sick old dog, page-23

I have had occasion to have dealing with the chairman. I think he is a smart operator. I have not touched base with him for some time and before I bought in I would just to hear his take on things.

I don't believe that he would keep topping up unless he had done his homework.

The last time I had contact with guys who work at PSH they had indicated that once through the renewal program the business is de-risked to a degree. They say its completed or near completion - some others say they still have a year to go.

You can have a blow-out and your timely advice to me has made me think a bit harder on this one.

As I understand it they have been doing some timely renewals of parts of the Soda Ash process as part of this program. You have to get the gearing down and in fact I think that will not happen for the next 12 months at least. That requires a further cap raising or a renegotiated deal with bankers. I think either of those are going to be difficult.

With the exchange rate having given them a bit of relief and Kevin 07 really confusing everyone with his RPST that may stay that way for some time or in fact even trend towards the long term rate of around 80c and stay there.

At that level the company may have time on their side to start putting a few runs on the board. At 83c the company should hit its targets easily.Get the mine dump sorted and reduce stock over the next financial year. Use increased profitability to start a two fold program of paying down debt but renewing or getting ready to renew the Soda ash processing plant. There is no doubt that if I was looking for a strategic asset it would be to avoid adding soda ash to the list of imported products. The Bicarb plant seems to be a good one and without it PSH would have been dead by now.

The big issue is Natural Soda ash (onshore USA mostly) and the rest such as PSH which creates synthetic and costs a lot more for the process.

The other part to this equation is the transformation of USA. If they continue along the road to rampant socialism/ Eco green economy they will increase their cost base dramatically. IMO their competitive advantages will be eroded by higher cost inputs and that will push up prices like Soda ash. We are living within a time period in which there is evolving a new world order and power shift and its slowly evolving but old world economies seem to have got themselves beyond the point of being able to trade their way out of problems. So I look at Europe and have no interest to invest there. Read a report that 30% of population actually make something rest are either unemployed or service / bureacratic processes. 30% cannot sustain 70% in current lifestyle.

The real threat to this change would be a dramatic and sustained drop in the US$. That would leave PSH with a higher US$ price but maybe less A$.

PSH if they can have a good business and a relatively stable exchange rate could become a good business. It could drop reasonable cash dividends and still invest in existing and new plant. They could make strategic acquisitions but still keep themselves relatively small.

The moat they have is that it is unlikely that anyone would spring to build a new plant in Australia. The price they can command is always a price taker but if transport becomes more expensive than that buffer keeps growing. Not a bad business if you understand your risks. Given your knowledge for example you could manage the risk of major plant failure. You would carry a strategic stock of both Bicarb and soda ash. You would look to monitor and maintain those areas of the plant that give that risk and you would seek to upgrade where feasible to reduce people costs or energy costs.

Look at their water usage - seem to have done a reasonable job there.

I just have a feeling that there is some value here and that things have been going wrong for some time.

1 LCE bad shareholder to have on-board going to whine all the time. Overpaid wanted to do a coup failed etc etc.

2. They started investing when money was cheap and easy and will only finish 24 months after the GFC played its hand.

3. Poor leadership at board level didnt give directions and direct management IMO.

4. left a depleted asset by Private equity investor who just wanted a return now. Sold everyone a bag of goods on way out.

To have survived and still be profitable is amazing and to have got the Bicarb plant going to give some degree of profitability is or was a bit of a miracle.

Good old battler.

I have a lot of fish in the tank at the moment so wont be looking to buy until it has hit the 33c but I must say I am definitely going to start doing a bit of digging. Hopefully a few of my fish grow fat and I can harvest them.

I have a few just to be on register.