We are probably in agreement, and the perceived differences are semantic. I'll repeat what you wrote, and comment in blue font. Like Wenesday's child, FYI's SP has far to go, and I am not in any hurry to sell.
If I could just say though that I don't quite think you are aware of just what FYI has.
The key is our Kaolin deposit and the consistency of the feedstock and the years of R&D we have put into adjusting our flowsheet.
You can't just grab any old Kaolin deposit and start producing HPA it is a lot harder than that.
I am aware that: a) FYI has a good kaolin deposit (easy to mine, not too remote from Kwinana, good volume and quality); and b) extracting HPA via the HCL acid leach and crystallisation process required research to optimise plant design. Plus, the current and planned multi-use of Kwinana as a refining hub by Alcoa, Nickel West, Covalent Lithium and EcoGraf suggests significant economies of co-location of complementary activities.
On kaolin quality, I don't know the percentage of the various minerals in the Cadoux kaolin deposit, although I accept that the kaolin has a better fit-for-purpose rating than most kaolin deposits. However, I would be loath to say it is globally unique, and nothing comparable can be found elsewhere. Why do you think Alcoa isn't just buying a Kaolin deposit and getting their team of 70 technical experts to build a flow sheet to produce HPA? They have tried. Alcoa substantially refines bauxite into alumina on a huge scale, which from a cost perspective is only half way to making aluminium, which Alcoa does not make. Alcoa's refining capacity is some 17 million tonnes, and the global market for HPA is probably 20 to 30 thousand tonnes. Even HPA grows ten-fold growth in the next decade, by Alcoa's standards, that is small beer. To me it makes a lot of sense for Alcoa to enter into a JV with FYI, and if in future Alcoa wants to enter the business on its own, it could move to 100% ownership.
On the technology, the opportunity cost of diverting the focus of Alcoa's technical experts to kaolin-sourced HPA may not be worth it. Knowing that producing quality HPA can be economically done via the HCL leaching and crystallisation process would suffice to allow to tweak the refining plant just as well as FYI can. The basics of the process cannot be patented, because it is prior knowledge.
If you don't think HPA offtakes will be worth much, how do you suggest FYI go about locking away sales then?
The reason why new projects seek LOIs is to support applications for funding, government support, et cetera. If the target is to convince Alcoa, the LOIs will tell Alcoa nothing that it does not know. Alcoa would probably prefer FYI to do nothing on the selling front until the JV negotiations are either successful, or otherwise concluded, and if successful, the agreement would cover marketing and funding. I suspect that the quid pro quo of the deal would give Alcoa the marketing rights.
Both parties to the JV would know who in the battery and LED game would buy what quantities of ultra HPA for what price. Actually landing sales in the early years would be a doddle, IMO. For a different product and with a different JV partner in mind, LOIs have their uses. If FYI were focused on selling kaolin to traditional markets for kaolin (paper, paint, ceramics, etc., my view on LOIs would be different
FYI Price at posting:
78.0¢ Sentiment: Hold Disclosure: Held
