¶ Introduction
No, this is a huge movement in the share price, like 50% like you said. You want to try and answer the question, were there any indications or could you as average punter on the street have had any foresight or suspicions that something like this would have happened? Mate, what a quarterly season. Stocks that are responding to results mate all. Those pawn shops mate. Boss has been beaten up, line line town kind of got out a little bit unscathed. Well, relatively speaking.
Huge movement, so emerald they were down over 10 plus percent. Greatland 2424% on the day. Greatland smashed and. Unfortunately, not too many big jumps. On the upside, I think it's a bit of a result of the the short interest that build up and dwindled over time. But lots to chat about. Right. There's been big stock movements this reporting season, mate. And in addition to some of the quarterly results that have come out, I want to talk about some some some grassroots shareholder
activism that is emerging. None of them word art resources, which have, you know, the board there has accepted a deal from Capricorn shareholders. Unsurprisingly, they're not happy, mate. We've been hounded to talk about this one. They're mate, it's amazing the organic interest in in, in Word I've been, I've been truly like surprised at the level of level of interest in the, the shareholder base there, but I've been compelled to talk about it. So I'm I'm gonna get to that later on too.
¶ Boss Energy's Brutal Week
Alrighty mate, let's let's start with boss. I think that's the the natural place to start because that was the the biggest share movement. So the. How far down is that since they put out the quarterly like it's like? So it notched off again the the following days. So obviously we're. 50 odd percent down like yeah, it's been that since the quarterly come out it's. Been a bit of a haircut for the companies that were that were long, the investors that were
long. But yeah, so in in quotation marks, the highly successful ramp up is having a few question marks thrown around specifically that that the outlook has disappointed. And obviously for context, mate, the week prior had seen a management change. So Duncan Crabb, MD is going to step down through September, reported to come back early next year as an Ed, but a change in leadership at an interesting point of time. So we'll, we'll lead into the outlook by talking about the
quarterly cash flow. So the looking at the waterfall chart here, you can get a bit of a flavor for how they did. And it's an it's an interesting one because they sold way less pounds compared to what they produced. So it, it looks a bit funny, But if if you back it out, you know, bearing in mind this was a, a good quarter where they're digging into to honeymoon, which they know a bit more about as a,
as a resource. They would have earned $4 million if you assumed that they had earned 31 and a half, $1,000,000 in extra revenue, assuming they would have sold everything so. But all in cash has actually gone gone down. It's gone down. So it's a bit over what is it like 36 million odd dollars as it stands with a bunch of inventories that they kind of market $85 on the assumption that they can assume it via this sort of carry trade that they've performed for a little while.
But the the market probably well OK, they'll acknowledge the the operational performance of that quarter, but the stock doesn't fall like 40 plus percent in a single day on the back of 1 bad quarter. It's the guidance update that came contemporaneously with the quarterly which has spooked the market big time here. Yeah, yeah, absolutely.
So rounding out on the on the quarter, because there's, there's hints of it and then they come out with a separate announcement like you say, which is guidance FY20 6, but they talk about increase reagent cost. Hence your, your cost profile for FY20 6 is heightened. And essentially what we're getting at is there there's a lower uranium concentration in the the PLS that comes out means you got to pump more and process more to kind of get to the same
amount. So that PLS to IX 10 are that they speak about is going from a number in the high 80s to to the 50s. And they speak about a long term life and mind average of a number around 50, which meaning, you know, when you think about the fact that they were in the 80s and to average that out, they're going to in due course fall below that, which is a bit of a concern.
So that number of £2.45 million per annum is what they'd guided to. And if you go back to the, the AFS, the, the feasibility study they'd done, I think that came out in 2021, they were meant to hit that number in year 3 of production. And that's all been thrown into doubt now. So guidance is £1.6 million per annum for the coming year. And then they indicated on the call that they expect to have a similar number the following
year. And then it's a bit up in the air because there was a lot of talk about, you know, the continuity isn't great and we just need to assess it. We need to do work. We're meeting our continuous disclosure obligations by talking about it now. But we don't have enough answers was the kind of rhetoric on the call. So I think it's worth playing One question from Glenn Lowcock, he asked this one try not really hammer it home at at the three factors.
I'll play it now so you can get a flavour for it. Hey, I'm still a little bit confused. So you say you've identified challenges that would may arise in achieving nameplate capacity which is the 2.45 and you talk about continuity of the resource. So is that leading to less volume coming out or less grade or less recovery? Like what do you? What is the one of those three that must be causing you to make that statement? Volume it's it's made the volume
aspect like pounds on deluge. So you know we have to look at the well field design and the pounds under leach and what you want is continuity and results to give you that that sort of confidence in your well field design. And you know what we're saying now is the resources there additional wells are required that's leading to an increase in sustained capital that we're seeing in our all in sustaining cost for FY20 6. But yeah, the challenge there could lead to volume under Leach, so.
