AGM 2023 recap
Thanks to all the regular poster that keeps this board alive!!!
It is not much, it was a very short AGM with nothing new to share on their part.
Nonetheless as promissed, here is my summary of this year AGM.
I hesitated to go to the AGM this year as I’m much disappointed by this company and I have already expressed my opinion to them (JSL, Eric, Patrick) more then once, either by emails or phone calls. It’s just the same B*ll Sh*t all the time.
To no surprises, this year was no different, another AGM without any flavor, without any meaning, typical of their way of doing things.
The AGM took place at the same place (Fasken office) but in a different room. The Regular formalities at the biggening and then absolutely nothing. No presentation of anything, no update of any sort, no encouraging talk on any development, no pictures of some progress, absolutely nothing. Unless shareholders present in the room asked questions the AGM would have ended there. As I expected, the main purpose of this AGM really was to get that omnibus plan changed officially approved.
Every year it is the same, every year I’m annoyed by this, but it is what it is.
Beside that, another sad part is that we were only four shareholders present. After all the negativity that was said on this board, I was shocked to only see the four of us there. I was expecting a lot more people, so has management. They were very surprised and somehow amused when they realised that only the same four people as every year were there. They were also a bit amused by the voting results. Many people have claimed their frustration, but very little have express it. They were expecting a very angry crowd and, they were ready to face the music by answering our questions. The entire board was present and available to us for questioning during and after the AGM. (Not sure I saw Yves Perron)
Eric received more votes against him then JSL (11m vs 4m) I was personally very surprised by these results as I find Eric is doing a fantastic job representing this compagnie. He might have been wrong on many timelines, but I’m not convince it is his fault. He can only go with what he is been told. That been said, the results are what they are, nothing has changed, business as usual for the team. May their focus be on delivering that deal...
On a more positive note, because there is also some positivity, the entire board seemed quite relaxed and professional. We were not rush at all after the AGM to meet with management and discuss further one on one. I thank them for that precious time, especially Eric.
JSL was in a good mood, and he was sharped. There seem to be a nice coalition between the different board members.
I said it last year and I’ll say it again, seeing them like this at the AGM always comfort me that we really seem to have a solid team leading this project.
I do not approve of their promotional method, (not to say nonpromotional…), or their lack of communication and their miss opportunities for creating shareholders value in the short term, but I can’t help myself to think that they seem to know where they are going.
The problem is that for them, two or four months late, if not years later just doesn’t seem to make any difference. It doesn’t change the outcome of what they are forecasting for this company. They have a very long down the road vision and they are very confident that they will achieve it at one point.
Even if they like to remind to us every time that they are shareholders as well, we just don’t seem to be on the same time schedule as them. We’re also not in the know, we do not have a hefty salary from the company, no bonuses, and no omnibus plan like them to ease the wait before the grand prize arrive. Some will say that we have the privilege to buy more shares on the market, sure but at what risk? I guess it all depend how much you trust this management team to perform and convince the market… To each is own on that...
That been said they are aware that they can’t wait indefinitely to find the right deal as it will cost them elsewhere down the road.
A game of patience with this management…
The question is how much longer?
What would be consider too long form them?
It’s a question that they never answer no matter how much we try to find out…
PARTNERSHIP
No surprise here, we were not able to get much new details, they can’t disclose anything more then what has already been said.
There seem to be many kinds of offers on the table. If possible, they seem to want to go for the best offer that would take care of all three steps at the same time (Offtake, dept, equity). It is not always easy to align the three in the best terms possible for each part. It might also involve more then one party on the negotiating table to cover all the parts and it is very complex to negotiate.
They didn’t say that I’m just illustrating what I’m reading in this. There could easily be an OEM or / and a battery manufacturer that are willing to do the offtake part at X price and the equity part at Y price. The offtake price might be interesting but not the equity price or vice versa. The price might also be good for one company but not to the other (if more then one compagnies are involved, witch I wouldn’t be surprised). Then you have the dept portion that will involve a loaner of some sort. Is it a bank or the same company that is doing the Offtake, we don’t know, but it sure does imply an interest rate. The interest rate seems to vary depending on the prices of the offtake / equity. A very complex negotiation seems to be taking place and everybody is trying to get the best out of it.
