Project CAPEX and Working Capital Comparisons, page-50

DYOR. Some observations.
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A simple comparison of ADN and FYI.

FYI released their DFS today. These are the key things announced:

https://www.asx.com.au/asxpdf/20200311/pdf/44fxr4tb5pqhlj.pdf

• Annual EBITDA USD $133M
• Start up CAPEX USD $189M + USD $5M working capital
• 3.6 years to payback from start of the ramp-up period
• Operations (ramp-up) scheduled for Q2 2022
• 5.9 years to payback from now (my calculation)

Now let's look at ADN:

https://www.asx.com.au/asxpdf/20190930/pdf/44907csqf665tx.pdf

• Annual EBITDA AUD $52.75M (USD $34.6M) for 75% share
• Startup CAPEX AUD $6.75M + AUD $12M working capital (75% share)
• 1.25 years to payback from start of the ramp-up period
• Operations (ramp-up) expected to be scheduled for start of Q3 2021
• 2.6 years to payback from now (my estimate based on recent company updates)

FYI numbers appear strong on an earnings basis but it will come at a huge capital cost ...

• for every $1 spent FYI will earn about $0.69 per annum
• for every $1 spent ADN will earn about $2.33 per annum

FYI's huge capital cost brings with it huge complexity. A more capital-intensive project is inherently more risky from both a technical and a commercial/finance/funding risk perspective. They have for the time-being negotiated an AUD $80M draw-down equity facility, essentially convertible notes which from past experience can be very risky for shareholders from a dilution perspective ( particularly in challenging market conditions ). They will still need to organise a further > AUD $210M of funding.

FYI are focused on HPA which has nice revenues but at huge capital expense. The quality of their kaolin is such that this is the only strategy they can pursue to extract reasonable value from their resource.

ADN have $4M cash in the bank with around another $8M to come in from conversion of the remaining options so will be in a strong position when it comes to getting the project underway ( could easily pursue offtake prepayment arrangements ).

ADN's high-purity resource at Poochera allows them to take a lower-risk path to cashflow in a relatively short timeframe. Then from the strength of Annual EBITDA ~ $52.75M will be able to use that cashflow to fund growth. We'll get an update on ADN's HPA progress soon as foreshadowed in the last announcement (5 March) ...

https://www.asx.com.au/asxpdf/20200305/pdf/44fsls863zr900.pdf

i.e.



Notes:

EBITDA:

1. ADN = LOM EBITDA $844M / 15 years x 75% project share ($52.75M)
2. FYI = ANNUAL USD $133M x 0.66 exchange = AUD $202.7M

Total Capital:

1. ADN = (AUD $9M + AUD $16M) x 75% share = AUD $18.8M
2. FYI = (USD $198M + USD $5M) / 0.66 exchange = AUD $295.7M