Ann: Operational and Shipping Update, page-16

My guess is that part of this announcement ties back to smelter credits and their existence (or their absence so far).

The pre-feasibility study (3 Dec 2020) noted an expected $0.65c/dmtu uplift that would apply to 85% of production. It was never made clear if this 85% related to pre-sorting into different shipments (eg 5 higher rate, 1 lower rate) or whether it came from post shipping work OMH did. If it requried further benefication sorting, all the operational issues E25 has encounted would have put this on the back burner for the Dec and Mar quarters.

I'd interpreted the Q1 statement of "phasing-in of substantial smelter credits for low impurities anticipated from Q1 2022" to mean the ore sent needed processing and the smelter credits would occur following this work. I think others had the same interpretation. What it may have however meant is that E25's commissioning was incomplete and further beneficiation sorting was required to achieve any smelter credits with the required commissioning to achieve this still being months away in Q1. Investors struggling with E25 communications wouldn't be a new issue!!

My current guess is that about a month before departure E25 signs a delivery contract with OMH that specifies the contract price along with the intended volume, grade and an allowed shipping cost adjustment to get back to FoB pricing. After signing this, E25 finds a suitable ship and gets it loaded. On departure payment occurs according to the contract delivery spec's which E25 knows on signing.

This payment is however adjusted for washup's where previous shipments have varied from specification. These can be favourable but have so far tended to be negative. The Dec quarter may well have had negative shipping cost washup's. The March quarter would have had negative volume washup from the Dec qtr. There may have also been negative grade washup's of the Petra report is correct that 1st half ore was only 30.5%. The Aquamarine shipment was therefore commissioned as a high silica delivery using the pricing premia contract clauses (so those long-lost smelter credits might be in this quarter for this shipment). E25 are advising this next shipment has been signed up as a normal delivery so it won't have the smelter credits benefit (at least on departure). Its still unclear if smelter credits are something that can be washed up as a subsequent receipt.

To keep investors guessing (tiger changing its stripes?), E25 has noted 35-40kt as the next shipment size. This is annoying because it makes it impossible to know whether the probable underlying contract has been signed for 40kt and may result in a negative washup if they send 35kt. Or is the contract signed at 35kt so as to ensure its delivered in full and the is a possible 5kt favourable washup next year. Has it been signed somewhere inbetween? I guess if cash is really strong this quarter, they probably signed the contract at 40kt.

From the 3 Dec 2020 pre-feasibility report: