Firering Strategic Minerals Limited (LON:FRG) Independent Non-Executive Director Vassilios Carellas caught up with DirectorsTalk to discuss recent fundraising, its path to increasing ownership in Limeco, and the operational milestones ahead as Limeco scales production.
Q1: There’s been a lot of discussion around the fundraising and what it means longer term. How should investors think about the short-term dilution against the value of increasing Firering’s stake in Limeco at this stage?
A1: Clearly, we understand the dilution concerns. It’s something that’s been on the back of our minds as well, particularly doing the placing at this price. At the same time, the Board participated at this price, so we have a clear alignment with our shareholders.
The raise does increase exposure to an asset that’s in the growth phase and growing. We also have the addition of the kilns coming through, with Kilns 3 and 4 coming online later on this year. That should improve output and margins.
So, yes, I’ve been focusing on clear long-term value through increased ownership and getting dilution at this stage is not ideal, but it is something that we think long-term will be beneficial to the company and the shareholders.
Q2: So, to what extent does this fundraising now secure the remaining Limeco option payments and the path to 45% ownership?
A2: The raise obviously is enough to cover the remaining two payments. We are now in the process of doing the next tranche, which will take us up to 41.7% ownership. We’re obviously positioned now to also take up the tranche in July, subject to getting all the regulatory approval to do so.
The aim is to move to a more self-sustaining operating model as the Limeco scales up production.
Q3: What are the key milestones that investors should be watching over the next six to 12 months?
A3: Obviously, the continued ramp-up at Limeco is key, that’s where the focus for the company is. Kiln 2 has now more or less gone through the optimisation phase and now is in production. We’ve got Kiln 3 coming online in the next couple of months and Kiln 4 thereafter. We’ve also got the calcitic powder milling circuit coming online.
We’re scaling throughput, scaling production, and increasing margins. The offtake agreement that we were awarded validates the product demand and the commercial strategy of the company and ultimately building up a customer base across the mining, agriculture and industrial sectors.
Q4: Now, you’ve said that Limeco was effectively breakeven for March, what is it that needs to happen from here to move into sustained profitability?
A4: We’re effectively breakeven with the one and a half kilns that we had operating, and Kiln 2 was going through the optimisation phase and Kiln 1 is running at two thirds of what it should be doing.
Effectively, you’re now looking at Kilns 3 and 4 coming online. So that will increase production, which will increase revenues and then you’ve also got economies of scale coming through. So ,you’ve got your cost base coming down.
The underlying project economics will look better as Kilns 3 and 4 come online. Higher throughput will obviously mean lower costs. So, you are looking now at a business that’s transitioning from proving the model to scaling it up.
