A40/TAW Merger Meeting Summary

Very nice setting on level 30 QV1.
Views out over the Swan River, Kings Park and beyond.
Registration desk setup in reception area.
Asked if I was a holder and they checked my name on computer and gave me a voting sheet.
Shown to the room where the business would be carried out.
Small room, again with a nice view.
Light refreshments available in the room.

Rob Benussi took the lead and went through the proceedings just after 10am.
Kicked off with the usual introductions/formalities and a brief company summary.
Mark C, Mark T, Rob and Vicky at the head table.
Bob Vassie couldn't make it.
Rob will be finishing up when the merger goes through.
Mark C thanked him for his efforts over the last two years.

All those present were asked to vote and a ballot box was sent around by Computershare guy to place your votes.
His name escapes me, waS the same guy at front desk on entry.
After votes were completed meeting was convened to do a count.
Approx ten mins later it kicked off again with a resounding Yes vote for merger.
I guess everyone in the room was happy and a round of applause to ring it in.
Credit to Mark and the team to go into damage control and to promptly resolve the issues with ASX when they happened.

There was a short Q+A after all the formal proceedings finished.
I had quite a few I wanted to ask and "cornered" Mark after the meeting with them.
Very approachable and receptive.
Here is the information I got.
Please bear in mind its not translated word for word or in any particular order of our conversation and I'm going from memory.

To try repay @luanboo for all his efforts I noted his question about exploration.
Mark said it will be a focus in 2019 and its something the market would like to see.
Briefly talked about the recent Wodgina sale and that the market (aswell as my misses) likes it big.
She is on to a winner, hopefully we are too in 2019 and beyond.
I asked have we got a target here and Mark said there are lots of targets.
It wasn't what I was referring to and I explained that we had a 30-50MT target 12 months ago that got put on the back burner to focus on plant construction and ramp up and have we got a target in regards to that going forward?
Mark came back quite quickly with 100MT as if a shoe in but may take us past 2019 to get there.
I pressed for a 2019 target and whether I put forward 50MT or Mark said it himself 50MT was mentioned.
Thats double our current resources and for me a fair and achievable target for 2019.
Getting up towards the 40/50MT figure next year would be good trigger to allow implementation of DMS 2.

To put it to bed for all the plonkers, we did a shipment in November.
~12k as quoted on the shipment summary.
Another shipment of similar size for December.
Asked about capacity at Esperance when ramp up is finished here and elsewhere and no issues expected with that.
If anything Esperance port want increased throughput.
Kidman may decide either Esperance or Perth with Perth being more likely in Marks view.

We talked about the Bald Hill product.
I asked how you rate it to peers and read that its the best product coming out of Australia besides Greenbushes?
Greenbushes may have higher grades but its very likely the Bald Hill product is better from a deleterious elements perspective. I asked what the converters are looking for and mentioned that GXY are still fetching good prices despite "poor" product, iron and mica ~2% and that (all?) the other players still not even releasing full product specs.
Ideally iron content below 1% (which nobody is really producing in Australia yet apart from us <0.5% and maybe GB). Bald Hill produces a coarse product which along with the above sets it apart from peers including GB.
This makes it easier for shipping and handling. I asked is that the only benefit and Mark said its beneficial in the conversion/kiln process. They need to supress the dust in the conversion process which fines product produces but its not insurmountable. Mark mentioned that the potassium levels are becoming relevant for converters, why I didnt ask but should have. At this point I asked have we been sending samples to parties for future off takes and he said yes. I asked if we send them out with a view to future sales or if they are requested and Mark said parties request them.

This leads us on to future spodumene off takes.
Mark said availability is becoming tight again.
He said that spodumene prices have been resilient despite the drop in Carbonate pricing.
Hydroxide is where its at in regards to demand going forward which we all know already.
PLS is wrapped up, Wodgina now the same and Ganfengs recent deal with that other mob leaves slim pickings from producers for others. It was said there Seems to be a bit of a resurgence in demand recently.
In regards to Tawana, Burwill have first dibs for expanded production.
I asked Mark would it not be better to diversify and get some Koreans/Japanese/others onboard and he agreed.
I didnt ask for a timeline for future spodumene off take (should have) but based on Marks comments, I dont think it will be hard to find a home for it. In addition to that Mark also mentioned how hard the Chinese are in regards to negotiations. They drive a really hard deal he chuckled.


Ta offtake will be coming soon I asked?
Again with Starck alot of back and forth and hoping to get a deal done there soon.
Prices have eased here lately but I never asked for a price and not sure I would have got one anyway.
As with BH spodumene, its a premium product.
Have had multiple parties engaged.
Customers of Starck have been going to the source and engaging directly with Taw for product (but seems like Stark are in the box seat). I asked will it all go to one party and he said very likely.
I asked what are we looking at from an expanded production point of view here and Mark said towards 400k pound p.a is a fair estimate. If we take a very achievable $A100 ($US70) that gives $A40M just from Ta at BH but I expect prices currently higher than that. If you want to look at it another way it will give more credits in regards to all in costs of production than previously thought.

I asked how progress is going with Burwill in China. He said its going good.
They have two trains and the hydroxide one is ???……going well, ramping up……my memory fails me here as to what he said. Mark will be getting a progress report on Wednesday he said but I cant remember if this was in regards to converter progress in China or tantalum off takes.

That brings us to costs of production which has been a bug bearer for me for a while with little guidance since FS.
Mark mentioned in the Q+A that we are looking to get down to around $US400 figure.
I pressed him on this afterwards and mentioned that in the FS we were looking at $A400 give or take is that not happening now? He said its definitely not out of the realms of possibilities and that alot of it depends on the timing and the mining plan. He mentioned that it could be as low as $250, not sure if he meant USD here, probably, as has been alluded to in some broker reports previously. For now my internal target is a $US400 p/t sometime next year but I expect in usual Calderwood fashion this will be conservative over time. He also said the company hopes to release some official guidance on this over the coming months.

In the Q+A Mark mentioned that costs should start reducing from around Jan/Feb.
Which I expect means we will start hitting the better ores from around then and Maybe less strip.
When talking to him he mentioned about 15kt shipments but I can't give anymore context on this.
From what I gathered this is the current expanded production >200tph along with hitting the good ore from early next year. We should expect to see improvements throughout 2019 ——> costs dropping, Spod+Ta production increasing 1h19 and then that will lead into the fines implementation/ramp up and those things happening all over again into 2H19.

Final designs for fines has been implemented and items being ordered.
He said that should be going well by mid next year and I asked will we be starting to ramp that up by mid next year
but it sounded more like it will be cranking by mid next year and completed maybe March/April. Expanded production was mentioned in high 200's by Mark in the Q+A. Come on Mark lets crack that 300 like I have been calling for months.

There was another very nice chap there for some of the chat I was having with Mark.
He seemed more interested in talking about iron ore in Geraldton and Zinc somewhere else and train derailments than Taw. This might have been a positive for Mark, breaking up the more serious lines of questioning I was looking towards but Unfortunately from my perspective That bited into the time I had pressing more things with Mark as everyone else had already left and it was just us three and two other Tawana staff left in the room at that point. In hindsight I should have kept going with the questions and given the chance again thats what I would have done, I am a shareholder and entitled to do that but instead I went to the pub and got plastered. Win Win you could say for everyone.