also in the US and Europe, derisking the marketing side of the business - and capturing a much improved margin between various sales prices for the different products, and just a concentrate. Once fully ramped-up, the feasibility study expects a steady state EBITDA of more than 80 Mill$ p.a.
Graphex wants to be in a position by the end of the 2.Quarter, with the help pf it´s financier, to make a Final Investment Decision FID. This timetable would allow ore-comissioning in teh 4th Quarter 2021. Personally, I think the big task will be the financing….Normally, I would see the marketing of the product as the biggest issue after that - but Phil Hoskins has put a few years effort into this , and is probably unrivalled as an expert in this new area of mining within Australia. And we have a market here, which is screaming for product - and even more so for product, which would be independent of Chinese sources. This is really a quick rund-down only and as you know, this is just a blog and no research product….so if you are interest, just have a look at the very detailed information on the DFS, and today´s presentation, on GPX´s webpage. I think it´s worth the effort - and otehrwise, just listen to Phil´s presentation in Zurich, 21st of Feb!
Genex - the company release their Quarterly today. Unfortunately, they have had a software glitsch at their solar plant at the old Kidston Mine, which resulted and next to no electricity being generated in October. This has been rectified a while ago, and the operation has produced as normal over December. The loss of production amounted to approx 1 mill A$ in revenue. There is a chance to recoupe the lost revenue from insurances - but not sure as yet. GNX had 21.8 Mill A$ cash in the bank at the end of the year, and construction of their second proejct, the Jemalong Solar Project, has started. Most important, though is the Pumped-Hydro Project at Kidston. As we know, the project has been fully debt financed by the Northern Australian Infrastructure Fund, with a 610 mill$ loan, and an equity injection by J-Poer from Japan. The Queensland government will finance 132 mill$ for the necessary power line. But all three components are subject to an offftake agreement, which was to be fixed with EnergyAustralia, and fell over at the very last minute, when the Hongkong-based holding companie´s board did not sign off on it. All three mentioned agreements have been extended, and the good news is, that Genex is still in intensive consultation with EnergyAustralia to complete an offtake agreement. I stand by my little Genex, and continue too hold a large position in the stock! They have, what Australia needs: large scale electricity storage in form of a Pumped-Hydro project - just one step away from getting going and adding a a lot of value to the company as well as Queensland!