Follow up from last week conversation with JSL / Haber First, I would like to thank Rinny and Tinker for reporting your discussion with JSL, very appreciated and nice to compare all of our answers and impressions of what we could gather.
Myself and others had the great opportunity to get a meeting on last Thursday with JSL and Haber via video conference. (it seem to have been his week to talk to all of us)
I would like to say that JSL and Haber were really generous with their time for talking with us and answering our questions for a long time, I would like to reiterate our appreciation to them for doing it.
Since many important subjects have already been covereded by Rinny and Tinker and that we have the same info, I'll try to only highlight other parts of our conversation with them.
Like I said before M. Haber is absolutely incredible, it is very interesting to listen to him, you can tell that he knows the market inside and out. He shows a lot of confidence in the future of the Lithium market. According to him and JSL, the lithium market is rising, the prices should only rise further from here.
According to them, the advocating work towards all the big players (OEM, etc) is done. They all know that investment will have to happen one way or another in the mining / exploration sector in order to meet the required demand for 2025-2027. The E-movement is started, there is no turning back. The problem is that, still today, they are struggling on who and when to make the necessary investment.
15K-20K$ needs to be invested for every new ton/yr needed. That is a huge amount of capital that needs to be injected very soon. If 1M tons are needed in 2025-2027 and out of that roughly 600K tons might come from existing producers, that leaves 400K of new resources and that is roughly 6B $ and more that needs to be injected in the lithium miners/converters. Every body in the market seems to knows it, but they are still struggling to decide who and when invest (maybe not an urgent enough problem right now since covid?)…
The more they wait, the more expensive it will get. There could / will be a major gap to fill shortly. JSL and Haber seem to really think it is about to happen very soon and if it happens, it will put pressure on the prices. (we shall see…)
According to Haber, most (if not all the majors) are struggling to make good quality hydroxide. If nothing happens soon, they will have to use lower grade quality and try to improve it to make battery grade. At the moment, over 80% of the conversion is done in China. There will eventually be more plants around the world but it takes on average 4 years to plan and build a fully functioning conversion plant.
Haber and JSL mentioned, that the CRE team has done their part, players in the market know Rose, they know the quality of lithium we have and all the advantages of investing in us, the due diligence has been done from other parties. It’s just that no one wants to make a mistake. It is a question of getting in at the right moment at the right price etc. With all that we hear around the globe, government wise, instability, jurisdiction, etc, the possible partner / partners just want to make sure that everything is in order. They can’t force them to sign as JSL says. Nemaska (and other project around the word) has affected us greatly and no one wants to be the next person / company to make the same mistake. The partner / partners need the assurance that no more money will be needed and that the project will be able to proceed forward as planned. The permitting is an important step here, they believe things should start moving faster after that.
JSL confirmed that what has been discussed with the partner / partners as not been lost, it is only a question of time and mostly permits…. We are still aiming at giving a portion of rose, his goal remains the same, no more then 25-30 % and to remain under 200 M share dilution if need be.
The investment and the mine construction really needs to happen within the time frame meaning construction start in the spring 2021 and production late 2022. We need this to happen in order to be ready for the 2025 market. It takes some time to have the mine rolling perfectly and about two years to build phase two, the hydroxide plant depending on the choice of the partner (everything seems to be pointing in that direction) and they are working really hard to make it happen, it is out of their hands at this point (according to them) They are limited by the market sentiment, the government authorising the permits, etc.
We asked if the final price is needed for the partner before a deal happens and how much money will be needed to finalise it. JSL said that the final price is mainly for Primero has their will be financial incentive to built the mine under that price which is very interesting for primero, the partner doesn’t need it per say. The money to get it done is already included in the Capex, there is a 15 m$ in the capex for different things including that already accounted for.
We asked if the max price as been affected by the prices increase of various commodities / products following Covid and by the fact that construction will potentially start almost two years later than when the max price came out. JSL said that they haven’t noticed much increase so far in the mining equipment, it shouldn’t be a concern. We don’t know the exact amount of the max price, JSL doesn’t want to say it, but he said to not worry about it, that they’re is a buffer in the max price in order for it to remain in the acceptable limits if there would be an increase of some sort. We also asked him if we can expect any delays in order to receive the equipment on time for the mine once we have a partner. JSL said that most of the equipment is coming from Europe and USA and no foreseeable delays are anticipated as we speak.
We talked about the money in the bank and the PP as we were told that we had enough money to last until February. JSL said that we indeed had enough money to last until February and that the money in the bank doesn’t take into account the taxes and mining credits of roughly 300K that we should receive in February next year. Both JSL and Haber explained that the money was needed to helps strengthen our position in front a potential partner and the rest of the market, we are less vulnerable with it in our bank. It was better to do it now as opposed to waiting too close to the deadline (empty bank).
