VML - Vital Metals

[aus_trader]

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

If funding can be fixed for a number of years at a low rate, we could be safe taking on a bit of serviceable debt.

With signs of several countries slowly nudging up the interest rate lever, we might be living at the bottom of the cycle.

 

[waterbottle]

Rare earths sector at risk of more substitution if prices spike

Demand for rare earth permanent magnets is due to soar as governments and companies step up efforts to cut carbon emissions.

www.mining.com

Interesting counter article, essentially claiming that rare earths can, and likely will be, replaced by other metals should they become too expensive.

 

[aus_trader]

Rare earths sector at risk of more substitution if prices spike

Demand for rare earth permanent magnets is due to soar as governments and companies step up efforts to cut carbon emissions.

www.mining.com

Interesting counter article, essentially claiming that rare earths can, and likely will be, replaced by other metals should they become too expensive.

There could be a couple of substitutes for the magnets, but I don't think the whole spectrum of rare earth metals could be replaced easily.

 

[sptrawler]

There could be a couple of substitutes for the magnets, but I don't think the whole spectrum of rare earth metals could be replaced easily.

I think it is a bit like batteries, you can make Li-Fe batteries for a lot less than Li-ion batteries, the same as you can make evaporative air conditioners cheaper than reverse cycle air conditioners.
You just have to decide what suits your needs.
Best you decide, on which to back.
Just my opinion, but it is a very important point IMO, rare earths give better electric motors, nickel, cobalt and lithium give better batteries.
You have to decide which will get the better market traction, cheap and cheerful or more expensive and more bang for your bucks. ?

 

[aus_trader]

I think it is a bit like batteries, you can make Li-Fe batteries for a lot less than Li-ion batteries, the same as you can make evaporative air conditioners cheaper than reverse cycle air conditioners.
You just have to decide what suits your needs.
Best you decide, on which to back.
Just my opinion, but it is a very important point IMO, rare earths give better electric motors, nickel, cobalt and lithium give better batteries.
You have to decide which will get the better market traction, cheap and cheerful or more expensive and more bang for your bucks. ?

There's no question about batteries I believe. Who wants something that has to be charged all the time due to poor components ?

I don't own an EV. But going by other experiences from what I do own (cordless Li-Ion drill and other power tools, smart phone etc) I personally wouldn't want a cheap and nasty that keeps having a flat battery when trying to get things done !

With RE, I guess I'll have to keep an open mind. My gut feeling is the core RE elements/materials are too unique and alternatives will produce sub-par performance...

 

[waterbottle]

Some good news. Hopefully other purchasers will look at VML for rare earth supplies

 

[waterbottle]

Great job lads!

Second contract (although not secured yet). Let's hope this keeps ramping up.
Looks they've got access to the US market with this deal....
Now for Europe and Japan...

 

[waterbottle]

Looks like I missed their investor presentation, released yesterday afternoon.

I have to admit, the last two announcements have boosted my opinion of VML compared to when I sat through their last intevstor presentation.

We can now get an approx. value for both UCore and REEtec contracts.. Estimated value of product at $49/kg as of Sept 2021.

Aiming for 2000t TREO p.a for REEtec from 2022 - 2028 and then potentially ramps up to 6000t after 2028 for an additional 10 years. That works out to be approx $98 million p.a for the first 6 years, and then up to $294 million p.a for the following 10 years - $3.5 billion USD over 16 years.

The UCore agreement can't be estimated yet we don't know what product they're after and what price they're receiving it at, but assuming it's the same as REEtec then it's $98 million p.a from 2024 - 2026, after which it potentially increases to $245 million pa USD.

So estimated earnings from 2022-2024 would be $98 million usd p.a, between 2024-2026 it would be $196 million usd p.a, $343 million usd p.a between 2026-2028 and then $539 million usd p.a after 2028.

Now, these figures are based off of what's in their presentation.
These figures would also exclude kipawa (given we don't have a DFS yet or any idea of how to mine it) and Wigu Hill (for the same reasons but I'm sure everyone here knows my stance on Wigu....).

The ore currently available for sale via North T is not enough to fulfill both contracts. As per their presentation, North T only has 9345 tonnes of TREO, which would be enough to supply both parties until the end of 2025 (assuming 2000 t/pa from 2022-24 and 4000 t/pa from 2024-26).
This means that VML must have Nechalacho online by 2025 and ready to supply (which also coincides with their timeline in the presentation). I'm optimistic based on what I've seen from the team's performance.
Interestingly, based off their valuation of $30/kg TREO, Nechalacho comes out at $39 billion USD alone based on today's prices.

In summary:

1. Plans now in place for income streams
2. Proven ability to source, plan, mine and (soon to) produce RE products
3. Positioning company to take advantage of current geopolitical climate
4. Potential income streams should accelerate from 2024 onwards
5. Current valuation of $257 million AUD. Average p/e for asx somewhere between 20-30. Would expect valuation to also increase in 2022 onwards given earnings increase.

