VML - Vital Metals

[aus_trader]

African countries are waking up to the exploitation...

 

[aus_trader]

By the way all my comments are against the controlling, power hungry tactics of CCP and various entities that are set up that are under direct control, which/whom I termed as agents.

I have seen extremism amongst us, so please see that none of my comments are directed in any way at the Chinese citizens who work tirelessly under extreme regimes to make and manufacture the goods and products we buy and take for granted everyday. Nor is any comments directed at our fellow Chinese community or any Asian ethnic groups. Just to be clear, I do not share/agree with any Hansonian values.

However it's good to think in a business mindset. This is the time to do so, and I am reluctant to apologise for waking up those of us who are sleepwalking into a trap at National level without even knowing it. Otherwise it'll be too late when we realise in the near future that we've sold off the heart and soul of our nation...

 

[waterbottle]

Anyone manage to catch the investor presentation with NWR? Any links to a recording?

 

[barney]

Anyone manage to catch the investor presentation with NWR? Any links to a recording?

Go to the link and register your email etc and a replay of the Presentation with Uncle Geoff will be available

Geoff Preso Virtual Conference

 

[waterbottle]

Go to the link and register your email etc and a replay of the Presentation with Uncle Geoff will be available

Geoff Preso Virtual Conference

Thanks, I just had a look. Not sure if the crew from VML take a look at these forums (here's hoping they do... ). I've used italics to indicate references to their presentation that are worth checking.

My thoughts:

1. The overall presentation was disappointingly short with minimal focus on future developments. The presentation was mostly a rehash of everything that had already been presented/accomplished over the past 2 years, which to their credit is substantial, but nonetheless deficient when a meeting worthy of a market announcement has very little in the way of future plans. In VML's defence this may be a limitation of the host given Geoff seemed rushed and overly focused on time.
   
   
2. The medium to long-term narrative for VML is taking shape. The short-term goal of shipping ore to Saskatoon for processing in late 2021 and for production by the end of 1H2022 is excellent. It's a coming-of-age event where VML transforms from explorer/early-stage miner to potentially viable business.
   The vision for VML is commendable - a North American rare earths producer (presumably equivalent to Lynas) able to process ore from multiple mining sites across the North Americas, being founded in a conducive geopolitical & accommodating technological period.
   My criticism here is that there are several sub-projects, all of which I'm sure will require a number of years to develop on their own e.g. VML's March '21 presentation had Tardiff slated to commence in 2024, although the October '21 presentation now has it planned for 2025... Are they biting off more than they can chew? How likely is a company going to be able to go from fledgling rare earths producer in 2022 to international miner + substantial North American producer in the space of 5 years?
   
   Slide 11 gives a great example of this, particularly the graph on the right. Great explanation of what they hope to achieve but I'm going to need something more tangible than hope...
   
   
3. No mention of any other potential customers or indications on how the plan to obtain (Slide 10). According to this presentation, we are ~ 8 months away from having a product that can be sold, with the only customer being REEtec. This needs to be addressed ASAP.
   
   
4. The success that they've had with North T has been incredible (Slides 12-15). They've developed the site according to their original timeframes. The quality of ore has been better than expected. They've managed to secure Canadian government funding along the way for a reasonable cost. Importantly, they've demonstrated that they have a reliable and effective management team.
   
   
5. I am extremely skeptical of the Wigu Hill project. It's based in Tanzania where several international miners have already lost their licenses to the Tanzanian government. The project was purchased from Montero mining in 2019 after they lost their retention license. The company is currently in a legal battle with the Tanzanian government. It seems that the Tanzanian government has a history of doing the same thing to other miners.
   VML seems to own the intellectual property behind the project which isn't very substantial given the absence of mining rights... In fact, the Tanzanian government's own mining database lists a company by the name of "Wigu Hill Mining Co ltd" as the right-holder, with a license that expired in 2020. Further, VML nor Cheetah are listed as recognised investors on the Tanzanian Mining Commission's register.
   Wigu Hill is presentation padding until proven otherwise, and frankly should be considered a sunk cost.
   
   
6. The Kipawa project gets a mention (Slides 25-29). The problem remains timing. When is that project going to be addressed if Tardiff won't commence until 2025?
   
   
7. The plant gets a mention (Slides 30-33). The 1000t/pa processing capacity surprised me. The off-take agreement with REEtec was for 1000t/pa. So how are they going to be able to generate more product to sell to other customers if their plant is already operating at max capacity? Why build a plant with arguably restrictive throughput, that essentially locks you into only being able to fulfill the contract of a single customer?
   There is a suggestion that VML will increase its capacity to 2000t/pa within 2 years. However, VML has alluded to the fact that they are aiming for a 5000t/pa REO production once Tardiff is included i.e. by 2025, and that this is the ultimate goal for the REEtec agreement (in its current form). How does VML plan to go from 2000t/pa to 5000t/pa? Will they need a new plant? Is the site large enough to accommodate changes to equipment?
   
