Will M&A spark life into lithium?

So I'm, I'm just very curious to see AI mean like this is, it's just a leak at this stage. There's no binding deal on the table, although the rumour is DD is underway. But if, if it actually translates to an agreed deal, super interested to see if there's, you know, more of this and like, is this a way that I can recycle some, some capital and and endure? Righto buddy miners, we're giving bloody. We'll give gold a rest today. We'll get it's bit of lithium. The Indians want in on lithium.

We've got bloody, we've got Lavato the OHH, the small cap that's now in the All Ords and we've also got a bit of Adriatic. A corporate update and you want a corporate update at underground operators next week from the Samvic team, their bloody tent and hopefully Derek Herb will be there talking everything Samvic ground sport. Tell me about the. Ground sport. I cannot wait to just stand in front of that booth whether they want me there or not. I can't wait.

I can't wait for that. I can't wait to to just hear about the innovation that they've got underway. There's gotta be selfies coming everywhere mate. I wanna, I wanna see their new dynamic Bolt. I'm sure that's gonna be showcased at the conference. Bloody just an old school split set I can walk around with fending off fans with don't. Forget the chemical innovation, Oh mate, there's a whole bunch of different products coming out that aren't even bolts. Well, you won't even.

They've probably got resin there, but you won't even know 'cause you can't. Smell it? Amazing, but. I'm jealous you get to see the €1 billion man mate, enjoy it. And the free set and the free ground support division that come with him, right?

Let's take it away. The Indian groups that won in on lithium and notably Australian lithium. This is yeah, this is the story broken in Reuters a few days

ago. And, and their Intel or insight was that a consortium of four Indian state firms they're looking to collectively acquire 20% stake in SQM Australia's lithium assets being a 30% stake in Andover and a 50% stake in in Mount Holland. The, the article kind of goes on to say that, you know, due diligence is on and the companies have expressed their interest with an initial offer. And the, and the number that's quoted here is 600 million U.S.

dollars, right? This is interesting for a bunch of reasons, but the the thing I wanted to focus on to for our discussion today is actually just valuation. Because if there's a decent see through, you know, value on the table here, that has some some pretty big flow on effects for, for not just, you know, SQM, but other other WA lithium Hard Rock players at the moment too. Yeah.

And considering what was paid for Andover, what the bid was for Kathleen Valley back in the day and 600 million to wrap up all those stakes, I'd like to see what you come up with here. Yeah. So, so this is, it's, it's look US 600 million is, is roughly 950 million Australian dollars.

So that would, that would imply evaluation if you, if you multiply that by 5, because if they only want a 20% stakes, that would imply a, a valuation of 4.75 billion Australian dollars for SQMS kind of you know, entire lithium Australia business of those those two assets.

So I am keen to kind of contextualise this here because just think about 18 months ago Azua was gobbled up by Gina and SQM together for, for what was you know, a fully diluted equity value of of 1.62 billion Australian dollars. That that implied that SQ Ms. share of of Andover would be worth 810 million / 2 right. And 20% of SQM share, which is what the Indians would would effectively be be be buying as part of it would be worth 1/5 of that or 162 million Australian

dollars. And that that's for 60% of the project because crazy's got still got the 40. Correct. So that's, that's effective. That's that, that number that I've deduced there is SQM, but they're going to have 30%. But but you know, 1/5 of that is what the the Indians effectively be buying. So I'm trying to, I'm trying to contextualise that 162 and then trying to figure out, OK, so what's, what's the, what's the

Mount Holland value here? And really frustratingly analysts that cover SQM, they don't value it's mining assets on a sum of the parts basis. They don't do DCFS on it. They group the lithium segment and they apply this like chemicals multiple on, on EBITDA, which is really frustrating. So you know, I just wanted to see what the Street was valuing Mount Holland at. And of course you just get clueless when you're looking at the analyst coverage. So I went to Wesfarmers and same

thing. Good luck finding a single NAV estimate of of Mount Holland by reading Wesley's analyst coverage. It's a big conglomerate. It's doesn't doesn't quite cut the mustard with Bunnings, does it? No, the closest you'll find like you can, you can see JP Morgan estimating ramp up of Mount Holland to take 12 months longer than the the planned 18 month management target on and on their numbers. Mount Holland isn't even positive until FY20 7.

