AAM Research Piece, page-57

Current FS numbers for capex, Opex, etc are important and and do need to be considered as part of any investment decision and discussion. I understand there may be inaccuracies involved and the proof will be in commercial production. If you have read my posts on A4N, you will see that I have based my buy decision on the fact that I can see a lot of upside after assuming significant error in the capex, opex, and with HPA price as low as US$15,000 per tonne so I definitely have not taken any numbers as gospel. I have allowed for error of varying degree, ranging from no error to errors of around 30-40% on costs. Less error on production output volumes as that should be easier to get closer to planned output. Compounding higher costs, lower output and lower sell prices has a big impact and the upside obviously varies but it is always strong for A4N and that is why I prefer it. I can simply see strong upside even with significant cost blowouts. If ATC have built in a lot of fat as they claim, then I can see good upside here and if I assume they achieve the “fat”, I would assume shareholders will get rewarded. I simply see better upside in A4n. I prefer to assume significant negative errors in costs and HPA assumptions and still expect strong upside from resulting cashflow, rather than have to hope ATC achieves the lower costs, higher output relative to their FS and that they achieve better than $US25000 on sales.
One big problem I have with ATC is the massive error in capital cost assumptions in their 2015 FS when they gave a figure of around A$100mill which later blew out to A$400 mill. I can understand and could accept a blow out of 30-40% even after only a year or two but that large of an error either suggests incompetence or deceit. Either way, I would find it difficult to trust the company and invest without a full replacement of management. A PFS usually states errors of plus or minus 30%. I could tolerate that plus a bit more in case of genuine error or unexpected price rises. That is why my assumptions are based on errors of that magnitude. The chances of all assumptions being out to that degree should be low for any stock if not too much time has passed. Some updated numbers might even surprise to the positive side for A4N and ATC might achieve some of its “fat”. A4N’s last study update was earlier this year so I’m expecting numbers to be reasonably close to within stated error tolerance. ATC’s last update that I know of was 2017. I expect someone will correct me if I’m wrong on that.