Is that, is that because you have you Max out what you can put down the pipe back to the plant? I just, I mean if you just if it's more CapEx for more well fields and you didn't have you need more well fields to get the volume ultimately wants it. Doesn't that still get you the nameplate? What else is missing? You need to make the statement that you can't get there.
You're right, it can and that's where that can still get you to nameplate, but that's where we want to do this assessment and just say, you know what that economic cost outlay is and the capital costs around oilfield infrastructure. So the resource is there. It's just a question of of as you say, the cost to do so. You know, at the moment there's the margins are still healthy for 1.6 going to FY20 7. We're confident that we'll get at least £1.6 million.
It's just a question now of how we how we go about that. So, yeah, it's just I guess, yeah, we just wanted to flag that, that we need to do a review and and assess against our enhanced feasibility study assumptions. But this is an assessment of the economics then more or less you know like a more well fields, more CapEx, more OpEx. Can you still then make an economic model?
But I would have thought with an $80 a pound uranium price and even with the cost and CapEx you're now incurring for £1.6 million, surely it would be economic or you think there's going to be even more costs to come? No, Glenn, certainly that can be the case. Yeah, absolutely. That was a. Fascinating bit of a bit of audio mate. I love to follow up kind of line of questioning that Glenn takes.
It's it's it's sort of simple as a grade continuity, like, yeah, you know, number of. We might be fumbling him a bit because I'm going to play another snippet from him, yeah, later on. But the the clarity and thinking and the breaking it down is, is super, super simple, right? And yeah, I love that sort of breaking it down to to what
really matters. And the question to ask as an investor, what you want to kind of know is, no, this is a huge movement in the share price, like 50%, like you said, like you want to try and answer the question, what were there any indications or could you as average punter on the street have had any foresight or, you know, suspicions that something like this would have happened? Like that's what in any case, just to, to learn for going forward in, in your, your future
investments. And I think it's worth going back a year and listening to the, the, the geological whiz, Mike Bevan and what he said on, on the show in June of 2024. So a bit over a year ago now. Uranium, when it occurs in your payday channels and, and sandstone hosted, you really want to have a, a good interval of, of sandstone or with high porosity, right? But you get good flows and you really want the uranium to be mostly within that sandstone
layer. Now, sometimes what you do get is you'll get uranium, but it's either in clays or it's in a very narrow band of, of sandstone which is in contact with the clays. And if it is at that contact as well, what you'll often find is the uranium is actually stuck to the clays right or bound in the clays at the surface of those contact between those two layers. Now clays is not porous, right? You can't push uranium, you can't push a solution through it and and extract it.
And also when you're when you're putting down your well right, you're pumping your solution down, which is then going to travel through a a little logical layer and get pumped up. You know, the amount of actual interaction with that uranium that's stuck to a roof of that sandstone is quite limited. So when that company went from well that was us that did that,
right. So when they went from when they first took over the project, when they cut the when they cut the resource rate from 500 PPM to 250 PPM, it increased the resource as well. But a lot of that resource was within really quite confined pathologies. Now The thing is as well though, is that in the process of doing that. Review. There are very little cross sections available of their resource, right? So I can only make that inference from the information that's available.
I wish his I wish his YouTube channel was still up Mike, but he's now that he's now that he's endeavoured on a new life. I think he I think he's his YouTube channel's unfortunately gone, but we've still got that little nugget so. So if we try and refresh listeners or people that didn't listen to to the segment right breakdown the the sort of thesis that he had looking at their work from the time.
Yeah, I remember him kind of saying like the, the the horizon within the paleo channel that has the the best grades and is the most amenable to leaching is the lower, the lower one. Right now, Uranium One, they originally set that that cut off grade to 500 PPM and that's what they mined the horizon above it, which you know, you can see in that that cross section, that's a, a thinner interval of, of sandstone.
The grade is lower and the grade often occurs at contacts between the sandstone and the upper layer, which is like sort of a clay material. When you've got the uranium concentrated at that horizon, it can be difficult to extract because it's more stuck to the clays than it is the sandstone. Or at least that's how I remember kind of MM retelling it. So so the sandstone is more
coarse. You can get the lex Evian to to flow through it versus the clay, which is you know, it's not not permeable and you can't flush that lexivium that can't collect the uranium and be pumped back out. It's, it is also interesting, like I know you've, you've dropped into our show notes here, JD, like you can see the the Paleo Channel resource honeymoon to the left is Brooks Dam to the, to the right is East Calgaroo.