Flash up a chart here. So I'll look through Wesley's annual reports. And I was just trying to see how much money like they and, and SQM have have sunk into, into, you know, building, building the mine.

And by reading a bunch of the statements and, and everything like in the last few statements specifically, they've, they've constantly brought up a potential impairment on Mount Holland. If, if their assumptions on the, on the lithium market aren't accurate, but they, they get to actually impair it. But yeah, I kept kind of trolling through and, and trying to pick up a bit of a, a ballpark number of what at least the carrying value of, of, of Mount Holland is. And so Wesley, they paid 760

776,000,000 for their 50% of that project when they acquired Kidman in 2019. And since then they've sunk ballpark 1.5 billion Australian into into building their share of the mine and the refinery. So Shum shum SQ Ms. 50% has kind of a you know, the same, the same carrying value that'll be yeah, two 2.3 billion all up in Australian dollars.

Hence if you want to get 20% of that, which is which is the reason what the Indians would be acquiring here, 20% of 2.3 million is 450 million Australian dollars. So All in all, 450 million for for you know, for the for the Mount Mount Holland minority interest and plus 160 million for the for the Andover minority interest equals 610 million Australian dollars. That's that's kind of rough math kind of carrying value of those two assets as as I interpret it.

And remember the, the Reuters rumour said 600 million US or 950 million Australians. So on my, on my in a very rough Bush math, this Indian offer, if the number's right, would be a pretty, a pretty attractive premium to the sunk capital or the carrying value of these assets. And, and remember, like the end over deal was done during Lithuania. Like no way would that same deal get, get, you know, go through for the same price that it, that it did, you know, 18 months ago like it did.

And Kathleen Valley, like, sorry, not Kathleen Valley, Mount Holland, Yeah, I mean, it's not profitable at the moment. So you kind of this, this, this offer from the Indians, if the value is right, yada, yada, then it's a pretty, it's a pretty healthy kind of, it's a pretty healthy deal on the table. You know, of course the, the, the the Indian consortium, they're going to want the product and marketing rights that comes with their respective ownership percentage. But yeah.

And the other thing about the Reuters, the Reuters article, it makes no, no mention of Kwinana. And so I don't know if the the interest kind of covers that any respective share of you know, Covalence hydroxide facility which is, which is being built in Commission there. But if, if the value is true, like it's just a, it's a massive kind of vote of confidence in the value of FWA Hard Rock assets, which are are really in the doldrum right now. Yeah, absolutely.

It's it's huge. I mean, just to go on from what you said there, I, I would assume given the way the article was written and stuff, and it's pretty, it's pretty early days and everything. But the way it's kind of sounds is that they're after that stake in Covalent, which is the same entity that owns the Mount Holland stake and the refinery

as well. And given everything that's happened since those transactions and you know, the, the way you're talking about it being a carrying value, you know, you're not really taking into account that everyone else that has tried to go downstream hasn't had too much success in WA. So those numbers and like you said, super early days are a lot higher than I would have

suspected. Totally think about, think about, think about min res right now, like if they could, if they could sell down a 20% stake of their, if their, you know, W Australian lithium Hard Rock business to, to an Indian group for, you know, when, when these are the kind of numbers on the table, That's that that'd, that'd be a huge, a huge win for them. If if the equivalent kind of deal's on the table. It doesn't. The Reuters league doesn't say it's on the table.

But heck, if I was at Monrez, I'd be doing everything I could to try and to try. Fine, yeah, to try and try and get an equivalent deal on the table for for me. Even even a 50% premium on all their minority interests collectively, I'd reckon they'd take that. Yeah, totally. It's, it's, it's a yeah. And we, we, we kind of saw, see similar stuff whenever there's these minority sell downs of the, of the, the big kind of

copper assets. There's, there's an entity, strategic entities who have a strategic interest and they've got a much different kind of cost of capital. And, and are willing to have to, to, to buy a, a minority interest for a much higher implied valuation than the market is giving that company kind of credit for at that point in time, which, yeah, can really assist any, any cash flow dynamics that the companies might be, might be having.

So I'm, I'm just very curious to say I, I mean, like this is, it's just a leak at this stage. There's no binding deal on the table, although the rumour is DDS underway, But if, if it actually translates to an agreed deal.

