January 31, 2013 09:27 pm
First, welcome back JT, and also welcome to all the other recent inductees to the adult table. Thanks Nova and others for going the little bit extra that can make a big difference. Special thanks once more to Mav for setting the table for us.
Nebbya...good analysis of a murky situation. Wwwater...Thanks yet again for your focus and knowledge shared.
I had some thoughts which I actually wrote earlier today along somewhat similar lines, are are not intended as any kind of retort or better idea than what has already been posted, just a slightly different focus. For all we know, the main points of each point of view recently expressed here on the PEA delay might all be in the ballpark in some way. The point is that while the fundamentals at Steens, LCM, and the other projects continue to appear more robust at each news release and update, the uncertainty generated by the apparently voluntary delay has muddied the waters to some degree for us, and dinged the SP yet again. Please note the single "W" on the waters...... :-)
.The date of the NI 43-101 for Steens was May 30. Modifications and updates since have occurred a couple of times. While much of the information was known to the company as it was developed in the interim, and drill core assay results received, the company is prohibited from telling the public the details of those results until they are incorporated into an official, Snowden prepared, provincial SEC approved, update to the existing NI 43-101, hence the need to update the document with any information they wanted to have included in the PEA.
Since it is unlikely that they would do so to include bad news in the PEA, the assumption is pretty good that what news there is, is good, to make it worth the PR hit resulting from the further delay.
Do you remember the 55 drill cores that have not so far been able to have been incorporated into the NI 43-101? I believe there have been 88 cores at last count (officially) made public through the NI 43-101 publication, within it's formal or informal updates to this time. I suspect that either some or all of the 55 "mystery" cores have shown more improvement in resource and grade to the extent that management thinks the trade-off between delay in announcement and investor disappointment will be worth it, as once the news is out, no one will care if it was delayed, if it is good news, all is forgiven, and the SP goes up etc. As I said before, this is just one of the possible contributing scenarios, and with no official statement or other credible evidence, might be the, or one of several, reasons for the delay,
The problem we retail investors have is that we are working in the dark, which is frustrating in itself, but management knows and has known lots of stuff for a long time. Another possibility that would make the delay "worth it" would be if the company, who do know the Capex/Opex requirements of both S.A. projects, have already talked to potential funding sources about what they need, and the provider has told them that if they provide an approved PEA showing X increase in resource or mine life, and/or would provide or show the funding source a firm offtake agreement, they would provide the money. There are other possibilities too, but you get the idea. Those guys do know the facts and numbers, which are good, and there has to be some good reason, IMO, for them to take the criticism in the short term for some long term benefit, IMO, as it seems to be a choice they have made, not something they have been forced to do. As Plagued pointed out earlier, they could have simply published what they had on schedule, and gotten cheers from the peanut gallery instead of boo's, and he was right in that.
So let's look ahead a bit, and see if anything could look so good to the board long term, say, 12 to 18 months?
The whole ROW REE sector is actually in a race to profitable operation, after which normal business measurements can be made and verified in quarterly reports. That is when you want to be the top dog profit per share wise, when a part of the sector has actually become functional producers, selling product and generating positive revenues. Among the "first producers", only MCP has ever made a book profit. The latest quarterly, under Smith's watch, claimed $.05 a share. Mr. K has warned about the next couple of quarter results, Q4 of which should be out soon. That may be revealing of their situation. Lynas will be lucky to do more that eke out a very small profit from their LREE carbonate and mixed oxide sales for the next year or two, and no surprises, and it will take some time to reach that level, if they do make it. If both of them come to market with large volumes of LREE oxides and/or carbonates, which is their plan, the glut will cut their margins to the bone, while GWMG's sales of those products is secondary to the output from LCM, and will not be a big component of their revenues. Break even or above is a win for these "surplus" LREE products not needed by LCM.
Delay is part of the game. Lynas is currently over 18 months behind schedule over their original LAMP production target, and MCP is today 4 months behind their prediction of full 19,050 TPA by last Sept 30, which they affirmed was correct as late as last July, just 6 months ago. While I was looking that up, I noticed in their 3rd quarter report, they had no comment on when production of Nd/Pr would be possible, showed that part of Phoenix 80% complete, and left the projected date of Nd/Pr production blank. Twenty pages later, they stated that Nd/Pr demand was what would generate the need to build Phase 2. Of course we know they are still not in production, and Smith is gone. It was conflicting statements such as that which convinced me to don my MCP sell parachute while the balloon was still going up.
Perhaps it was the memory of Smith claiming they were on schedule up to practically the last minute last summer that spooked some of us here today. The similarity does call that up, on the surface. But, in GW's case, we are talking about a paper document, and in their case they were talking about full production from a near $1 Billion facility. Dwight did not tell us last week that the mine and all of South Africa's projects would be in full production on March first, just a month away, which was basically what Smith claimed. Kind of a difference, at least in my book.
The rest of the exploratory field, such as Ucore, AVL, REE, Tasman etc are all currently looking at around two or three year lagging programs behind the 3 first producers, under the best possible circumstances for each, possibly more, and we know many wil expire in that period. That's a big gap they will have to fill, and a lot of funding to acquire in the meantime.
I continue to believe GWMG is the only company in this "first producer" three horse race(profit per share) that has a good chance to become the first actual ROW REE company to have significant sales revenues that generate significant profits. IF they are able to complete the S.A projects, and they have a quarter where their profit per share beats both Lynas and MCP, and that looks more likely every day, they will have a realistic chance to hold the triple crown of:
A. Only secure mine to market supply line outside of China.(attracting customers seeking that security)
B. Best profit per share in the sector.(attracting investors and boosting SP)
C. Only producer of LREE, HREE, and CREE oxides, carbonates, mixed products, alloys, metals, and ultra pure metals in the ROW, as well as Thorium in recoverable storage and assorted byproducts.(Only full service game in the ROW)
Would all eyes of the Sector, and some of the larger investment world eyes be looking at such a company? Would investors be comparing the results of each of the 3 companies?
I'm thinking that would be a good day to own shares in the company bought at any price it has ever sold for, including the all time high. Those who have averaged cost down to under $.50 would be especially happy on that day.
I'm also thinking that perhaps that is the goal the board and management team are reaching for, and might be willing to risk taking an up to 60 day delay hit now, if they thought by doing so they could make that triple crown day come even one quarter sooner.
I can't promise that, I can't prove it, other paths to the same triple crown might exist, but I know it's possible, based on the what we know today about the 3 first producer companies, their situations, and their probable future courses. Not only possible, but probable to some decent percentage with the information now in hand.
Is there anything known today that would predict with greater probability some other eventual result? That's a legitimate question.
Knowing what we know today, is there any known reason for this race to end any other way? Now some may say that maybe GW will not get funding to build at Vredendal, or maybe South Africa will nationalize the mines, or maybe customer demand will dry up or whatever, but how likely are those possibilities compared to what we do know today, and the company's history of accomplishment of goals so far. They've had the same delays as other companies, but they have so far completed every project they started, or if thwarted, changed course and made lemonade from the lemons that they were handed, like they did when they bought RARECO when the offtake deal collapsed.
I'll have to give Marc LeVier one strike, since I don't know what he has in mind, or what he has to work with, but I'm willing, so far, to give him another swing.