Communication is not always flowing as fast as we / they would like. Some of those big compagnies don’t necessarily answer the same week. Many different levels inside of the company must be consulted before they come back to CRE. They are not buying a cheeseburger here, we get that, but it sure is getting frustrating sometime, probability even so for CRE management I would assume.
Most of the compagnies that they are dealing with seem to want a deal base on the market value (which is very low right now 1.75 ich$) and CRE wants a deal based on the value of the company (2.4B$) The company / companies that come up with the best offer will win. It is just unclear if and how our recent fall in the SP is affecting the negotiations.
CRE has a number in mind for the Offtake and the equity that they won’t go under (they of course did not share that number) but it sure isn’t at the present level. Nothing will happen unless the companies are willing to go to that number or above.
Management admited that the market is more difficult and, in a downtrend, but they don’t seem to much preoccupied by this as the demand is there and will only keep increasing. The interest towards CRE is also very strong, it is only a question of time.
The big question is how much more time…
For all we know they could also be in the middle of finalizing the contracts. I personally wouldn’t be surprised if we only see a deal later this year. I just hope this time management will come forward with an explanation the case be before we must ask for it.
I asked JSL about his interview with RK equity on November 7, 2022. In that interview he mentioned that they are looking for one, no more then two partners for the chemical grade, one or two for the technical grade and one for the tantalum. I asked him if they are dealing with all that at the same time in order to achieve the best deal they are looking for? He said that Tantalum is no issue, it is such a small portion of their portfolio that it will be done separately. As for the chemical and technical portion he couldn’t say more about it at this time
Start of construction
September is still the goal for the tree clearing. The Tree clearing must be done before April as from April to July it is the nesting season for birds, and they are not allowed to do it during that time. The partnership deal is important, but concerning the tree clearing what is even more important is to achieve 65 % of the front-end engineering before we do it. They will most likely proceed with the tree clearing as soon as they reach that 65% even if they have not finalised a deal by then. everything is on track for that to happen by September or sooner. After the tree clearing has been done, they are not limited as to what they can work on over there even during nesting season.
Drilling program
I have asked JSL about the drilling program announce on April 6, 2022 and repeated many times over in various interviews (crux investors and probably others)
Three legs, 25K meters
Leg one - Expansion of Rose (10K meters)
Leg two - establish a new discovery at Lemare (7k meters)
Leg three – New gold spot target (8K meters)
Since we only have 1/3 done, I was wondering when we may expect the program to be completed as I was personally expecting it to be done much faster.
I was very surprised to hear JSL commit to a date. He said that they have secured a second drill and they expect by the end of next winter to have completed the entire announced drilling program. (That is assuming that the forest fire will allow them to go back there sooner then later) They have already said that it is in the winter that it is much more productive to do drill. I don’t think the forest fire will be an issue by then…
The three legs are supposed to be done in order but even if there is more drilling done at Lemare, there seem to be a lot of work done at Rose, nonetheless. They have mapped the exact places where they will drill, and the expansion of Rose will happen.
After the AGM, I talked with Eric and my understanding is once again that the lifetime of Rose is not an issue at all. The value that an extension to Rose would bring would not be as big to the SP has what a new discovery would bring (Lemare). The extension value would be calculated at a much bigger discount as it would only happen at the end of the actual life of the mine. A new discovery would bring more value and quicker hence the focus on Lemare. For some reason the market is not giving any vlauation for the land package we have. They are working to change that.
SP situation and promotion
They all admitted that they have been very bad with timeline, and it probably didn’t help. They will pay more attention to it. They also admitted that they could have done more promotion / visibility including the retail side. They are actively looking at it, we should see / hear more of CRE. ( I’ll believe it when I see it)
I tried to find out how much money they are planning to allocate to promotion in general, but they refuse to give that information pretending it is not something they are allowed to say…
Patrick comes from the institutional world, every time I have spoke with him, he just doesn’t seem to believe much on the retail side. Without the institution backing the price up, it usually goes back down as fast as it goes up if it is just retail. I agree with him at some level, but I, and many others too, believe that the retail side is also very important and we are not focusing enought on it.