And what you can see is there's like they've actually colour coded certain well fields and from like, I think it was the Macquarie presentation they put up. They basically say there's, there's three well fields in honeymoon there, which are set to kind of come on online in, in the first kind of 3/4 of if financial year 2026. The next three kind of quarters to report. We'll still see production from from honeymoon like well fields kind of coming online and, and that that delivering the
production. Then it's East Kilcaroo well fields per this sort of schedule, which are you know marching or or accounting for a huge proportion of the the production here. Yeah, that's B6 through to B9, those Far East Kaikaru ones that will come online. I've, I have personally been surprised at how few people I've kind of talked to about, about, about boss, how few people knew about the great differential between East Kilkeroo and and honeymoon. So it's.
A pretty substantial difference as well. Again, if if you go back to the 2016 mineral resource and I'll keep referring to that one because it's been scantly updated. And yeah, anyway this, this one you can see E kilkeroo is 640 PPM versus like honeymoon there, they've got nearly 1300 PPM. So it's a pretty substantial difference. A bit over double, yeah.
It's fascinating to, to, to flick back to the market reaction, you can see that there was a sort of flash through of changes in substantial ownership and a lot of them were sort of prime brokers. You can't get a, a big tail, but there was one from a, a shareholder who rents $51 million of stock on the day at an average share price of a bit
over 2 bucks. So I don't think they'll be sending a BOSS a Christmas card anytime soon, but I'm sure there'll also be plenty of hedge funds on the short side that'll be kicking themselves too. Because we've spoken a lot about this sort of short factor squeeze over the the past quarter roughly. And what that's sort of reflected in with regards to Boss is the short interest
falling pretty substantially. So it fell from about 25% all the way down to 12 or 13% as these equities across the market, uranium, lithium, some of the names that sort of come to mind, they those share prices rise and people had to sort of bail out of their positions, right. So I'm sure a few of them won't be as pleased as they might
otherwise have been. And I would expect in due course, you know, once the the changes that we've seen in the past couple of days flush through another sort of change in that short interest, but an interesting one. No one ever feels sorry for a short seller, but but but I do feel sorry for shareholders. And I think like your to circle back to your, your question, which is like, could you have predicted this? Could you have seen it coming?
Yeah, like I think like what are the other questions you can ask as a shareholder is like, you know, why, why? Why are they, why are there no cross sections of of East Kakuru in any of the mineral resource statements? Why is the mineral resource of, of honeymoon kind of through to East Kakuru not actually been updated to the market since 2019 despite a bunch of drilling on it? You know why, You know, why is, why is there such scant kind of information about about some of this stuff?
And you know, if you're if you're asking those kinds of questions, maybe get closer to being able to predict this. Yeah, yeah, well said. OK mate, tell us about Line
¶ Liontown Grinds
Town. Line town, another interesting one mate. So first thoughts on line town, I'm not sure if you had the chance to listen to the, to the quarterly here, mate, but they spoke for 40 minutes and left less than 20 minutes for the Q&A. And I, I, I think that's kind of interesting framing, right? Because I think you can just chuckle that in a sort of written form of commentary from management.
No problems with speaking 10 or 15 minutes, but you want to hear as many questions from the analysts as possible. Yeah, yeah. If your scripted component is is 2/3 of the analysts call, then what do you, Yeah, come on, come on. You've got, you've got the, you've got the announcement, you've got the presentation and put all your your script and stuff in there. That is what it's for. Yeah. Anyway can? Count on you to say anyway. Punch your way, I'll forgive. Them this time off.
So what what really matters in the the quarterly call and report, I think there's a few things to circle around. So obviously a lot of eyes on what's happening on the ROM pad there. So ROM stocks are are dwindling and they did flag this right. So they are going from that transition from open pit mining to underground. By Q3 of this financial year, they're going to be fully operating from the underground. So they built up the stockpiles
there. And one of the the repercussions, again not a surprise is that there has been elevated gabro content going through the plant, meaning recoveries have dropped down substantially. So we saw them take up to that sort of 70% level and then they dropped down this quarter to 57% and we're expecting in the coming half year a a number between 60 and 65%.
And then beyond that, expecting them to get to that 70 and really beyond that 70% as they, as Tony put it, can be a bit more surgical about the all that they pluck out from underground and they're going to need to do that to make the unit economics stack up. They talk about 222 types of all. OSP is all sorting product which is unsorted like or effectively it's it's got. Dilution and stuff you don't want. And then there's clean ore, which is, you know, post post
sorting. Yeah, yeah, which, but it's just, it is, it's striking when you just look at the impact of recoveries as a result of putting more of the, the OSP through the mill. But the big question is, is like, well, well, like, like what? What? What? Why did you have to put through so much, you know, OSP through the middle? Yeah. And and it ties in with the broader question of where are
unit costs heading. There is an expectation out there that these unit costs peel down and you can see in almost every analyst's model that they they're going to fall substantially between now and say FY 30. And the company hasn't really updated on these costs in in quite some time. So you're working off a steer from the company and you're making assumptions as an analyst. But as you'd suspect, there were
a lot of questions around this. So we'll play one from Kate McCutcheon, which I think covers this quite well as they look to get a bit more clarity on this point. And then in Slide 16, you've told us that you expect FOB cost to come down 20 to 25% in 27. So that implies a little over 800 a ton Aussie, which is kind of similar to Linda's question, is that level of cost out also how we should think about all in sustaining costs? And would it be unfair to assume
that's a A level going forward? So a lot of the drop. In FY20 7 is because we start getting efficiencies, a lot of the mining costs underground are fixed and as we ramp up volumes, we we wash the fixed costs more cleanly over over more tons. From a sort of go forward perspective. You know, I think I mean as you can see in the the meal chart there, we do have high capital development costs at the moment and we expect those to to moderate over time.
So as we've previously, just to build on what Graham said Kate, as we move into the thicker bulk zones of the ore body, which we anticipate doing in the back end of FY20 6 and inch 27, we will definitely get economies of scale. We will be able to wash over the fixed costs of the contract mining over more tons as we get into those larger Stopes. I find this so interesting. I'll I'll let, I'll let you, I'll let you continue point here, JDI. Trust Tony to, to hammer home the point.
I, I think it's really interesting. The the obvious thing to say is that how could underground mining costs be lower than open pit mining costs? And when you look at those models, I, I hear what they're saying because the tons coming out accelerate and they, and the tons ultimately produced a significantly higher in 2728 than what they are and, and have been going back. But really I think it's, it's a thumb suck.
We, we, we don't really know. And it's a, it's a relatively big assumption to make that they're going to peel off. But what? What do you think on this one mate? Who who's who's mining underground cheaper than our computer mining? Just unit economics don't quite work that way. Yeah, it it, it's a tough one to to touch on a positive point. The lithium market has ticked up over the last month. And I think that that provides a bit of context to what really
matters at the end of the day. And that is what is cash and what is cash going to look like in in a year, in two years? And can they see themselves through this, this pretty tough period in, in lithium pricing. So straight away you can forget positive operating cash flow that kind of goes out the door a lot of costs being capitalized. But we'll play another question from from the Q&A, which I think breaks this down in in in really simple to understand terms. Skid math.
Skid Math. Just trying to if I run a very, if I run a very simple model of the midpoints of all your guidance including CapEx etcetera plus all the interest payments, principal payments, you're going to spend over 660 million Australian this year before inventory adjustment. You know that means you know your break even is about 1050 USA ton. On an SC six equivalent basis just based on your guidance, just running the skid math. So maybe you? Haven't had chance to do.
That so assume you're right. So we're yeah. So what's the question? So I guess, you know that would today's price of $800 a ton cash burn of 100 got 156. So that's fine because I guess just you know, like what are you doing? You've got your extra 100 million of debt you can you're allowed to get maybe you can get forward to defer. I just just curious, what are you doing? OK. To make sure you additional liquidity. OK. So that's the the question.
OK, well look there's a couple of things we're going to focus on. Well, clearly we're going to focus more on cost optimization and we're going to pull that lever. The second thing is, you know, we've got a strong balance to start with 156,000,000. Thirdly, you know, we've got a track record. Well, there's a bit of a price improvement, but we've also got a track record of finding funding solutions with our
customers and other parties. So we will continue to look at those funding options as we progress forward, as simple as that. But it depends really on where the market goes. Yeah. And and Glenn just to add to that, I mean we, we haven't pulled the lever on prepayments like a lot of our peers have done. We you know as we've just demonstrated in 27 and beyond, we have a significant amount of more volume to place. You know that could be spot,
could be long term offtake. So, you know, we still have quite a lot of options ahead of us. Everyone's got levers. Always levers, mate. Prepaid. That's a, that's a, That's a lever, yeah. I think the broader question of going more down the debt route, which is all they seem to be interested in doing as opposed to raising equity is an interesting thing to think through because they've still
got a huge market cap, right? Like it wouldn't be the most dilutive raise for a company in their, in their situation to, to perform. So of course you're always going to talk about the debt route, even if you're thinking in the back of your mind, you're going to raise equity because you don't want to scare the market off and make that a higher sort of cost of capital than it needs to be.