Super interested to see if there's, you know, more of this And, and also if, if, yeah, if, if, if any of the, the lithium producers out there who are either having kind of cash flow challenges or a forecast to have cash flow challenges like is this a way that they can recycle some, some capital and, and

endure, endure the storm? I think, and if you go back to that and I've saw a lot the so-called lithomania, it was majority of that was driven by, you know, M and a hype speculation, yeah, not speculation, but like M and a activity like the underlying lithium process dropped a shit

load from the highs. But it was all just everyone trying to the the rush to get ground something like this, which could you know, potentially create a bit of momentum in that is like you're just saying what happened in lithium previously purely dictated by M&A, not the actual price. So whether this might get the ball rolling again for that price, irrelevant. We're about to find out. But they might be all licking their lips a bit. The old lift pools.

What are they called the the? Bag lift bag holders, you'd say? Just to add to the the broader point, I think action we've seen from Indian groups around the world is really interesting and that's a trend that I think continues. Australia's not the first spot they've looked. They've tried to tie up deals in Argentina, in Chile as well. Even in Africa, in the DRC in particular, they're trying to do

more deals. India is a like a huge component of a lot of analysts growth, you know, global GDP growth and these sorts of things over the longer term. So to see them start to kind of mimic what what China did 20 plus years ago is an interesting kind of different take on on what they're doing here. What do you? What is, what's your prediction do you think? I just watched it, reckon it's going to come through or what is

it going to be a get the ball? Is it going to start a bit of momentum or it's it's probably the first thing of recent times that we've seen anything related to strategic investment in Australian lithium of light? Yeah, it would be, I think. I think it's just wait and see because you can't, you can't get the vote of confidence until this is a binding deal on the

table. And then all of a sudden maybe you can extrapolate to the to the other producers and, and back out a see through value, which is, which is on their, you know, lithium portfolios, which is, you know, either either more attractive than the market is, is appreciating or in or in line. And and if, if they just have a pathway to actually unlock some of that capital and avoid kind of short term funding squeeze because of, of, of market

conditions, that'd be awesome. But we've got no indication whether there's this deal is, is going to be binding or if it's going to lead to future deals as well. Yeah. What do you reckon is going to you guys, Jadie? Just to your point on strategic investment, the only other like party that would have been keen lately is the Chinese and there's just no way that that was going to happen in Australia.

So yeah. Are we interested to see what happens with Christie's 40% stake in Andover at whatever point if things do start heating up? Because that's a yeah unless he just keeps it forever, but he'd think some that'd be a bit of a hot Ave. that people would mobs like this would be going after. Yeah, especially when it comes to CapEx time, that's when that's when we might see something come up front. He's like I. Don't want to, Yeah, I don't want to pay all that.

Yeah, well, he doesn't have to pay. Remember, his stake, there's no, he doesn't have to pay it all for any of the the, the drill out of the resource, all of the work until that decision to mine is, is made. So he's kind of value is getting added to that project in the interim and and he gets to benefit that without selling his steak. Yeah, yeah. Frozen. Oh well, that's it.

Good old NSW. God, it's funny how this is this. This probably could come in as one of your best value deals going around JD 'cause once I put those numbers out, you'll bloody fall off your chair. So as you said, love auto. You look at the price here, they're nearly I think they're $400 million market cap now and you're I still remember, I mean it was in Lithomania. They would love auto were drilling for bugger all down in

the Dundas region. I think down in the South of WA they'll just a lithium exploration company and they did it, They've done a deal and I'll go through the numbers. They pretty much paid 8,000,000 bucks for this Hill Grove Antimony gold mine in NSW and now the companies worth 400 mil. But we'll go go through the things like Antimony it it was the no, it wasn't it touted as the best performing commodity last year. It it it had an absolute ripping

year last year, correct. Yeah, previously, you know, a, a, a drag for people that have been attracted to it. It's even had the nickname Anti Money before, but you, yeah, Lovato's turned that around. Yeah, yeah, well, I think it's, oh God, I think when they bought it, it was well, sub of 10,000 USA tonne for antimony and now it's $40,000 US tonne. It's not the easiest commodity to find a price chart for, I won't lie, but it's gone up a bloody shit load.

And I guess it was on the back of early December last year is was when China banned the export of antimony to the US, which is what really gave it the bloody momentum to where it is now. Now everyone's drilling for antimony.

