Ann: Trading Halt, page-34

It's pretty simple - If you focus on the ore operation only, it has pretty sucky metrics given pre-nameplate volumes, below expected grades and what may or may not turn out to be a temporary drop in Manganese prices. If there was no option to improve economics or HPMSM then E25 would be overpriced.

Have they stuffed up on commissioning yep. If WA didn't have restricted access due to Covid for a period of time, I think they probably would have sorted things faster but that's speculation and in the past.

DMS rather than the optical ore sorter may well be able to turn the existing ore operation around because:

• It will be less sensitive manganese ore that still has a trace of clay
• Presumably significant rework is currently occurring. The operation changes to do it once, do it right. Same cost base but more throughput
• DMS has been shown to get the grade up which means transportation costs per unit of manganese drop
• There may be a positive price curve within the contract beyond pure manganese content but this is an unknown possible upside
• The ore sorter is the existing item with the lowest theoretical capacity at 75tph (pg 24 Dec2020 scoping). The next lowest item is 90tph. If that was double-shifted (16hr), 1,440t/day would be the nominal throughput (or about 130kt / quarter vs 50kt currently being achieved). If the Vibro rinse screen is also upgraded, the next lowest capacity item becomes the log washer at 110tph (With a double shift that's circa 160kt/qtr or 642kt per year). With DMS + Vibro and you are looking at a 300% increase in throughput.
• While the lower price is a headwind, the issues of higher shipping costs and >$100/barrel oil look to be reducing.
• If reliable higher volumes are achieved, further shipping efficiencies may exist.

If E25 are close to signing HPMSM contracts that contribute to the capital cost of a US based plant, it's a game-changer (assuming the scoping study from earlier this year is even close to correct). As a reminder, there was an estimated NPV8 post-tax of US$1,142m on the 150ktpa scenario and its pretty easy to see demand scenarios by mid-late 2020's that are well beyond 150ktpa.


The 11 October update noted:


The above modelling used 78.4kt for 50kt of high price and price of $1,950. There was also 16.6kt at a low grade and price $900/t. Changing out to 75kt delivering 65kt at $1,950/t will improve the economics beyond what is shown above.