But I don't know what are what are your thoughts on the the levers or the types of capital they could pull in? I feel like there's a bit of a Mexican stand off amongst a bunch of a bunch of like, yeah, lithium producers. Everyone else kind of gets a bit of a bump if someone else, you know, curtails their supply and it doesn't make a substantial difference to to the market. And I do feel a bit for Lontown because they, it's a single asset developer.
It's not, they're not in the same situation as a lot of the other players where they've got other operations, a bigger balance sheet, a larger company. It's I don't need to be a position like I think it's a tricky situation to be in. There's no doubt. What would I do? Yeah. I would explore some of those like unique kind of funding options, but I wouldn't be averse to dilutive funding options as well.
Yeah, I'm with you. Like we all want to see them kind of get through this and get at the the end of it. And there are certainly a number of ways in which they can do that. And yeah, I don't think hoping for the lithium price to tick up is it's necessarily the best strategy as much as you want that to happen. But let's sort of wait and see. I think that the last bit we have to play is probably the best bit of the call. And this was a little comment that Tony O made to to Linden on
the way out. Let's give it a play now. Yes. Volume goes up, so volume goes up. Yep, Yep. Got it. OK. That's helpful. Thanks. Yeah, look, that's pretty much all I had. Thanks guys. You're going to change your rating on us, Linden? It's cricket. Next question. Thanks. But mate, Linden Fagan, he answered the question when JP Morgan brought out an updated research report later that evening. Retain underweight 30 cent price target. So he didn't change that.
He did not change the rating on Lyntown. Next time, next time. But you know what gives me confidence in in Lyntown? Tell me. Knowing just how close they are to the Sandvik Ground Support Kewdale manufacturing facility. That makes sense mate. Kewdale, It is just just out of Perth. Well, it's in Perth, but that is close proximity. You can have your bespoke ground support needs manufactured right here and delivered in no time. A. 100% and how good is the
strategy? Like this isn't just the Kewdale facility, Sandvik ground support, They do this all around the world. They're in every corner. They can get that order to your stat and I know you're a you're a big fan of the the apps out there mate. Are you on the ground support app from Sandy? Duh, mate. How good is that out right?
If you want to Chuck in an order you want to sort of size up what you might need for your bolts and your mesh, you can just Chuck it in right there and then on the app. Elite, elite, elite. And it's not just the app either, mate, R&D, these guys are at the the bleeding edge of making underground operations as cheap as they can possibly be. Personally, I think the app is part of the R&D vision, but it's all part of the same puzzle mate.
That is, but the innovation comes to the ground support the dynamic resin bolts mate. Far out that is, that is taking off. All born out of Derek Hurd's own creativity, right? Boy, and he's and he's wonderful team. That's it. It's the whole team takes all the whole team's responsible. All this is to say mate, that Sandvik Ground Support can help you drive down your costs and drive up your profitability. So get in touch with Sandvik Ground Support.
While keeping people safe. Thank you, Derek Hurd, and thank you Sandvik Ground Support. Go Sandvik.
¶ Greatland's Miss
To boss tank long town kind of scared to buy from just like share price perspective. It wasn't it wasn't like a super mover. Great land on the other hand, smashed, absolutely smashed. They tried to close to $7.00 a share 2 days ago. Now they're in the low fives, peeling back 24% on the day of the quarterly. Yeah, mate, tough, tough day in the office. I think the the the consolation is that they've been on a hell of a tear. Big tear.
Yeah, big tear. So it's not all that bad to dive in. What's going on part of it is backward looking while the market reacted this way and sort of reflecting on the underperformance or the perhaps disappointment regarding grade and and reconciliation, especially when you're talking about the the stockpiled or but then of course, you've got the the outlook again, similar to boss the the outlook was not quite what it had been expected
to be in the market. So those who purchase stock in the IPO, not a heap of people, although a bunch bought off the the Newmont sell down, they're underwater by 20%. But I'm sure, like we said, there's plenty of shareholders that'll be sitting quite pretty still. So what's actually happened from a garden's perspective?
So breaking it down in in simple terms to try not to run through so many numbers, but looking at the midpoint of what gardens had previously been indicated to be you had 320,000 oz at 2500 Aussie all in sustaining cost. Now what we're looking at is 285,000 oz at 2600. So you know, call it 40 ish 1000 less answers and A and a marginally higher cost profile there. If you reflect on the all and sustaining cost of the quarter just gone, that's coming out at
about 1000 bucks higher. Now, granted, they they've benefited from purchasing these stockpiles and a bit of accounting and them not having to speak for the the mining costs in the in the stockpile product there, but it it's a big tick upwards. And what? Why? Like I said, why the readjustment? So firstly, you've got this grade reconciliation issues. So the the gold grade expectations in the stockpiles have been lowered down.
