Crash course in recent GMC history

I didn’t plan on posting on HC while on holiday, but as glad as I am to see myself miraculiusly a few pips away from break-even on GMC, I’m worried with the amount of hype and some of the content being posted here, especially so soon after MUS’s dramatic collapse. I just hope that new investors realise that as attractive as GMC’s FA sounds, nothing is a sure thing, and not to go punting more than they can afford to lose. Everyone knows this advice, but it’s painfully obvious not everyone follows it. That said, I hope we all have a win from here.

A few necessary points to counter the rampant hype:

1. GMC are not fully funded to compete construction and start production, not even if all 1.3 billion options @ 0.5c were exercised (which is not going to happen). They’d be close if the 136 million options @ 2c were also exercised, but still not quite there. Therefore 1 of 3 things are likely to occur. i) they rely solely on DSO to fill the funding gap and the production timeline gets pushed back. ii) capital raising and further dilution. iii) a cornerstone investor buys a % of project - technically no dilution to shareholders, but still a dilution to profit

2. GMC still have not announced how much manganese supply they have secured. Indonesia may have high quality manganese, but it does not have any JORC-compliant mines, and most of the supply appears to come from artisanal miners. There was a report commissioned in Oct 2015 by the previous board on the availability of manganese in the area, which does not inspire a lot of confidence. Kupang was not the #1 recommendation, from memory. The old BoD (who I believe drafted the 8 smelter plan) also expected to operate their own mine, which the current BoD appears to have no plan for. https://hotcopper.com.au/threads/ann-gulf-manganese-update-manganese-ore-supply.2614538/

As great as the FA is for 2 (and especially 8) operational smelters is, first they need a steady supply of ore. This also limits the effectiveness of DSO. I believe they require 64ktpa for 2 smelters. US$1-1.5m/month @ US$200/t margin = 60-90ktpa of manganese concentrate. Hopefully that is factual, or we at least get confirmation at the AGM. This has been a key sticking with me for a long time.

3. GMC’s current Board has demonstrated poor capital management to date. I would encourage everyone to read the FY17 annual report. Out of the A$5.4m of expenses last year, over A$4.8m went towards admin & salaries - including A$3.4m in remuneration for the 5 directors - and nearly $400k towards legal (Pak Marthen) & professional fees (Triple C) and interest on loans (Tanah Capital). I believe only $2k was actually attributed to developing the Kupang Project in the audited report - the unaudited quarterlies put the figure at $3.3m, which appear to have been mainly share-based payments and performance rights.

There are more points I could raise, but those are the main ones that come to mind, and it’s difficult typing on an iPad. I no doubt come across as very negative, but for the record I haven’t sold any of the shares I purchased almost 12 months ago, nor any since coming out of suspension. I’m also in it for the punt on that compelling FA - I just wanted to offer a balanced voice. Personally, I’m expecting many more setbacks and unpleasant surprises before we eventually reach production.

Below is the crash course promised in the thread title. Apologies for the formatting - I’m cut & pasting from Evernote on my iPad. FYI, the current fully diluted MC is A$78m. GMC will carry the same valuation at 2.2c as it did prior to being placed into suspension at 4.2c ($88m), so don’t necessarily expect that gap to get filled soon. The original SP driver was the implied valuation from Pak Marthen’s bogus offer. The FA is the same today as it was 15 months ago when the MC was $11m, albeit further from production and yet to receive significant funding:

