Last week I wrote a blog article on MHM’s second US processing contract. At the time I thought it was a great result by the company to secure two contracts within a matter of days. You can therefore imagine my surprises on Monday when they announced their third contract. Unfortunately I was not able to comment straight away as I was at the Gold Symposium. It was however very nice to see the share price rocket past $1.
The announcement was very similar to our second US processing contract and was structured as a “tipping arrangement” over a twelve month period. This will give the customer the opportunity to see how well our technology works and hopefully move onto a tolling arrangement in the future.
As per the earlier announcements the usual confidentially agreements are in place and no additional details will be released on the parties’ identification for the time being. MHM also stated that they continue to engage with a number of other companies for additional salt slag and black dross supply.
This refers me back to my previous comments where I stated that the first contract we signed was in my opinion around 100,000 tonnes per annum as it allowed management to state that sufficient supply had been secured the justify the plant’s construction. Based on a 200,000 – 250,000 tonne p.a. plant I then said that we may get one more large contract, two more medium contracts or three smaller contracts. As a result I expect that contract number 2 and 3 and probably sub 50,000 tonne per annum contracts and probably closer to 25,000 tonnes. If they are only 25,000 tpa each then that would still leave anywhere from 50,000 to 100,000 tonnes of capacity at the plant. I will therefore alter my opinion and state that we could expect one or two more contracts for this plant. Whether they come now or at a later date is another question.
Finally the announcement mentioned that the company is engaged with a rail provider and has commenced preliminary planning and engineering for construction of a rail spur. The availability of rail is an important consideration for MHM as it provides flexibility of transport and can potentially increase the radius for which salt slag and black dross can be sourced. This leads me to question whether MHM has changed its preference from opening more than one plant (i.e. two or three plants at 200-250,000 tonnes p.a. each) or one larger plant that will originally operate at 200-250k tpa and then be expanded over time to 500k tpa or higher.
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