MHM Company Update

MHM Metals today announced the first of a series of monthly progress reports to will provide a running update on the company’s operations. I feel this is largely due to the decrease in the share price and the delays we are currently experiencing with our US expansion plans. Management clearly see this as an opportunity to shore up investor confidence and provide a short term catalyst to the share price (which is up over 10% on the announcement and overnight rise in US and Euro markets).

Now normally I am not a fan of companies releasing information for the sake of it or for trying to pump the price, however, I do feel there has been a disconnect between the share price and the company’s fundamentals, regardless of the delay. We need to recognise the MHM is generating income and profit and does appear to be on course to significantly expanding their operations, and as such an appropriate value needs to be applied to the enterprise.

The information on the Australian operations is nothing new so to speak. It does however clarify that from next week on the plant will be operating 24 hours and that all the upgrade work will be complete. The salt crystallation plant (which is not needed straight away due to the evaporation ponds) has been ordered and construction of the building is awaiting council approval.

In regard to the AL80 shipment to Impex, there has been a slight delay at Customs, because it is a new product. However, seeing as we cannot control this process there is no point stressing over it.

Where the report really comes to life is in regard to the US expansion operations. Ever since black dross was mentioned a month or so ago a number of posters on Hotcopper were banging on about this being the end of the salt slag business and that MHM had failed and was now scrambling to find new opportunities. I am glad to say that we can now put that to rest with the announcement stating:

“The appointment of US aluminium industry veteran John Pugh as MHM’s Director of Operations, North America, initiated MHM’s examination of black dross recycling opportunities. John’s identification of this complementary opportunity and introduction to additional salt slag producers are of substantial value to MHM in the US.” (I have added the bolding).

It seems to me that John Pugh has already earned his pay cheque for the year.

The announcement then goes on to state that US supply contracts have taken longer an anticipated. However it is “important that investors not lose sight of the magnitude of the opportunity that lies before MHM”. So it is clearly a waiting game at this point in time and the equation is quiet simple. If you believe in MHM’s technology and believe they will secure US expansion then this is a fantastic opportunity. If you don’t believe the technology is as valuable as management state then it’s time to step away.

I remain confident in the long term potential of MHM and as such continue to remain invested. As always please do your own research and consult a licence financial advisor before making any investment decision.