After last year AGM, he asked for ideas where to promote on the retail side. We have provided a few ideas. Recently, before the shareholder’s letter he asked for more ideas, and we provided many others. He just doesn’t seem to consider most of them relevant. I’m not convinced he took the time to examine them adequately.
He is a nice guy, but I do not think he has the same vision as many of us have. He is getting a lot of the frustration from many of us, and it seems to wear down on him. More then last year at the AGM that is for sure. His job title puts him in charge of the investor’s communications and promotion, but in fact I believe it really is JSL that decides everything. My perception is that it all comes down to what JSL has in mind and how much money he will accept to spend that will determine the type of promotion we will see.
According to management, we have seen some institutions getting in after the permit, hence the increase in the SP. After the miss timeline for the partner, they have exited hence the fallout. They are working to get more institutions in, but it is not always easy because we have such a low market cap, many are not even looking at us. Nonetheless, the interest in CRE seems to remain, but the financing seems to be the next milestone for it to happen. (I’m curious to hear what will be the new excuse next time if financing is not doing it. Let’s hope we do not come to that…)
This is a mixt of previous conversations with management (before the SH letter) and the AGM. Management understands our frustration with the SP, but they do not agree with what many of us are saying. For them, it is wrong to say that CRE has been disappointing following the permit. For them it has performed very well relatively to its peers, in fact they like to point out that CRE was the second-best performer after Sigma. The comparation they like to make is with Atlantic, Sigma, Frontier, Rock Tech, Sayona and Piedmont. They usually don’t include Patriot, Winsome or others in the mixt as they are exploration-driven speculation stock at this point.
According to Patrick, at the AGM, we are only about 40 cents to low. 2.25$/share is where we should be right now if we compare ourselves to the others. ( I was shock by his very low valuation)
Eric is a bit more encouraging; he still believes we are very much undervalued. The average in the industry is now at 0.56 (down from 0.65 not long ago) we have heard him use the 0.65 in many interviews. He explained that it is a number that always fluctuate depending on the market situation.
Right now, the lithium prices are going back up, but the market is still going down. It’s like the market doesn’t believe the turn around. Eventually the market will have to follow, and we should see even greater highs.
He still believes we should be trading at a premium of that considering how advance we are and considering our very conservative FS. The financial deal should take care of things.
He explained that the analysts in Canada are still evaluating a lithium mine as any regular mine. Their estimates are always calculated based on a % of the FS (with various discount applied) In USA, it is usually seen more like a chemical. The evaluations are usually based on the Ebitda, the revenues once the mine is running. (A multiple (4-5-6, …) times the revenues) which gives a much greater valuation of the company. We could easily be at a 3B US$ NAV if not more with that kind of evaluation, which should bring a higher SP target.
He said that they are working to get more USA base analysts covering CRE. It doesn’t happen over night and the financing is certainly a milestone, but it is what they are working on. They seem to want to tap in more in the USA market for those obvious reasons.
New Market listing
It was discussed last year at the AGM, but it didn’t happen. I brought it back this year and it is not something we should expect soon. They are still considering it, but they say that it takes time and people to do it. Australia for example, it apparently requires having a dedicated person over there for it to work properly. Right now, their focus is on the financing and advancing the mine. After that is done, they might look at it more seriously.
That’s pretty much it, If I think of something else, I’ll make another post.
I personally don’t know where I stand with all this. I just hope this time management will respect their word and keep us better inform. I also hope they will create a lot more market stimulation and momentum. It should be exiting to hold CRE at this stage, but it is not. It is all on them to make it happen.
Last year I said no more excuse after the permit, what a disaster so far...
This year I will say no more excuse after the financing is done…
Good luck to us all.