You again Scoonie. What is it?

MMI have released their quarterly. The highlights are below + my conference call notes:

• Metro Q2 net FOB prices up 13% on Q4 2023 as market continues to strengthen

• Record Q2 shipments of 1.42 M WMT – up 12% YOY

• Final components of the 7 M WMT pa expansion successfully commissioned with OFT Ikamba and new screening circuit ramping up

• Successful $40M Placement and $5M Share Purchase Plan completed, allowing early repayment of $17M in junior secured debt with a further $22M to be paid in Q3

• 2024 shipment guidance revised to 6.0 to 6.4 M WMT reflecting delays in Q2

• In recent weeks, all assets have demonstrated 7.5 Mt pa rates with integrated system rates at 6.5 Mt pa and trending higher

MMI Conference Call notes:

“The ramp up is there as planned however 1 month late due to wet weather + a minor breakdown in the barge loader and getting all plant commissioned.”

“Continuing strength through the next quarter in bauxite prices”

“With the capital raise in May MMI will pay down $39m in junior debt and will pay this off in the coming month”

“Capital budget of $36m and works 100% complete and 90% of the capital spent. On budget”

Further 7% volume growth China expected this year in traded bauxite.  Growth from less locally produced Chinese bauxite and more imports.

“Australian traded (RIO) bauxite prices up 48% in the last 2 years. MMI prices will follow. MMI expects a 8% price rise in the current quarter”

Would describe the mood of CEO Simon Wensley on the Conference call as somber. Simon talked of ‘bumps in the road”, “a frustrating time” and “unpredictable things”.

Firstly, how is MMI’s debt tracking?

With the cap raise in May 24 and the operation now up and running again MMI is unlikely to go broke. That is a positive.

At the end of this quarter they will have paid down some of the high interest short term debt and should have manageable net debt of around $60m.

Well, just how much money did MMI make?

We know from the June quarter cash flow statement they were operationally cash flow positive in an amount of $1.2m.

What NPAT will MMI make once operations are running at optimal levels?

From the information MMI has provided this is not a straightforward question to answer.  MMI talks of a “site margin” of $15/WMT however it is not entirely clear just what is in and out of this figure. (Clarification requested of management and pending. Don't hold your breath)

We also know they received in the latest quarter FOB revenue of $43.40 WMT.

Their production chain is: dig up bauxite/truck/screen/load barges/tow to offshore ships/load ships. This maxes out at 7.5MWT/pa. MMI have advised they have on an individual process component basis hit this target in July, and in time seek to get the production chain in its entirety to this figure.

Assuming no price changes in the sale price of the bauxite, this results in an annualised revenue of $325m.

 Lets say it takes a further 6 months for the above production to be reached.  

A production rate of 7.5 WMT/yr on currently company guided figures, results in a “site EBITA” of around $112m. 

Using the 2023 accounts as a guide:  call depreciation around $20m and interest charges of around $5m and Admin expenses $10m.  

This leaves a PBT of around $77m and a net profit after tax of around $54m.

There are currently 5.9 billion shares on issue (+716m performance rights) @ 4.7 cents share price so results in a m/cap of around $275m.

So MMI at 4.7 cents a share is selling on a forward PE of about 5.

Well that's pretty pathetic. Really for a small miner, why would you pay any more?

Agreed, as a yardstick BHP and RIO currently sell on a consensus forward PE of around 10 -11. So a forward PE of 5 is probably about right, but there is further potential upside.

The CEO on the conference call indicated that one off site costs represented about $3-$4/t of production costs.

The CEO also indicated that bauxite prices were rising and hinted at positive re-pricing of 8% in the near term. Lets call that a price rise 5% or FOB price of $45.57 WMT.

This results in site margin of around $20.00/WMT .

Site EBITA becomes $151m at max pdtn rates. Resulting in a NPBT of around $116m and NPAT of $81m.

On these figures, then potentially MMI is selling on a forward PE (say 12 - 18 months out) of around 3.4.

So if the above scenario took place it is not inconceivable for MMI to re-rate to a PE of around 5. Would mean a share price of around 7 cents.   An appreciation of around 40%.

Mate, you haven't convinced me.

Not trying to. All speculative, being based on target, yet to be fully achieved production numbers, controlled production costs, and bauxite pricing all heading the right direction.  In their favour MMI do have a very motivated and competent CEO in Simon Wensly and the bauxite pricing winds are moving in MMI's favour.

Mate, can't you spend your time more productively looking at better opportunities than this sh#t?

Noted.