   
8. Off-take agreement with REEtec (Slide 34) is the only commercial partner that they have after 1.5 years?

All-in-all, not what I was hoping to see. VML seems to be a company with big ideas that may never outgrow the North T deposit... Prove me wrong.

 

[aus_trader]

Good analysis @waterbottle , I think VML will be a slow and steady achiever over the long term. If their plans are getting executed over the years, fining new offtake partners shouldn't be a problem. At a company level I am optimistic.

However as I mentioned, from a global point of view the bigger risk for VML and other RE stocks is if China floods the markets to suppress RE prices. It'll be like the ice age that Uranium stocks experienced over the last few years or worse when U3O8 was trading ~US30/oz. Just in case, what's the plan if RE prices start to nose-dive when we least expect it ?

 

[barney]

@waterbottle A good and detailed post which raises some valid short term questions. Getting late so no time to discuss but I'll try and get some time over the next couple of days.

The Share Price could be reflecting impatience due to some of the points you raise. This is pretty normal at this end of the market. As we know, Spec hunters are generally price orientated and "time" often generates unwanted price pressure so Traders tend to look for greener pastures.
ps I assume anyone trading this on price action alone would likely have been out when support at 6 cents got broken a few days ago.

Your "point 2" above is very important to VML getting to the next level and is only a matter of months away. I think the next few months could see the SP drift around/maybe more downside, but a couple of years from now should be a different story. That's the plan at this stage for me anyway

 

[waterbottle]

Good analysis @waterbottle , I think VML will be a slow and steady achiever over the long term. If their plans are getting executed over the years, fining new offtake partners shouldn't be a problem. At a company level I am optimistic.

However as I mentioned, from a global point of view the bigger risk for VML and other RE stocks is if China floods the markets to suppress RE prices. It'll be like the ice age that Uranium stocks experienced over the last few years or worse when U3O8 was trading ~US30/oz. Just in case, what's the plan if RE prices start to nose-dive when we least expect it ?

This is part of the problem. I'm sure there were plenty of miners who went under in the late 2000/early 2010s due to a collapse in rare earth prices.
I think VML needs to establish itself ASAP. This isn't a market where you can assume conditions will remain favourable for years to come so it's best to be opportunistic.

 

[barney]

This is part of the problem. I'm sure there were plenty of miners who went under in the late 2000/early 2010s due to a collapse in rare earth prices.
I think VML needs to establish itself ASAP. This isn't a market where you can assume conditions will remain favourable for years to come so it's best to be opportunistic.

We need to remember that they will likely have one of, if not THE lowest extraction costs of any RE company on the planet due to the nature of the ore, plus their staged production profile is exponentially more cost efficient than fabricating a billion dollar plant prior to gaining customers.

If the RE sector does take a hit, this is the kind of Stock that will survive in the long term (in my opinion)

 

[aus_trader]

We need to remember that they will likely have one of, if not THE lowest extraction costs of any RE company on the planet due to the nature of the ore, plus their staged production profile is exponentially more cost efficient than fabricating a billion dollar plant prior to gaining customers.

If the RE sector does take a hit, this is the kind of Stock that will survive in the long term (in my opinion)

Thanks @barney for your analysis. You might be right that VML might be one that can put up with an unfavorable period. High cost, low margin miners and stocks with mammoth cap ex mines that need to be built may be affected severely.

I'll keep at least part of my holding long term. Even if there will be a period of RE price manipulation via the exploitative party mentioned.

 

[sptrawler]

IMO and it is only my opinion, small companies having a few prospective leases seems to come in handy when they run short of cash, once they have a proven reserve on the tenement they can always on sell them to help fund the core focus.
Whether China flood the market or not, I think will have little impact on the search for alternative supplies, China by showing its hand has left other countries like the U.S and E.U, U.K etc, little option but to diversify the supply chain in all sectors.
So again only in my opinion, VML by sourcing RE in Canada, really only has to worry about U.S, Australian and alternative Canadian supplies.
Like I said only my musings

 

[aus_trader]

IMO and it is only my opinion, small companies having a few prospective leases seems to come in handy when they run short of cash, once they have a proven reserve on the tenement they can always on sell them to help fund the core focus.
Whether China flood the market or not, I think will have little impact on the search for alternative supplies, China by showing its hand has left other countries like the U.S and E.U, U.K etc, little option but to diversify the supply chain in all sectors.
So again only in my opinion, VML by sourcing RE in Canada, really only has to worry about U.S, Australian and alternative Canadian supplies.
Like I said only my musings

Absolutely @sptrawler I think VML's region of operation just puts it in a category of it's own. Only other asx listed RE stock in the same region with strategic American grasp is probably ARR.

With the other RE stocks, one has to be careful IMHO. I am not trying to distribute some fear to my fellow ASF members, but just stating the possibility that the world's largest RE producer can easily vary their output and manipulate the prices and crush some of the lesser hopeful stocks with the intention of taking control once the shares are trading for pennies or insolvent. Think of OPEC and Arabian countries combined on oil price influence to draw some sort of comparison...