In super simple terms, they talked a lot about risk adjustment, but it's gone from 0.64 down to 0.5 seven in the the higher grade stockpile that they have because they have these low grade stock page that run at about .3 also reflected in a bit of the open pit or as well. So they've been feeding a decent portion of this stockpile product through the plant, 2.2 million tons in in the past
quarter alone. And then you've got another big adjustment in the growth capital that they're going to spend over Fr 26. So this has previously been guided at 80 million that's jumped up to about 250 million. So they're going to be doing a heap more drilling 240,000 meters over the coming year. And this all sort of ties in with really wanting to extend that that mine life because if you remember when they purchased thing, there was only a couple years of mine life in it. So they want to.
I'm going to push that out whilst they approach FID on. Have your own. Yeah, yeah. And they've got, they probably argue with the fact there's only a couple of years in my life and they'll talk about the future cutbacks to Telford etcetera. But the the reconciliation issue is interesting. You do this is just, you get, you get punished by the market when you, you're, you're disappointed on guidance or expectations and you get, you get punished in a disproportionate way then might
be warranted. But at the moment you have one reconciliation issue in, in, you know, in one area, everyone starts wondering and extrapolating, are the lower grade stockpiles maybe going to have reconciliation issue as well? It's the those high grade ones that were recently mined. So was it an all body reconciliation issue and the model? Has been used and there's flashbacks as well to to Newmont because they had problems with this asset back in the day with
certain reconciliation problems. So shareholders do not want to say that again, if we try and peel into like how much cash are they actually going to make over the foreseeable because they've come in at the back of six months where they've harvested a
fair chunk of cash. But if you look forward and this is, you know, really back of the envelope type numbers, But if you assume the midpoints of their guidance over the next year and assume the current gold price, 5100 Aussie bucks, multiply the all in sustaining cost by 1.3 to give you a relatively friendly assumption for cake. That gives you $490 million. Now you minus the midpoints of CapEx, that's 370 million. You get 120 in, in free cash
flow there. Now you also have to bear in mind that at the end of this year, they're going to reach FRD on heavier on. And I, I don't think it's out of the realm of possibility to, to see them spend 500 million plus over FY20 7 on CapEx, including, you know, the, the asset build and everything else they're going to spend on over that
year. But all that's to kind of say that there might not be an awful lot of cash flow over the next few years as they sort of bring on have Iran and increase the, the sort of profile and extend the mine life and these sorts of things. It could be way off base, but they're just sort of rough numbers on that one. They're they're, they're going to, they're probably going to argue their case that you've double punished them on, on CapEx for applying cake and then mining CapEx again.
But. I I would argue back. Yeah. You would argue back the the, the, the 370 CapEx that you subtracted there is that including like you know the bunch of kind of work going on in the the decline for Haveron? 70 million bucks. OK. OK. So there's partial, partial work into Haveron as well through that, OK. Yeah, Yeah, that's right. So I think like overall the the asset is clearly in the hands of a company that cares more about it.
And I think the asset's improving and I think all the drilling they're going to do here is it's a good sign, right? Because it's going to extend the mine life and it's going to help them understand. So you don't have these shocks with like the, the drill spacing is coming down quite dramatically. So you've got other positives like recoveries being at 15 year highs. If you look at the, the full financial year and they're sitting on a relatively healthy pile of cash.
So the the readjustment has been pretty harsh and it's a bit of pill to kind of swallow. Is the business like 24% worse than it was the day before? I don't really think, I don't think you're going to mark down NAV 24% on the back of these results. So I think it's more of a factor of people getting a bit carried away with how good things could have been previously and extending those sort of
expectations going forward. I think things are still, you know, like it's, it's there for them to deliver, right?
¶ Why Warriedar Shareholders Don't Like the CapricornDeal
Let's let's get into a bit of activism, a bit of M&A with Capricorn and Warda. I've been compelled to do this segment, JD, from the flurry of of emails and DMS and everything that I've had from Warda shareholders. I didn't know there were so many of them out there, did you? Antimony yeah, retail connecting a few dots I didn't know beforehand, but looking backwards. Yeah. Well, anyway, I'm now very well
aware. So Capricorn, they've agreed a script deal to buy Word and it's triggered a wave of kind of grassroots pushed back mostly from the the retail shareholders of of Word who feel that the deal undervalues them. Those shareholders, they're voicing their dissatisfaction and they're organising on stock forums to try and force a different outcome compared to the deal on hand right now. OK. If we step back, what? What is the deal? The terms are kind of simple.