As it was mentioned by Rinny and Tinker, a part of the money will be used to start promoting. They are looking at various options and they are aiming more at the US market with the promotion. It should start very shortly once the PP is close, witch we should hear of it very soon.
Concerning the money, we still have the Helm line of credit of 4.5m plus interest and we have another 14 months before we need to pay it. JSL said that in 14 months we should be elsewhere completely, it will go very fast once we have the permits (the fr*****g permits…..) (it seems to be the only thing that hold us down.
JSL also told us that the PP shares have been mostly bought by the same major investors, it shouldn’t be shares that will be liquidated by the moody market. It is a dilution, but it is strengthening the company the way it was done (according to them).
We discussed the EEBITDA and the possible magic EPS number. It is hard to know what will be the multiplier number once the market sentiment improves. The next lithium bull market should be even stronger than the last one. JSL and Haber said that Nemaska and us were a bit too early for the last one but we are right on time for the next and we will be ready for it. JSL just reminded us that during the last bull market Haber sold Rockwood for 42 times the EBITDA (obviously the size of the deposit had an impact). We don’t know what will be the average on the next wave, but it shouldn’t be lower than it was. He did not suggest that CRE will be worth 42 times our EBITDA on the market, but just used it as an example to represent the big scheme that existed at that time.
(It seems to us that our market value will probably be determined 50 % by what we do and 50 % by the market sentiment and commodity prices)
Interesting fact that we didn’t know, approximately 2/3 of profits are generated by extraction of raw materials and conversion is the other 1/3.
We discussed about the permits; we had an inquiry concerning some of the questions / answers that are in the Comex document. I only found the French version, haven’t got time to look if there is an English one, sorry folks. The main enquiry is concerning question QC3-5 (on page 13 of the document) this is the question
Caractrisation gochimique des striles, du minerai, du mort-terrain et des rsidus (section 3.6.1 et section 3.6.2)
QC3 - 5. Selon les rsultats des essais cintiques prsents l’annexe QC2-11, un des chantillons d’amphibolite prsente des rsultats qui indiquent une augmentation de la concentration pour diffrents paramtres (S659713). Cette concentration s’approche des critres de rsurgence dans l’eau de surface du Guide d’intervention - Protection des sols et rhabilitation des terrains contamins1, notamment pour le cuivre. Le promoteur mentionne que les essais sur cet chantillon sont encore en cours car les rsultats ne se sont pas stabiliss. Le promoteur devra fournir les rsultats lorsque les essais seront termins. Le rapport devra inclure une analyse des rsultats obtenus et une explication des tendances observes. Selon les rsultats obtenus, le promoteur devra dcrire les mesures de gestion prvues afin de tenir compte de la nature avre des rsidus miniers.
RPONSE L’essai concernant l’chantillon d’amphibolite S659713 est toujours en cours. Le comportement gochimique peu ractif de ce type de striles demande une dure d’essai plus longue qu’ l’habitude afin d’tre stabilis. CEC met en place les mesures afin de caractriser ces matriaux adquatement. CEC fournira les rsultats, incluant l’analyse des rsultats obtenus et les explications des tendances observes, lorsque les essais seront termins.
Basically, they are running tests on some samples from the mine and we don’t have the full and complete result yet as it takes a longer time then usual for the sample to stabilise. JSL tried to explained it to us the best he could, I won’t even try to repeat it as it is very technical, but basically, according to him it shouldn’t be an issue and they will provide the full answer when available.
The rest of the inquiries seems to be very futile and not worth mentioning at this point as it shouldn’t be a problem. Let’s just hope the government sees it like it too and that no more delays occurred!!!!
To recap
-Permits by the end of this years, provincial in the fall and federal by December if everything goes well, they are almost finished answering the question on the federal side
-Partner(s) sign shortly after that (if everything goes well)
-Mine construction next spring
-Production start end of 2022, beginning 2023, in order to be ready for the 2025 market
-Promotion of the company should start very soon and we should see an increase in price
-AGM by video conference, the platform they will use and all the detail should be in the package we will received.
Both JSL and Haber seem to be really confident in the next lithium bull market and our position in it. According to them we are well position to make great things and see our value increase greatly.
Let’s hope, they do some great promotion, that they can make the market see us for what we’re truly worth, that the permits arrive soon and no more delays occurred. We should find ‘’soon’’(within the next 10 months) if all that patience and time pay off.
Thank you once again to many of you for keeping this board alive and strong in those really harsh time!!!!
Cheers to all.