 

[sptrawler]

Absolutely @sptrawler I think VML's region of operation just puts it in a category of it's own. Only other asx listed RE stock in the same region with strategic American grasp is probably ARR.

With the other RE stocks, one has to be careful IMHO. I am not trying to distribute some fear to my fellow ASF members, but just stating the possibility that the world's largest RE producer can easily vary their output and manipulate the prices and crush some of the lesser hopeful stocks with the intention of taking control once the shares are trading for pennies or insolvent. Think of OPEC and Arabian countries combined on oil price influence to draw some sort of comparison...

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Which is the very reason I'm attracted to VML, slowly, slowly minimal debt, is the way forward IMO.
Way too many companies try to upscale too quickly and end up carrying too much debt, into a volatile market, then can't find funding in lean times.
obviously sooner or later a trade war will break out with China, only the fit will get through, because of China's obvious cost advantage.
Tarrifs can only go so far to protect producers, they still have to have a competitive advantage, to survive.

 

[qldfrog]

Which is the very reason I'm attracted to VML, slowly, slowly minimal debt, is the way forward IMO.
Way too many companies try to upscale too quickly and end up carrying too much debt, into a volatile market, then can't find funding in lean times.
obviously sooner or later a trade war will break out with China, only the fit will get through, because of China's obvious cost advantage.
Tarrifs can only go so far to protect producers, they still have to have a competitive advantage, to survive.

But i would add as counter argument that free money as we have now may not be going on too long, so slow move might be a death move whereas a
huge debt ,build now will be the best way out with 20% inflation and a crisis where your output is still in demand

 

[sptrawler]

But i would add as counter argument that free money as we have now may not be going on too long, so slow move might be a death move whereas a
huge debt ,build now will be the best way out with 20% inflation and a crisis where your output is still in demand

20% inflation, means a definite 22% interest rate on your borrowings, so I still think building output on cashflow, is better than huge borrowings and forced sales of product at any price.
But who knows, time will tell.

 

[qldfrog]

20% inflation, means a definite 22% interest rate on your borrowings, so I still think building output on cashflow, is better than huge borrowings and forced sales of product at any price.
But who knows, time will tell.

Well with between 6% official and 8 to 10 % real inflation figures in the US this month, interest rates are at 0 or so...
So i expect with 20% inflation in coming year, the company will pay bonds at 3 or 5 percent and make a killing...
The world after...

 

[sptrawler]

Well with between 6% official and 8 to 10 % real inflation figures in the US this month, interest rates are at 0 or so...
So i expect with 20% inflation in coming year, the company will pay bonds at 3 or 5 percent and make a killing...
The world after...

We've lived trough high interest rates, the last thing anyone needs, including companies is high borrowings.

 

[waterbottle]

But i would add as counter argument that free money as we have now may not be going on too long, so slow move might be a death move whereas a
huge debt ,build now will be the best way out

I agree.

VML is not a low risk company because they're purposely being cautious.
They're actually taking on a big risk by not moving quickly enough and this just doesn't seem to be appreciated because everyone is still of the mindset that debt =bad. That equation has changed since 2008.

The big risk they're taking here is that they're going to be outmanoeuvred and outplayed by companies willing to take on debt and become successful enough to secure some form of high profile status (which by the way they haven't, despite being Canada's first rare earth producer and North America's second).

There's no point celebrating a "risk - free" strategy if the company is no longer required in the end.

 

[aus_trader]

I think the company will be required in the end. USA is trying hard to secure supply and long term offtake agreements with RE stocks in their region and even with some of the Aussie projects. They are doing it precisely for the reason as they know China can manipulate prices in both directions. Now China has the upper hand to be able to crush RE prices with a huge oversupply, but remember it wasn't so long ago they completely restricted the supply and it was so hard to source RE outside of China.

They just have to survive through whatever dark periods that China will impose on them with sensible financial decisions. I personally think the free money experiment will come to an end, probably sooner than everyone is predicting. To take on massive debt during this 0% interest rate environment would be irresponsible and could land them in hot water unable to service the mountain of debt when the monetary experiment has to reverse and lift interest rates again.

 

[qldfrog]

I think the company will be required in the end. USA is trying hard to secure supply and long term offtake agreements with RE stocks in their region and even with some of the Aussie projects. They are doing it precisely for the reason as they know China can manipulate prices in both directions. Now China has the upper hand to be able to crush RE prices with a huge oversupply, but remember it wasn't so long ago they completely restricted the supply and it was so hard to source RE outside of China.

They just have to survive through whatever dark periods that China will impose on them with sensible financial decisions. I personally think the free money experiment will come to an end, probably sooner than everyone is predicting. To take on massive debt during this 0% interest rate environment would be irresponsible and could land them in hot water unable to service the mountain of debt when the monetary experiment has to reverse and lift interest rates again.

If the massive debt is on a fixed rate,it is genius.on a floating rate,i agree a looming disaster