You know, what are our shareholders for every 62 shares they own, they're going to get one Capricorn shares. And what does that merger ratio kind of back out or the 15 1/2 cent kind of per share price for, for your word, our shareholding. That's a, that's a 29% premium toward our last close before the deal was announced. And the whole company has $190 million equity value all in Capricorn script. Everyone knows Capricorn best in class kind of execution of building gold mines and
shareholder value. Team team is elite. You know, they, they've got a premium for a reason. They execute their long term thinkers. They're now they're they're of course, you know, making money color window. They're expanding that. The development project for some time has been Mount Gibson gold project, which is in the vicinity of Wardas Golden Range project and and associated kind of deposits there Ward are still
in pre development phase. They've got you know, they've got some promising Oz, particularly at our I'm going to call it Ricky Otto because it's spelled Ricky Otto, but they probably pronounce it Ricardo, but you'd know better namesake mate. Anyway, the Antimony adds some complexity, but it's also strategic value, and it's also probably the reason the stock has the retail following it does. Yeah, they're not in an awfully unfamiliar position for a company like like them, right?
No, no, I don't think so. And like the, you know, the truth of the position that they're in is it's like, you know, the classic challenge of pre cash flow junior, I mean, gold mark has been great. So a lot of these companies have been ripping, but you know, they, they're trying to convert the exploration momentum into institutional interest. Like, you know, you're funding long enough to advance without dilution, getting the market to pay attention for more than 5
minutes. All of that stuff's tough. And they'd started to build a strong following. That following now feels like the board sold the company too early and too cheaply so. What do you think mate? I have a bias to usually sympathize with the shareholders who feel aggrieved or done wrong by a board. I'm usually in their court like 90% of the time. This time I'm not, I'm not convinced it's a bad outcome for shareholders. But to explain that, I'm going to try and contextualize what I mean.
Like I think the shareholders are they're comparing like I see a lot of them talk about this, you know, EV per Oz and they'll compare it to to Spartan and other recent deals. And you know, you know how I kind of think about some of that, like the value of announced in the ground is not the same as the value of announced in the ground somewhere else with higher grade and all that kind of stuff.
What's what's more though is I think, I think where our shareholders they might not fully appreciate like Capricorn's motivations and their motivations aren't as straightforward as you know what you just read in the deal rationale that's come to market. Yeah, OK. So I mean, let's peel out What? Why? It's an OK deal then. So shareholders like, well, a big group of shareholders appear to think that the board has done
a bad deal for them. And you remember, like you can actually read the the scheme, yeah, the Sid when it comes up and the deal's announced and you can figure out when the confidentiality agreement was signed. Now, in this case, ACA was signed between Capricorn and Warda on the 25th of March. So that's four months before the deal was actually announced. Warda stock was six cents then. And I don't think it's immediately apparent to everyone what is like happening when ACA gets signed.
But the usual, the usual process, you know, for ACA to actually get signed is, you know, a, a, a bidder or someone who has interest in a target that will, that will, you know, give the chair of the, the target company and NBIO and the NBIO will say, you know, like, subject to mutual due diligence, be interested in pursuing a corporate transaction. Sometimes they'll often name a price, sometimes they don't name
a price. And the, the receiver, like their defence strategy might, might initially debate to knock it back or to argue for an uplifting price. So by the time you actually get to the point where ACI is executed, like the, there's already been a bit of a negotiation on price, sort of subject to subject to further due diligence or maybe maybe you agreed to, to share some initial kind of material. But the full amount of, you know, DD required comes a little bit later.
But you get close on price before you actually sign that CA. And, and for Capricorn to actually like sign that CA 6 of March, like they're going to, they're going to put a bunch of conditions in the NBIO that's actually sent to, to worry around in the 1st place. And one of the conditions you're kind of always going to put in these situations is something like, no, for like, you know, where this is conditional on the current share structure, which
looks like this. And you're not going to raise any more equity. So it's all of these kind of pricing things are conditional on the capital structure at that point in time. And no, no material change. So they've, they've actually entered the CIA four months ago with a, with a date. And when I see that, I usually assume that a price is agreed four months ago and, and it's going to be conditional and no change to the capital structure.
Now 4 months ago, word our stock was six cents and the capital structure looked different too, because word our raised $19,000,000 in May and they said they'd spend that drilling out 50,000 meters. In one sense, you know, that's kind of a curious thing because like, you know, Capricorn is there, they've agreed, they've agreed enough to get the CIA signed and they wouldn't want the race to be that. No one wants to acquire cash with a print for a premium.