So this was so this was actually the first well did VAC work there in 2009 at uni when Straits Resources held it and Straits had just put it effectively it was it wasn't full care and maintenance, but it went from when I got there, there was just a skeleton crew on doing still pushing a decline wasn't any production. They just really trenched deeper people like. Did they call it a gold mine back then? No, it was, it was always known as one of the IT was a gold antimony mine.

Yeah, and it was, it was always one of the only ones in Australia. The other ones, Kosterfield, which is Mandalay Resources down in Victoria, so they've one of their reserves, they've got about 1010 1/2 thousand tons of antimony. You see the reserves of Hill Graves that they've got at the moment, they've got about 39,000 tonne, 1000 tonne of antimony with a bit pretty similar grades, a bit lower, but it's I think Foster Field produces

antimony as a byproduct. You've got the other ones that Southern Cross Gold that's been the the balter that's they, they haven't got a reserve out or anything. That's going to be an interesting one to wrap a reserve around with all the bloody veins going everywhere. That's a bit that's .9% antimony on their exploration target. So, but I think this like, you know, hill Groves set to in their study, if it if they hit the numbers to that's going to supply 9% of the world's antimony.

So it shows it's not a, not a big bloody, it's a market that's controlled by, you guessed at China, 80% of the world's antimony comes out of China. So, so they, they acquired this project and it was sort of before antimony. The, the price hadn't moved yet as much as it did now. And they acquired it for 8,000,000 bucks. So $3,000,000 purchase price plus $5,000,000 for replacement of government bonds. And it come out of Red River.

So Red River went into administration based due to their Thalanga copper projects up in Queensland. Yeah. And you say that there was a shares issued to in the investment in the transaction. Shares were issued to traffic euro two and a half million dollars at .07 cents in Lavato which is now a dollar. So they were, they were one of the creditors for Red River and then they agreed to convert some of the debt into shares in Lovato. Hope they still got them.

Which I, I, I, I'm pretty sure they do. I'm pretty sure they do. I couldn't say it's all do they try is I'll see there's like one of the substantials holders like Bank of Nova Scotia. Would traffic Europe be under that? I couldn't. It was the first time I looked at it today, so bear with me. Yeah. And like another there was the one of the, I guess the cornerstone investor that come in for 20% of Lavodo was Gauge Capital Management of Beijing.

So it's like a sort of a Chinese major holder. I think they're back at about 15 and a bit percent now holder of Lavodo. So yeah, and it was and you look at what like straights resources. So straights actually become effectively became heiress. So they actually sold it to Bracken in 2013 for 27 and a half million. So these guys have picked it up for effectively 8 million plus the traffic year shares they

issued. And it's just talk about perfect timing for as I said, the antimony process is effectively 5X and yeah, that's how they've bloody ended up with it. So it's and you, you look at the commodity when they did the actual project study the the OR reserve and the pay FS, it was based on spot price of 2350. This was spot at the time US 2350 for gold and $23,000 a tonne for antimony.

So Fast forward to today, gold is what nearly 3100 US as of the other night and Antimony's 4040 thousand US. So it's just yeah, phenomenal bloody rise. So you can see you can sort of yeah see why it's getting this getting this attraction. So and look they're touting about 88 million pre production CapEx. They've they ended up rising $30 million the end of last year. So the joys of the big market cap. So they've got about 28 left in the bank.

So I guess thinking. Yeah. So because there's existing, there's existing operation there. It's funny, you like when you go from Kent, you go through this, go down this road, through this gorge and then back up over to the mines on the other side of this gorge to where all the processing and offices are. Because it's like, it was like a little pilot plan. It's only like a 250,000 tonne mill that was there.

It wasn't, wasn't a huge one. And then so they're looking to expand, expand it to 500,000 tonne per annum. But obviously we're in, we're in NSW here, we're in farmland. We've just seen not putting a bloody knocker on it. But you we've seen I guess what happened with the whole Mcphillamy's side of things. We're in a much different. It's, it's not a mining town at all. Armadale. It's about 100 odd guys from the Bloody Sapphire City in Burrell, my hometown.

It's a beautiful part of. It but it's not a like you don't you don't go around and see West track buildings and stuff everywhere and like it's, it's just not a mining error.

