2021 - General Discussion, page-4573

The market for rare earth and strategic metals like HPA exists. The substantial buyers are known. At any point in time the prices are known for the grades that are relevant. For all we know FYI already has "invitations to treat" from parties other than Alcoa, and these have to be put aside until the current MOU expires. I for one would be upset if FYI rushed into an offtake agreement.

IMO, the MOU debate is about as fruitful as debating how many angels can dance on the head of a pin, where even the most elegant debate is facile.

It was the experience of BHP that offtake agreements with Chinese buyers were dysfunctional, because when the agreed price was higher than the spot price, the buyers bought on the spot market.

I used to draft contracts as a profession, so I am aware of the language used in these agreements, and if I were hired to craft a contract that would be fair to both parties, it would hinge on the concept of a right of first refusal (ROFR), and what is the quid pro quo for that right.

My guess is that Alcoa wants to be the offtake party, but to be fair to both parties, a mutually acceptable delta should be in place, so if a potential buyer offers a meaningful premium that Alcoa's is not prepared to match within the leeway of the agreed delta, then the third-party offer can be accepted. The quid pro quo would be a volume offtake, and if not met, the agreement may be terminated.

It is a contradiction for me to hold that these debates are a waste of time, and then proceed to opine on what a MOU might look like. My excuse is that it amuses me to muse on the topic of commercial contracts, and being retired I have the time.


deal canmust be allowed to proceed.  FYI's interests, there would be