05/08/16 - Gulf secures US$10m cornerstone investment
-binding term sheet with Marthen Amtiran (Pak Marthen)
-US$10m for 10% equity in PT Gulf Mangan Grup with 6 month option for further 5% interest for US$7m
-non-refundable US$200k deposit to be paid within 5 business days
-US$9.8m to be paid within 5 business days of approval from Indonesian government
NOTE: Implied value of GMC = US$113.3m x 85% = US$96.3m. Current fully diluted MC = A$11m
08/08/16 - Gulf acquires two ferromanganese Smelting furnaces
-from Transalloys in South Africa for US$1m
-Gulf to supply Transalloys with up to 30kpta of high grade manganese ore for 3 years “at current reported Metal Bulletin’s index price for manganese lumpy”
-XRAM Technologies to undertake design and construction requirements for relocation of furnaces
15/08/16 - US$200k received, remaining $9.8m to be deposited within 7 days of relevant permits and licences to operate Kupang Smelting Hub
08/09/16 - Gulf secures additional funding to progress the Smelting Hub
-A$1,050,000 @ 1.5c to clients of Triple C Consulting
-government approvals progressing well
03/10/16 - Gulf receives provincial government approval for development of Kupang Smelting Hub
-in the Bolok Industrial Estate, the original site selected by Gulf
-no further approvals required to commence construction program
15/11/16 - Gulf finalises terms for US$10m cornerstone investment
-US$10m for 10% equity in PT Gulf
-12 month option for further 10% interest for US$10m
-Pak Marthen appointed as President Commissioner of PT Gulf
-Full payment to be received within 21 days
NOTE: implied value of GMC = US$100m x 80% = US$80m. Current fully diluted MC = A$44m
21/11/16 - Gulf signs manganese alloy offtake agreement
02/12/16 - approval received from BKPM and the Ministry of Law and Human Rights for the US$10m investment - funding expected to be received next week
13/12/16 - voluntary suspension pending announcement on cornerstone investment - expected no later than 27/12
NOTE: current fully diluted MC = A$88m
28/12/16 - US$10m expected to be received in January 2017
23/01/17 - appointment of Operations Manager - EPCM contract signed with XRAM - Gulf continuing to work with Pak Marthen to secure US$10m - Tranche 1 expected imminently, Tranche 2 by mid-February - discussions also underway with additional funding providers
01/02/17 - counter offer on substationally different terms proposed by Pak Marthen - currently being evaluated with decision expected no later than 16/02
16/02/17 - Pak Marthen still interested in PT Gulf investment - deadline to receive funds extended to 18/02 - announcement expected on 24/02
20/02/17 - Termination of Binding Agreement
-counter offer deemed unacceptable
-Pak Marthen still interested in investing
-company reviewing options to take legal action against PM
-PM to be removed as President Commissioner of PT Gulf
-company in advanced discussions with SI’s on share placement
-announcement expected no later than 24/02
24/02/17 - actively progressing discussions with SI’s on placement - announcement no later than 03/03
03/03/17 - still in discussions - management on site undertaking DD with SI’s - expected to be finalised no later than 10/03
09/03/17 - Gulf corporate and operational update
-A$350k loan received from Tanah Capital and A$250k deposit paid towards first two smelters
-stripping and refurbishment to commence with shipment expected Q3 2017
-A$19m EPCM contract awarded to XRAM for construction of initial 2 smelters to commence upon completion of CR
-PLTU recently increased generating capacity from 32 MW to over 120 MW
-additional 32 MW capacity expected H2 2017
-PLTU confirmed commitment of 14 MW to power first two smelters and capacity to eventually power all eight smelters (~70 MW)
-Pak Marthen removed as President Commissioner
10/03/17 - still in discussion with SI’s - expected to be finalised no later than 20/03
20/03/17 - still in discussion with SI’s - expected to be finalised no later than 27/03
27/03/17 - still in discussion with SI’s - expected to be finalised no later than 03/04
03/04/17 - placement discussions progressing positively - further details expected no later than 07/04
10/04/17 - Share placement to advance Kupang Smelting Hub Facility
-A$1,023,000 placement to 2 x SI’s @ 0.5c
-funds received will repay A$350k loan to Tanah Capital and finalise refurbishment of smelters
-same SI’s to invest additional minimum of A$3.5m in future CR upon signing of Bolok land lease agreement (1.5c/share + free attached “3 for 2” listed options @ 0.5c + 2 non-executive board seats)
-General meeting to approve CR of min A$6m to max A$12m @ same terms (CR includes the minimum A$3.5m from SI’s)
19/04/17 - A$1,023,000 received from SI’s ($877k from Tanah Capital and $146k from BB Lee Super Fund)
NOTE: Pak Marthen counter offer not disclosed to market (original offer US$10m for 10% of PT Gulf), then 11.2% of GMC (100% owner of PT Gulf) sold to Tanah Capital for A$877k. Leonard Math (CFO) tagged playing golf with Facebook buddy, Tan Han Swee (Tanah Capital) shortly before 0.5c placement
01/06/17 - Gulf signs binding land lease agreement
14/06/16 - Market update
-CR progressing well and expected to close shortly
-BB Lee satisfied that conditions agreed with Tanah Capital and GMC have been met
-Tanah Capital not satisfied and still reviewing conditions (1. Signing of land lease agreement, 2. Variation to offtake agreement to include provision for “Letters of Credit” as required under Indonesian Law)
-Tanah to advise GMC no later than 30/06
22/06/17 - Tanah Capital terminates subscription agreement - BB Lee to still proceed - new high net worth cornerstone investors to take up Tanah Capital allocation (minimum A$3m)
23/06/17 - Gulf secures funding for construction of first two furnaces at Kupang Smelting Hub Facility
-subscribed total A$12m
-A$7m via placement and A$1m in convertible note on same terms
-agreement to raise additional A$4m through placement to SI’s (by no later than 30/09)
-smelters to arrive on site in Q3 2017
-construction scheduled for completion in Q4 2017
-production on track for Q1 2018
-cash flow from alloy sales expected mid-2018
29/06/17 - reinstatement to official quotation