I remember when I was there they because they got a heap of, you know, old school follows in from North Queensland to come and start the mine as the superintendents and that and they said they like to employ a local workforce there because they employed them as owner operator like that to teach everyone, all these people out of mine, like teaching me how to put Polly together like because no one had ever never seen it

before. There was obviously people that had mine before that they recruited. But it's yeah, it's totally, totally different landscape to to over here. I didn't, I didn't even know it existed till I went to uni and it was only bloody an hour and a

half or what. So because if you look at the, well, the, I think this was in, this was in their DFS or something like talking about the, the development application, because there was the development application that was I guess that you'd say the development permit that was in place before was for a 250,000 tonne of ore per annum operation. And that was like effectively expiring in December 2023. So they're talking about increasing it to 500 and 550. They're talking about the

increasing the tilings capacity. So that is all part of a new sort of development development application They did just they did just release in February this year that they've converted it from like a wet tilings storage to a dry tiling storage option. So that's the pretty sure it costs more like what I've been told about dry, dry stack tailings is you only do it if you have to because it's a lot more like machinery involved to stack the tailings.

You're not just bloody pissing, pissing it through bloody pipes out into a dam. So you could say that's probably a measure taken to get the NSW permitting a bit bit on side. So it looks like they still have to only they will have to get approval to increase it to 500,000 tonne per annum like that's all been submitted to the regulators. But it's just that that's probably the the key risk that you associate with this is permitting in New South Wales.

Beautiful country. It's fucking cold there. Oh, cold is a mother in This is. If you want to work there. If you want to work there and there is a quite appropriate company I'll attach this one to. If you don't wanna get a grounded camp, this is what you have to do. This is the only thing that is probably equivalent to a grounded camp. They've purchased the Echidna Gully, which looks like some, oh, looks like somewhere where that host weddings. It is. It's an event space for hire.

Yeah, yeah. So they've purchased it for $3,000,000, so $3,000,000 cash, an issue of 770,000 shares. So they're pretty much they've nearly paid the same for this block of land and accommodation village as they did for the asset when they first bought it excluding the bonds. So this this is the the best non grounded camp I've ever seen in my life. So. That's up there with a grounded camp.

It's almost as good. I cannot confirm that maybe grounded had a may have built this, I don't know like because it like it just looks like a grounded camp in country NSW. Stunning. It's beautiful. I think grounded are probably going to have to add a bit of their capability here because when I read it the, the the sleeping quarters, it's like 8 people in a room kind of thing now that that won't fly on a FIFO camp. So you've got still going to need grounded to get there and

build some some sleeping. Quarters be bad. Wouldn't be bad. Oh, yeah. You know, it's like a bloody school camp, isn't it? Shut up, Matt. So, yeah, that was so the transformational accommodation acquisition you'd say. So that's so there's if you want to go work there, that's what you got to look forward to. You might end up getting married on your days off looking at that joint you've got too. Many price falls off a Cliff. Maybe they can become an events

company. Yeah, yeah. So I think this probably, as I said, based on the other well, that's selling Southern Cross or what is it SX1 now. Now they're dual listed like that still that hasn't even got a reserve or anything. That's that's still a long way away. This is an existing operation needs a needs a bit done to the mill and they're they're doing a lot of you know, there's a lot more talk about exploration now. So you might as well get the bloody story going.

But this would yeah, you got cost to field as well. But in terms of near term antimony, near term antimony production in Australia, this is probably it. This was always known as the what the antimony model I'd say because that's been in, well, when was I there? 2009, it sort of had AI think it had a bit of a restart then it dropped off. But it's just never had a seamless operation. So, yeah, it's one of them ones that all all looks good on paper.

But I, I look at it with the obviously just the NSW non mining area site. It's one of those ones where you'd be like, right, get a contractor there, like get a NSW contractor, come mobilize the workforce, bring the bloody as many people with you as you can. Because it's not a FIFO site. So you got to sort of bank on you. You could make it FIFO, which is increased the cost, but you want to bank on trying to make it residential to save money.

But you've got obviously find the people that have the have the mining experience. So there you go. Here's the bloody history of sort of. You can pay for the play rugby league for the Armadale Rams if you want. That's super interesting. Maybe the the, the one area which is like a a whole can of worms, but I'd be very curious. Obviously, you highlighted the China impact on the market there. These guys have a deal with with Wogan Resources kind of specialty metals traders British.

