Originally posted by Dustymountain
I understand this may come across as controversial, but try and take your emotions out of it.
I have a fairly large shareholding in AMAL with an average price just under A$ 0.30, for me to get back to an even keel I have to consider the current share price to increase by 50% and of course the time it will take to get there...
If I sell, I lock in my losses and have to start over somewhere else or keep cash / Gold until global market improves.
Lets say we know have a fixed amount of cash to spend (proceeds from equity sale or saved capital to invest) with the view of increasing our investment by 50% in the shortest time frame...
One would naturally research the market looking for value/good fundamentals and future trends, also considering the global economy which some may deem a bit risky atm.
The questions are:
- from your research would you invest now or wait till the global economy to derisk...
- Invest now in some good companies that are now at reduced prices
- Would Amal be one of those companies?
Answering the questions:
- from your research would you invest now or wait till the global economy to derisk...
No. If you sit around waiting for there to not be any risk in the global economy, you'll never invest in anything. It is too high-level, and too vague, to guide investment decisions.
You need to factor specific risks into your thoughts. Obvious examples for A40 being what would be the impact of heightened US/China trade war and/or a global recession on EV sales? Car sales always drop in a recession, but would EV sales still be able to grow? Even then, the factoring in only affects how much you would be willing to pay and how much you would be willing to invest.
- Invest now in some good companies that are now at reduced prices
You always want to be doing that. That's the name of the game, to me.
- Would Amal be one of those companies?
Not right now, we don't have enough information.
To buy more, I would need to see all of the below:
- New offtake agreement(s) that cover the remaining 50% of production with a similar pricing mechanism and particularly a similar price floor. This is simply to provide some certainty about revenue into the future. Once scale is achieved, they can get more aggressive with "spot" pricing and maybe even auctioning off each month's supply, but not while they're still in a growth phase.
- Production for the rest of January (at least) to have been maintained above 400tpd, ideally closer to 410tpd. That would demonstrate 7 weeks of production at the highest rate they have ever achieved (Sep qtr was about 308tpd), and would suggest steady state is approaching if not already achieved. If this is missed, they're unlikely to hit 180,000t this year, which would not be a good look, and could be a problem financially.
- Cash costs to for the Dec quarter to have come in at around the $31.29m forecast. Should be self-explanatory.
- Cash costs for March quarter to be similar. If they're going to make money, they need to be increasing production without increasing costs, pretty simple.
To sell, I would need to see any of these:
- No new offtake agreement by the end of Feb, meaning they're unlikely to sell anything in March and face considerable uncertainty (given that not having a deal by then would suggest there isn't a whole lot of demand around).
- Costs for December quarter coming in above $32m (excluding the merger costs)
- Production dips below 390tpd
Anything in between those is a hold, which is where we are right now while we wait.
Hope that helps.
https://mobile.twitter.com/SmallCaps_asx/status/1086433298438533120/photo/1
