Ann: Quarterly Appendix 5B Cash Flow Report, page-41

E25 have noted that a lot of the cost structure at Butcherbird is fixed. If the operation costs you $50m/yr to run and you have output of 240kt then each ton of ore costs $208. If most of these costs are fixed and output is increased to 360kt at say $55m/yr then average costs are $153/t. On this example, a 26% reduction in cost would lower the break-even point and provide profits where there was break-even or losses previously. This is why getting to Nameplate is so critical to the profitability of Butcherbird and why it is so frustrating that it hasn't been achieved after two years of operation.

E25 also has a grade issue but only the volume issues are easy to monitor as E25 hasn't been reporting grades. The Petra research report noted a grade of 30.5% which is well short of where it should be. If this could be lifted to perhaps 33% via DMS then there's another 8% increase in revenue from the same output volume (this is conservatively assuming the revenue scale is linear, it may be more than 8% if its non-linear).

Nameplate is about 90kt/qtr and E25 has been around 60kt/qtr in calendar year 2023 so only around two/thirds of nameplate is being achieved. From nominal throughput information presented in Nov 2020 for an upgrade capacity scoping study, the ore sorter had a capacity of 75tph. Two 8hr shifts on a 75tph process should have been giving 1,200t/d. Allowances for breaks/maintenance might take this back down to circa 1,000t/day nameplate (at least that's how I think the calculation is working - E25 hasn't clarified this). What isn't clear is how close the other equipment items are to operating to nameplate - if the ore sorter was a DMS unit and operating efficiently, would it just shift the bottleneck or would it be removed?

A third efficiency from increasing output is that some site operating costs are fixed if volume were to double or more. This would lower the operating costs further again. Gains of this sort are however only sensible if E25 can get the base operation profitable so expansion is increasing profits not break-even/losses.

E25 did some bulk samples through a DMS plant last year that showed increased grade / improved recoveries so it is a proven solution and is part of the flow sheet in many other ore operations. Its just got a higher capital cost, probably operating costs and may have a commissioning timeframe that also needs to be factored in. The impression last year was that DMS would be implemented comparatively quickly, but that doesn't appear to be the case.

A big issue is that JB would have recommended the optical ore sorter to the board and needs to swallow a rat in deciding it was the wrong option.