The Mn price is critical.
Both to the upside valuation potential and the downside should it fall too much.
The AUD/USD exchange rate is also worth keeping a close eye on, although it's probably less volatile then Mn price.
Additional risk comes if the ore sorter fails to get the ore up to the 33% grade as used in E25's as well as Euroz's financial modelling.
So it is still a high risk situation.
However:
I feel that E25 management has done a number of things to reduce the risk.
The Butcherbird deposit has a few unique features that should protect us should the underlying Mn price fall too much.
1/ As mentioned by the BullMarket, E25 have been conservative in their Mn pricing estimates used in the PFS
2/ Off takes, although linked to spot prices, should have a small premium incorporated into the contract for the exclusive supply agreement.
3/ As mentioned in the Euroz research note, the ore should fetch a small premium to 33% grade ore due to the non-China supply, the surety of supply from Butcher Bird's +100 year mine life in a Tier-1 jurisdiction and it's close proximity to smelters in Asia
4/ In addition, the high silica (SiO2) content of 22% should enable 'Butcherbird ore to realise prices more closely aligned with concentrates grading at 37%' (from euroz note)
(*the revenue per tonne received from ore at 33% and ore priced at 37% is quite a lot and can mean the make or break of many projects)
5/ The note also highlights the recent sub-sampling of the Coodamudgi deposit that had Mn values of up to 42.3% only 1m from surface.
This will equate to additional revenues per tonnes sold.
I'm sure work is being done on this that may even bring the overall grade up to 39% making this an exceptional discovery in it's own right
6/ No one has incorporated any battery metal business upside into their valuation.
Not even the (very bullish, almost unbelievable) $16 per share target from the Sydney Fund.
The work E25 did with CSIRO produced manganese at a purity well above the standard at 99.7%. This could see E25 leveraged to the EV thematic as the only downstream processing operation in Australia.
Furthermore, (from Euroz) ... 'We anticipate an inevitable expansion to high purity production and a downstream processing facility which would deliver an NPV significantly greater then the concentrate export PFS'
Whaaat....so despite the massive numbers thrown around for stage 1 and then 2 of the DSO business, Euroz believes the battery business could dwarf even these massive numbers?
7/ Further de-risking I believe will come from E25 taking full advantage in this current CR to steer away from too much debt in these early critical, uncertain times.
I'm sure there will be debt utilised in the future for second stages and definitely for the big battery business but I believe we will be self funded going into production.
No debt means no one can steal the asset if we have production/teething issues next year.
No debt means if the Mn price has a huge unexpected drop next year or the one after, we could simply go on care & maintenance for a while but it wouldn't be terminal.
(20min delay)