Ann: Maiden Mineral Resource Estimate 261MT at 2.19% TREO average, page-190

Thanks for a great post again 2Ic. Certainly helping my learning in this space.

I couldn't help myself , so I thought, ok lets do as I did earlier with Lindian and swap the PEK numbers over to the current spot price of circa $ 65 K USD for refined NdPr oxide. But now lets also swap in the payability numbers from their announcement a few days ago as well. I used the 48 % figure given their concentrate is currently at that 45 % range.

Plug all that in and you get the below. It's a staggering massive negative NPV of almost half a billion dollars. Makes Lindian look like indeed a gem. Remember PEK previously used in their Oct 22 BFS the bullshit Adamas figures of $ 200 USD + per kg for Ndpr. The spot price at the time was around USD $130 per Kg. As it had been trending up for a couple of years, they went one step further and they thought no harm here lets just extrapolate it another $70 per Kg as RE players on the ASX have been want to do in recent years. I am surprised the ASX let them get away with it as a number so far out of the money at the time no matter what a consultant is telling them long run might happen is just BS in my view. You have to run these models on a conservative basis as they need to support things like debt funding and new rounds of equity funding, so they need to be defensible and realistic, not optimistic pie in the sky valuations.



"An article on * yesterday quoted Argonaut senior metals and mining analyst George Ross, who said " at times of low prices, like now, there are very few development projects out there which would make decent profit. There are a lot of resources out there. There won’t be room to develop all of them, to be honest; just the best ones, It’s like any commodity – you have to be among the lowest cost producers.” He nominated just 4 players likely to survive and rise above the extinction event we are witnessing... MEI, LIN, PEK and ILU (in addition to LYC of course)."

Well my modelling is showing exactly the same result here with PEK at current prices they too are not close either to being economic. To be viable in my estimation where their current operating parameters sit, they need the NdPr price to double from its current levels but even then that would make them marginal from a cost of capital perspective ( to circa $130K figure, same figure it was around time PEK realised their BFS last year, but clearly if they had used that number then it wouldn't have looked super enticing, hence the much higher Adamas sourced number).

I find it a little odd that mgt are committing to a binding offtake that if prices stay at the current levels they are simply not economic without requesting any sort of floor price above current spot price, especially for a long run deal. By my calcs at current prices they are breaking even but with zero return on capital. No one invests $ 300 M USD to make nothing and it makes debt finance here in the West impossible. So something for me is simply not adding up with the announcement at face value. Hence I find it not surprising that in their announcement they say Shenghe are going to find a funding solution. Well that almost goes without saying as their numbers are simply not fundable using the known laws of finance that apply here in the West. Actually pondering on this, I feel for PEK retail shareholders as they are completely at the mercy of Shenghe now.

"China need RE-con to feed the beast and continue controlling the industry, including keeping RE prices uncomfortably low for new entrants. Unfortunately, every 'PEK' that does deal with the devil simply plays into their hands by securing their supply and extending their dominance at low prices. I see zero strategic value for China to allow NdPr prices to rise very high. NdPr-Oxide is simply s feedstock for the real value-add part of the industry... NdPr-metal, NdFeB metal block, Re-P-magnets. It suits China very much to import cheap RE-con feed by keeping NdPr-Ox prices down, simply not making much of that NdPr-oxide available to the west at low prices, then making outsized gains from downstream metal-magnet production that they will sell to the west."

The above is brilliant analysis and has helped confirm some of my own thoughts on this topic. As you have described to understand the REE industry you not only have to under cost curves of individual players but also the incentive structures across the length of integrated value chain. If it ever looks we will end up in a similar position to PEK and feeding the devil as you say , I am out and gone from Lindian. I would counsel Alistair and Asimwe to really think hard and long before going with a Chinese route to market with a Mon concentrate offtake for Lindian ( even if it meant a faster positive cashflow) as in my view, the PEK example shows its long term drinking from a poison well that only adds to the very cycle of Chinese control and low prices that you outlaid so well in your post. I would be far more happy they let it sit there for another year or two and find a buyer oustide of China ( ideally a downtream processor who can partner with offtake and capital, even if that meant material dilution) then go down a pathway similar to PEK.