I'd love to know. Traders, aren't they? Yeah, yeah, exactly. They, they do like mineral sands and all these kind of niche products and stuff. But I'd love to know what the what the payabilities, what these kind of terms are, given that China is the one ultimately buying the vast majority of the stuff. Yeah, what you're actually getting paid for once you get it up, but. And that's a life of mine off take binding off take agreement too for all golden and too many

concentrate. So market marketing, marketing rights for it. Yeah. The other thing I'd be curious about too is like we all know high prices secure high prices. Like how reasonable is the current spot price of antimedia persist and and yeah, what what, what new supply could be coming online around the globe?

Yeah, yeah. And but it looks like you look at this study, it's, it's probably one of those ones that reminds me of sort of Pilgrim Minerals in a way that the, it could operate at half the price, spot price today. It appears like if it was 20,000. So it's going to be a rush to get that to be a first mover and take advantage while it is high. Because if this mine can produce 9% of global antimony, you don't need much more to come on to really start taking market market share from you.

Yeah. So I think they'll be trying to get stuff out as bloody quick as they can, at the mercy of the government. Yeah. I mean, and on the on the processing point, right, if China's not exporting finished product, how keen are they going to be to buy Antimony right from the training gift? That's all right. They'll do what they can.

But you know, if if that's where all the downstream is to process the stuff, but they're not allowed by their government to export it, then what do you kind of do? Yeah, yeah. And I and I, we're talking about the the permitting and stuff like that. Like if you compare, I know I mentioned Mcfillimy's before, but Mcfillimy's purely grown field site that was all around

tailings dams. And I know it was native title, but which was coincidentally where the tailings dam was supposed to go. This one is if they go on dry stack, they've got an existing mine, existing infrastructure that just needs to be expanded in size. They've got, they've got a lot more in their favour than Regis had with Mcphillimy. So not a really like for like comparison, but still needs a ticket for approval. So yeah. All righty.

Let's let's talk about Bosnia. Adriatic, I reckon guys haven't talked. About it for a while, eh? Yeah, it's been, it's been a good six weeks, I reckon. They, I, I think we had a, so we, we had a brief chat about them sort of off the top of my head 6-7 weeks ago when they did

that capital raise. For. Expansion in in quotation marks so they've they've come out now with and operations update as well as their annual report and, and updated reserve, reserve and resource statement and the the stock's down 8%. So you can kind of tell that the market doesn't love it and what the, what the problems really are here, that they're an evolution of what we spoke about

last time. As we spoke, you know, starting a year and a half ago about the, the mining challenges to start Maddie, the, the softer ground and anticipated all these sorts of things. And then as you, you work your way through it, you work your way deeper into, into the processing plant and you test the next bit of kit. Every time you go through, you're finding out what's working, what's not all a part of the, the kind of ramp up

story. So I'll start with mining because they kind of broke the announcement out into mining processing. And then we can quickly chat about the, the changes they made to the, the resource statement. But they mined 67,000 tons, which is down a few percent on last quarter. It's it's not a great number to to be honest. Remember the plant is for 800,000 tons per annum. So looking at the stockpiles as well, you can see the stockpiles declined by 15% over over the

quarter working in their favor. They've got much higher silver grades going through the plant then they've got in the reserve grade. So comparing numbers about 316g per ton is what they've got stockpiled at the moment versus like a bit under 200 grams per ton in in the reserve. So that will be something that they have to face up to down the track. But that's kind of where they're at at the moment. And I think they're actually a bit constrained with the ROM pad at the moment.

So they've got a bit over 50,000 tons there. Then they've got a bit of waste and you know, a few other bits and pieces. But if you guys can can visualize and remember what Votesh kind of looks like, it's in the mountains, it's a foresty kind of area. You're a bit space constrained. You've got construction roads needing to be built to the the tailings facility, which they've only just got the permits and the agreements in place to do.

So I think they might be a bit constrained on that front, although we've only got like a one page announcement today. So it's a bit hard to actually work out what's slowing them down there. But we're two years into mining here pretty much now and we're talking about 67,000 tons per

annum. Obviously there was previous guidance numbers that came out beginning of last year and you know again revised beginning of this year, they were revised down pretty heavily because they weren't meeting the targets there. So the numbers they've got to meet for this half year is 250 to 275,000 tons to be milled as if you're just kind of assuming that you you keep those stockpiles constant for this half year.

