Ann: Coburn Operations Update for December 2023, page-4

Unfortunately not much joy in this update.

• Production @ 12,599 for December is still only about a quarter of supposed nameplate HMC at full production - so hence the very high C1 costs of A$835/t (also exacerbated by the ongoing commissioning and other "temporary" expenses). It is not clear as to how much of the C1 cost figure relates to steady state vs commissioning.
• Sale price achieved was terrible. Some time ago, we were speculating that they could achieve A$1,000/t. Even though we have depressed global HMC prices at the moment, the achieved US$433/t (so about A$655/t) suggests STA is being hit with significant quality discounts.
• At the moment, STA is losing about $180/t of HMC produced (A$655/t revenue & $A$835/t costs.
• Production costs will obviously drop significantly if they can get anywhere near to nameplate - but this is still a very long way away judging from this update.
• The lenders will be looking at this December result and wondering if they have a credible pathway to achieving profitable operations. Their capacity to survive this depends on a credible, milestone focused, pathway from here which both delivers cost savings (no more commissioning & temporary costs) and month to month uplift in HMC volumes.
• If they can achieve, say, a +10% per month, every month, uplift in HMC production, this looks like 13.8kt for Jan; 15.2kt for Feb - through to 22.2kt by June which is still less than 50% of nameplate. Even at 10% per month improvement, they would not hit nameplate volumes until April 2025.
• The above comment is just showing for illustrative purposes the sort of cumulative performance targets they need to be setting and achieving. Bottom line - they achieved a 19% improvement in December over November. I think they really need to be delivering mid-teen % production volume uplifts every month from here on in to have a shot at refinancing this by end Q1-2024.