NICKEL NEWS, page-951

FT, One would be forgiven for thinking the timing of BHP's rejection of MCR's off-spec (As-affected) blended ore looks might be a little more than coincidental. However, it might just be that. It's hard to say definitively without being inside the tent, but I think BHP's acceptance of off-spec product from MCR would likely have been only a short-term arrangement, pending a clearer picture emerging moving forward. Today's announcement by MCR clearly states they (MCR) were chasing a (formal) amendment to the offtake terms re- product spec. BHP have now said 'no' and it seems clear that delivery of any off-spec ore is now off the cards moving forward.

My current thinking is BHP is simply flexing its muscle as the owner of the Kambalda concentrator by reminding everyone that MCR is beholden to it for sales revenue.

In the ST I think it actually plays into AF's hands because material uncertainty surrounding As ratios is now a live issue. (It's not a completely new issue because As ratio management was already well-known, but imo it raises various related flow-on questions than were not covered in today's surprise announcement). The SP has reacted accordingly to a level now only pips away from AF's *current* floor price, which will now v.likely (imo) get hit with a number of punters selling into.

There's also the pre-existing issue of whether MCR was ever going to be able to achieve the (then) guidance of 8-10kt pa during first year ramp-up when only 2kt had been achieved during the first half. The market seemed happy to look through this particular detail prior to today, but today's announcement will likely give many pause for deeper reflection on more than what was contained within it. It will be interesting to see what the actual production numbers end up being now that BHP appears to have taken a harder line by rejecting non-spec ore.

Much is made of the benefits conferred to BHP in taking MCR's ore, which helps BHP by virtue of downstream blending with concentrate from its Mt Keith ops at the Kal smelter. It's true and I don't mean to belittle that, but there's also something to be said around MCR -- without its own concentrator -- being a captive customer. It's a symbiotic relationship and, unless AF is willing the spend the capex on a new concentrator for MCR, it seems (to me) that MCR needs BHP more than BHP needs MCR.

In short: This may well have been sabre rattling, but not to mess with Wyloo's bid per se. Just a gentle reminder to everyone concerned just how important (existential?) BHP's Kambalda concentrator is to MCR, regardless of who owns it. This feeds into my view that BHP won't bid on MCR. They don't need to, unless AF can figure out a way to justify the capex spend to empower MCR with its own concentrating capacity.

For giggles only (because I'm not a MCR holder). What if AF succeeded in buying MCR and then mothballed ops, thus starving BHP's Kambalda concentrator of feedstock, leading to its C&M shuttering. Fast-forward several years and he then lobs a bid to buy the now shuttered concentrator from BHP. It's a bit lot of a joke and not a live scenario for me, but I'd buy tickets to that movie.