You need a pretty enormous effort, you know, 2 1/2 times the best half you've had to try and meet those numbers for this half year. So I think they've got their work cut out for them. But on a positive side on the mining front, they did get the the development meters up slightly on on the last quarter. It's, it's the development meters that have been a bit of a bit of a drag because even even that. The capital development made

exactly, exactly. Yeah, like that, that half half year 25275 to be milled, you know in an 800,000 tonne per annum plant that's still not full utilization, which sort of signals signals a mining constraint, not a not a not a milling constraint, right. I, I, I think it's, it's both it's mining and and mill that the mill hasn't been tested yet.

So they what they sort of striving for, which you can see in the numbers up there is that they want to be running at nameplate capacity next half year. Again, it's it's very kind of ambiguous in the statement we've got here, but I think they're not quite kicking it out the park on both fronts. So I'll talk to the processing now. They got it to 5 million oz, the midpoint for silver equivalent for this half year. They've done halfway through that 1.3 million oz.

So again, a big stretch to kind of get there. The amount of tons that they milled matched this quarter what they mined, which on the mill is up 40%. So it's a a big record on the milling front, but that's running at 30% of nameplate capacity right now. So backing out there, the grades and, and recoveries, you can they, they didn't provide the specifics here, but you can kind of work out there in line with expectations with, you know, expectations not being all that kind of high.

They do give a couple specifics on what is causing the problems though. They've got the tailings filtration cycle times, which are just not up to scratch at the moment, which essentially means they just can't get the water out of the tailings quick enough, which becomes the bottleneck for the for the whole plant. Then you've also got the road that they need to build to the new tailing storage facility, which they only just got the

agreements in place for. So that again took longer than it was meant to take and it's holding them up in moving stuff out. So commercial production was meant to be hit this quarter. I think in reality they got they got nowhere near kind of actually achieving that. So they're aiming to hit that in the quarter that we're about to approach. So. Interesting that they they also released the updated reserve statement concurrent with this announcement with it.

Were there any any any any devil in the detail with the reserves? Yeah, I think, I think there's some fairly consequential read through some, some were guided to already. But the first thing you notice you open on the first page, you can see the tons have dropped by a way bigger number than what the mining depletion was. So we're talking over 10% less tons. And then you can quickly see just to the right of that the grades jumped up on almost all

the medals they've got. So you start thinking about what have they done with the the cut off kind of mark. And you can see the NSR cut off has nearly doubled from $68 a tonne to $130.00 a tonne. So the NSR cut off being essentially the minimum value of a block that they're going to mine or would mine if it, if it makes a sort of value that essentially just reflects higher cost assumptions.

And I think it's a, it's a pretty clear acknowledgement, like they spoke about last quarter that operating costs are much higher than they'd previously anticipated. You know, it's, it's, it's not a, a massive surprise given the two years of kind of struggle we've seen. But if you look at the mine life, it just pulls it in a couple years. So 15 years of mine life still they're they're not troubled on that front. But you know, I think this might be a middle, a bit of a middle

ground. And it'd be interesting to see what happens on that front and what happens when analysts start to flush through those high costs. That's fascinating, Double basically doubling the cut off grade, but it's only only results in an 11% reduction in tons after depletion, which, yeah, I suppose thanks to the pretty, pretty high grade nature of this whole body too. Yeah. It's a solid, solid ore body. Just, you know, the, the, the potential is there.

And that's been the, the one thing that the people that are along the stock always fall back on. Like just just look at the cash flow potential. You know, you might say, hey, it's a bit expensive given how the, the track record of performance has been and the fact that the royalties might be jacked up because they're super low and all these sorts of things. But if things kind of go to plan, it's meant to print, you know, 200 million plus per annum in cash for a number of years.

So that's that's been the fall back and hopefully they can kind of maintain that, right. That's the the agile thing of looking great on paper, but just going to a pretty fresh jurisdiction for mining, getting the people there to do it, throw in poor ground conditions for the capital. Like it's just been a, you can tell how those things just start compounding together. And you know, we've been talking about this since the show started this project. Yeah, the stock's near all time highs.

Yeah, even despite all of the the the challenges they faced. Great is king. It's it's pretty wild, right? Like, yeah, yeah, what you guys said is exactly right. I mean, there's a lot of unanswered questions after this announcement. You know, they gave a bit more on the processing underperformance side of things than the other. But I think if anyone had any doubt about what that placement was for two months ago, I think

it's pretty clear now. And I keep thinking back to McNulty curves and what that kind of what you can kind of infer from them in the context of this project. So I'll flash one up now and kind of talk to it so people

know what we're speaking about. But essentially you've got, you've got four types and type 1 is if the project with the the processing side of it specifically gets off the ground very quickly and really hits nameplate in a pretty swift amount of time, say say about a year, That's that's a cracking ramp up. And yeah, I mean, these guys are are pretty short of that at the moment. These curves assume sufficient ore feed to the plant, right.