Like, you know, you don't want that race to happen, right? But on the other hand, I actually think word I kind of needed to do that because their, their own cash balance was dwindling by that point. I think it was like it would have been less to less than 5,000,000 bucks at the time they did the race. Now, if they're negotiating with Capricorn, Capricorn kind of has a bit of leverage because word
has come raise. So the so the word I bought raises money and doing so they're kind of playing hardball with Capricorn. It's risky, you know, Capricorn could walk, but they don't, and it's potentially let them get in an even higher eventual price. Explain that further mate. What do you mean there? So assuming the price is agreed when the NBI, like you know when the CIA was signed and when the
stock was $0.06, right? No way was a price then agreed between the parties going to be 15.5 cents. I'd imagine like a $0.10, you know, a healthy premium was was maybe agreed between the parties. But Warda stock runs to $0.13 in short order. Capricorn needs to get comfortable with much higher price now or or walk away entirely. And if Warda has no money, it's harder to kind of negotiate from that position. They need options. And one option is to solicit, you know, others.
Another option is to to go with a loan. It says only ACI was signed. So we don't know if there was exclusivity yet. Don't you know, I'm not not sure on that from, but at least the CIA was, was, was signed. To me it looks like the the race kind of forced Capricorn to lift their price, you know, forced them to, to to get their own value, even though from the point they signed the CIA like this, you know, this is this is a much healthier price stock. So it's a risque defence strategy.
So I mean, what do you think the real value is and? To expand the conversation, you know, you can, you can sort of speak to that for Capricorn and potentially others out there. I, I think like when I think of Capricorn, like, you know, we, we, we spend a lot of time trying to understand the different Dnas of different companies. Capricorn like long term thinking from their side, like acquiring the project makes sense.
Golden Range sits like 90 kilometres South of Mount Gibson. This obvious synergy, some people will point to a model that Capricorn might embark on like, like, like, you know, it's done with Dukeden. You got kind of 22 mills, you know, it's like 100 KS part. And you know, various feeds, you get optionality.
You know, you can bring on different things at different times and, and avoid the, you know, when you're long or you can avoid some some of the lost value that comes from things being deferred till till later in the mine plan. And if you look at Mount Gibson specifically like Capricorn will be long or there that like they they did a first drill program which was outside the Mount Gibson resource recently on the highway prospect that hit 28 meters at 8.6g a ton, something
like that. You know, is it like, you know, it's early stage, it's got to be proved up. Is it which part of the mine planet Mount Gibson is it going to go into? It's got to be trucked as opposed to being like right near the mill, but you get optionality by actually tracking that to a different location, be it be it where, you know, word as existing plant which requires refurbishment is or an alternative plant as well.
Because if you look in that region, you've also got Golden Grove and that meal at Golden Grove is already set up to process complex ores. And that's what like, you know, word as and like met requirements may actually kind of require a plant without, you know, capacity. Yeah. So I mean, flicking that over, the Warrior shareholders say they want to hear a bit more. Where do you think it kind of leaves them?
From my perspective, this is probably as good a scripted as warrior was likely to get right, and that will fiercely disagree with me on this, but that's OK. Many views makes a market. You have to you have to think through the alternatives for warrior like and it should be said nothing. Nothing here is precluding someone else from bidding a
higher bid. Like a third party can come along and bid higher and happy days, but absent that, you know, like what, what a word ours options or why would shareholders be grave? Because the, the you know, the board is and the shareholders, they're choosing between two things. Go it alone or try and advocate for an uplift or accept the, the the you know, the the existing Capricorn offer. I think like just zoom out
really, really long term. Keep it simple, kind of just getting on the Capricorn train has been a fruitful strategy historically speaking. So, you know, that said, the scheme still needs 75% shareholder approval and the forums allowed the retail sentiment. It does matter here. There's I've seen people allege numbers as much as a, a 30% block of retail shareholders are going to vote against this and that.
And that clearly, you know, doesn't, doesn't, doesn't, doesn't, doesn't exactly work for a, for a scheme. So there might be a recap or there might be, maybe it's a bluff and maybe the bluff will be cold, or maybe, maybe, maybe it won't. Maybe there'll be an uplift. Like maybe, maybe the structural change all of that is to play out. I'm following it closely.
I I usually, I do empathize with shareholders and everyone wants more, but, but I would just encourage word our shareholders to think of like, you know, the, the, yeah, sixth sense versus 15 1/2. It's always hard to when you're anchoring based on, you know, the day before the deal was announced. But yeah. I'm with you mate. I think that's a a great spot to to leave it. Let's thank our fantastic partners that grounded sanded ground support and cross
boundary energy. Who to read mate over the weekend. Now remember, I'm an idiot. JD is an idiot. If you thought any of this was anything other than entertainment, you're an idiot. Then you need to read out a disclaimer.