Pensana (LON: PRE) has a perfectly sensible plan to take advantage of high rare earths prices. Note that doesn't mean it's a plan that will work, nor that they'll be able to make it work, but it's a perfectly sensible plan. The real bottleneck in rare hearts is in the separation of the concentrate and then the engineering of the actual products. Mere mining of an ore, the creation of a concentrate, that's simple enough. So, Pensana wants to build a rare earths refinery in the UK. They'll also feed it with concentrate from their own mine in Africa. All very sensible
Pensana share price from London Stock ExchangeOf course, just being sensible doesn't mean it really will work - it's just that not being sensible means it really won't. And here we come to the first of Pensana's problems. As we noted a little while back Pensana has run out of money. This is not a good thing, a company that stays being out of money goes bust. So, Pensana needs to have more money and soon - they're working on it as the saying goes.
But here we come to the next problem. As Pensana points out it's right in the middle of negotiating the big funding package that's going to pay for everything, the processing plant, mine and all. Which would be nice if it's signed off - that would solve the short term problem too. But having a short term cashflow issue really isn't the best position from which to try and negotiate the big package here. Because you do end up looking a little desperate - even, if you can't manage cash flow now then what are you going to be like with more?
The other thing is that - of course - the more you need the money the worse the terms you've going to have to agree to. It's entirely possible that these short term, and relatively small, cash requirements right now will make the terms of the bigger deal markedly worse. We'll have to wait and see but the longer we get no news on finances then the worse the likely outcome in our mind.