So there are shortfalls in using this as the kind of be all end all analysis, but there have definitely been problems at the processing plant side of things. And I mean, my next point's a bit open-ended. I'm came to hear what you guys think. But I read through it and there's the customary two or three paragraphs from the CEO and there's no real acknowledgement of all, of all

the problems. Like I know they're faced up to analysts on a couple of the calls and they've answered all the questions that have been had of them. But I do find it kind of interesting and perhaps it's just a strategy, a strategy they're taking to to highlight the positives and, and just emphasize that there's this things they need to do better and, and they're going to get there. But they, they really talked around a lot of the challenges without addressing them face up.

And yeah, I mean, I'm, I'm curious if you guys have any other thoughts on that. Maybe the marketing strategy is well, since it's I assume the share price all time high as a function of zinc and silver prices being very high. So it's like we've just we haven't hit ramp up, but that means we've just left it in the ground and mined at higher

prices, which they are now. So it might actually work out better for it because if they hit it, that was less material, more material sold at lower prices. So it's still in the ground. Mate, if the if the share price is any guide to go by the the strategy they're doing is working to tease so so I can't fault them. Yeah, Yeah, we've our like our question marks have always just been on what the, the interim funding pathway looks like.

You know, we, we sort of, I think collectively think at some point they'll get to a, a period where they'll be printing great, great money, but it's, what's the interim pathway look like to getting there? And when your, your share price is very high, then your cost of capital is it, it's not that bad. It's not like the market's punishing you if you, if you need to bridge it with, with more equity or anything like that.

But they also when you, when there might be question marks over the interim funding situation, but the ore body will kind of get there. Then you're also attractive for a, for a, for a takeover to, to various parties who have, you know, better belt, better balance sheets and all that sort of stuff. In the same way we talk about kind of Bellevue, you know, those sorts of things. So want to watch out for on all fronts. Yeah. Surprised no one had to dig at them a bit lower. It's hard.

To. Know buying a company out in ramp up is not the most common thing you see. Yeah. Yeah. I mean like like there's a, there's a couple more kind of points to it. Firstly, they've started repaying debt now. So they paid 20 million bucks USA couple days ago. That'd be a quarterly ongoing thing. And to the take out point, it's a tightly held stock, like five groups of individuals hold 50% of the company. So you need to Queens. Roads one of them, isn't it? The so Helicon is 21 odd

percent, L1 is over 15%. Then you've got Paul Cronin, the former boss and and yeah, I think T Rowe Price and and another individual up there. They make up the 50%. Yeah, so Queens roads not in it anymore. Other they converted their convertible early and I think the read through was why. Why'd you do that? Well, they probably sold their shares. Yeah, yeah. Yeah. Yeah, Yeah. So I mean, it's a, it's a super interesting one to follow, right.

Like, wait, Trav, you mentioned the the capital raising the, the sort of lower cost of capital that you can get away within share prices higher. But they've done quite a few raises now. So curious to see how, how the support remains and how they kind of delivered into it over the next few quarters. Yep. Yeah. Oh, there you go. That's bloody. We've mixed it up. We've mixed it up because. She's antimony, she's going to face medals. She's going to fire up at the

end of the week I reckon. We might have to record a Friday episode. Dog spectacular. Could be, could be. Yes, indeed. And the smaller end of town. Yeah. Oh no, no, I was thinking. There's a we're thinking about different things. Certain stock coming out of suspension on Friday. We might have to do a live cross there. Yes, yes, yes. No need to reveal what that one is. So rolling out. All right, good stuff lads. What have we got coming out? We might have.

AI was IMN mate, that's what we've got coming. Oh yeah, we do bloody hell and Jake Jane oh cannot bloody wait and continue on the Bender arm for the gathering and conference as well. I'm going to come back a ruined man cannot bloody wait and JRX as well Bruce don't forget that one. Once you've once you've had fun at all hug OPS go to the JRX one in Brisbane. Dicks discounts bloody flying out the door in the show notes click the links. Our great partners as well.

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