Anyone else have any other thoughts?


PS: VML, please get someone to proofread presentations before release...

 

[barney]

I have to admit, the last two announcements have boosted my opinion of VML compared to when I sat through their last intevstor presentation.

Looks like we can now get an approx. value for both UCore and REEtec contracts..

Agree @waterbottle This presentation was specific and well presented.

I haven't done any figures on the potential value of their "shorter term" objectives, but I am happy to accept Geoff Atkins's supposition that Stage 2 will be predominantly funded by Stage 1 + debt funding (ie. Minimal Share-holder dilution)

and Stage 3 (Kipawa) may eventually help them achieve their stated objective, to become "the next Lynas" (their words)

I'm personally playing the long game with this one, but everyone's trading position is different of course. Still early days for me.

 

[waterbottle]

Agree @waterbottle This presentation was specific and well presented.

I haven't done any figures on the potential value of their "shorter term" objectives, but I am happy to accept Geoff Atkins's supposition that Stage 2 will be predominantly funded by Stage 1 + debt funding (ie. Minimal Share-holder dilution)

and Stage 3 (Kipawa) may eventually help them achieve their stated objective, to become "the next Lynas" (their words)

I'm personally playing the long game with this one, but everyone's trading position is different of course. Still early days for me.

I'm in it for the long run too, but need to vigilant given many companies have started with the greatest potential only to fail.

RE: Stage 2, I believe it was to be funded entirely out of North T, but it looks like that's now changed to also include debt....
The North T zone alone should generate approx $230 million USD.

 

[sptrawler]

Agree @waterbottle This presentation was specific and well presented.

I haven't done any figures on the potential value of their "shorter term" objectives, but I am happy to accept Geoff Atkins's supposition that Stage 2 will be predominantly funded by Stage 1 + debt funding (ie. Minimal Share-holder dilution)

and Stage 3 (Kipawa) may eventually help them achieve their stated objective, to become "the next Lynas" (their words)

I'm personally playing the long game with this one, but everyone's trading position is different of course. Still early days for me.

I'm with you @barney when I was working a mate was buying Lynas for a few cents, we are talking probably 12-15 years ago, I didn't bother back then I was chasing fast turnover, not so much these days. I have a bit more patience now.
The other thing I like about VML over Lynas, they are working in North America not Australia, I think the red tape and costs may be substantially less.
Just my thoughts.

 

[spratty84]

Its definitely a long term hold for me, just hoping things keep ticking along nicely like they are currently.

 

[aus_trader]

Great to have a few fellow ASF members cover VML, it just gives you that little bit of confidence to hold through serious pull backs and boring consolidations.

Me too, going to sit on this one with a longer term horizon and watch it's progress.

 

[sptrawler]

Great to have a few fellow ASF members cover VML, it just gives you that little bit of confidence to hold through serious pull backs and boring consolidations.

Me too, going to sit on this one with a longer term horizon and watch it's progress.

Look I don't know if i'm right or wrong, but taking the example of Lynas, I'm pretty sure he bought in at around 8cents, I might be wrong my memory usually is good though.
Now even if he only bought 100,000 at that and put them in the bottom draw he has done well, that is the reasoning i'm using.
I've bought some shares and sold them for a nice profit, eg 2,000 CSL @ $27, sold them @ $30, nice little flip tucked it away and moved on to the next one, MQG after the gfc nice pick up at around $15 from memory, flipped them at around $30, great pick up moved on to the next one.
I'm a bit older and a bit more patient these days.
Now I don't put HZR in the same basket as VML, completely different business model, but working in the same area, renewables.
Yet I hold both.
Just my thoughts.

 

[waterbottle]

Look I don't know if i'm right or wrong, but taking the example of Lynas, I'm pretty sure he bought in at around 8cents, I might be wrong my memory usually is good though.
Now even if he only bought 100,000 at that and put them in the bottom draw he has done well, that is the reasoning i'm using.
I've bought some shares and sold them for a nice profit, eg 2,000 CSL @ $27, sold them @ $30, nice little flip tucked it away and moved on to the next one, MQG after the gfc nice pick up at around $15 from memory, flipped them at around $30, great pick up moved on to the next one.
I'm a bit older and a bit more patient these days.
Just my thoughts.

And more importantly, VML now has an established plan towards earnings of approx 500 million pa usd within the next 10 years. I have no doubt that will increase once as rare earth demand increases, VMLs network expands and the West pulls away from China.

With a conservative PE of 20, that would put VML at 10bill market cap within 10 years I. E. Share price of $2 within 10 years.

That's my whacko back of the envelope valuation

 

[sptrawler]

And more importantly, VML now has an established plan towards earnings of approx 500 million pa usd within the next 10 years. I have no doubt that will increase once as rare earth demand increases, VMLs network expands and the West pulls away from China.

With a conservative PE of 20, that would put VML at 10bill market cap within 10 years I. E. Share price of $2 within 10 years.

