Ann: FNN Investor Presentation Sydney 20th February, page-21

So, let's assume the market has grown to 50Ktpa by 2020. They're still saying - with no market testing - that they are going to make 200ktpa and sell it. If they aren't going to sell it, what's your crystal ball say about the cash they can make?

So, clearly they can't sell it. Maybe they sell 50kt @ US$12,000 and drive literally every other competitor out of business. This still leaves 150Kt of spare material flapping about trying to find a home for the first few years. But what's that do to your cost of production? It is really hard to say, but if we assume, boldly, that somehow KRR manages to produce 20x as much as their closest competitors (FYI, A4N, ATC) for capex of $300M (which is 10% per tonne of the capital intensity of any of their competitors) and an OPEX of, let's say, half or $5,000-6,000/t...

Their costs to make 200Kt @ $5,000/t is $1B. They sell 50,000 x $12K or $600M. They need to make $400M off the remaining 150,000t, which is $2,666/t revenue they need to get from the product. This means they have to find 150,000t worth of consumers of ceramic grade beaded sinter, with low iron and magnesium impurities per annum, and get $2,666/t when it is well known that 3N grade metallurgical and ceramic grade alumina out of Wagerup is fetching $1500-3500/t depending on spec, and volumes are effectively flat.

So, yeah, I have an opinion. And that opinion kind of seems to suggest that unless there is a whopping CAGR of 20-30% p.a. from now until 20-jiggidy-do when KRR turns on Speewah, several things apply;

1. They will flood the market
2. Prices will crash
3. Their revenue assumptions will over-call their 4N HPA assumptions
4. They cannot make it cheap enough to compete with even Western Australian metallurgical sources
5. If they can't sell the smaller portion for US$24k/t and can't sell the rump of oversupply for >$3K/t, they can't be profitable even if they're producing 4N HPA for half the price and 10% of the capital intensity of all other competitors (albeit in the kaolin/HCl scene)
6. Super-sizing this is ludicrous
7. And this is a $300M capex bill for just the HPA circuit

I wish them luck, I will be a very avid reader of the PFS.