That's my whacko back of the envelope valuation

That is exactly what I'm getting at, also being based in North America, there are some very rich companies there that can pick up a company like VML, for ashtray money.

 

[aus_trader]

And more importantly, VML now has an established plan towards earnings of approx 500 million pa usd within the next 10 years. I have no doubt that will increase once as rare earth demand increases, VMLs network expands and the West pulls away from China.

With a conservative PE of 20, that would put VML at 10bill market cap within 10 years I. E. Share price of $2 within 10 years.

That's my whacko back of the envelope valuation

$10b whoa , bit on the high side I think, I mean It'll be nice of course if VML gets that big. Even the biggest RE stock on asx LYC is only just over $6b, so just trying to put things in perspective.

What @sptrawler said is quite insightful however, i.e. to just hold few of the good ones right through. He knows about MCR that I sold far too early to realise a modest profit. Most of you guys know about my ASM (another RE stock) stuff up when I sold it as soon as it was spun off by ALK, and then it went on to become a 12-bagger at it's recent peak. These are not some hypothetical missed opportunities, but actual purchased and sold stocks as documented in Speculative Stock Portfolio. So I'll have to exercise some patience with VML.

 

[sptrawler]

$10b whoa , bit on the high side I think, I mean It'll be nice of course if VML gets that big. Even the biggest RE stock on asx LYC is only just over $6b, so just trying to put things in perspective.

What @sptrawler said is quite insightful however, i.e. to just hold few of the good ones right through. He knows about MCR that I sold far too early to realise a modest profit. Most of you guys know about my ASM (another RE stock) stuff up when I sold it as soon as it was spun off by ALK, and then it went on to become a 12-bagger at it's recent peak. These are not some hypothetical missed opportunities, but actual purchased and sold stocks as documented in Speculative Stock Portfolio. So I'll have to exercise some patience with VML.

Ah aus IMO you are starting to see the light, stocks aren't IMO one dimensional, so you have stocks that are holders for income, while you don't need the income, you have dividend reinvestment and add to them when they tank eg(WES)
Then you have shares that you think, well they are in a pretty good place, good management plenty of infrastructure and demand is ramping, eg (MCR)
Then you have, who is going to benefit from all this exploration? eg (IMD)
But I always think this wont last and sell out early, as I get older I become more conservative, as I don't have to make my decisions on my days off. ?

 

[waterbottle]

Big drop for Lynas today, although some important insight into rare earths offered....

Lynas expecting an increase in rare earth demand heading into 2022. Seems that they were limited by COVID outbreaks at their processing facility and limited access to shipping.
They're expecting a stronger rare earths market over the next 3-4 years.

I'm not too familiar with the company but it seems like they're trying to establish an Australian rare earths processing facility at Kalgoorlie and have recently received a recommendation from the EPA.
According to their earnings call, their production has fallen victim to COVID, global shipping woes to and from Malaysia, limited environmental approvals from the Malaysian government, and the cost needed to transport waste from their Malaysian processing facility back to Australia.
Their Kalgoorlie strategy may be an attempt to mitigate any future disruptions.
VML seems to be ahead in that regards with a facility already under construction with government support.

There was also mention of a US project by 2025, but nothing of substance mentioned in the earnings call.
My interpretation is it's a project that isn't a definite go ahead, and therefore may be available to another competitor.
VML seems to be making inroads into US markets through private companies (UCore) as opposed to government.

For comparison's sake LYC produced approx 16 000t/pa of REO @ 6 billion AUD market val.
VML will be producing close to 2000t/pa of REO in 2022 @ 250 million AUD.

 

[aus_trader]

Big drop for Lynas today, although some important insight into rare earths offered....

Lynas expecting an increase in rare earth demand heading into 2022. Seems that they were limited by COVID outbreaks at their processing facility and limited access to shipping.
They're expecting a stronger rare earths market over the next 3-4 years.

I'm not too familiar with the company but it seems like they're trying to establish an Australian rare earths processing facility at Kalgoorlie and have recently received a recommendation from the EPA.
According to their earnings call, their production has fallen victim to COVID, global shipping woes to and from Malaysia, limited environmental approvals from the Malaysian government, and the cost needed to transport waste from their Malaysian processing facility back to Australia.
Their Kalgoorlie strategy may be an attempt to mitigate any future disruptions.
VML seems to be ahead in that regards with a facility already under construction with government support.

There was also mention of a US project by 2025, but nothing of substance mentioned in the earnings call.
My interpretation is it's a project that isn't a definite go ahead, and therefore may be available to another competitor.
VML seems to be making inroads into US markets through private companies (UCore) as opposed to government.

For comparison's sake LYC produced approx 16 000t/pa of REO @ 6 billion AUD market val.
VML will be producing close to 2000t/pa of REO in 2022 @ 250 million AUD.

Good analysis @waterbottle

In terms of growth prospects, I am happy to be in the VML camp than a mature RE play like LYC.

FYI I did hold LYC shares in the past when it was still a fledgling.