Part 2, hope my notes help. Where unclear I advise whoever is going to the next meeting clarify any grey points.
In respect of the DP NE stated the off repeated line that they are just waiting on finding, and due to the permitting, land acquisitions and testing that ALK is well ahead of other companies.
He explained the bigger the project the better the returns and profit, the current issue is to ensure that they have off takes for the total output.
There are lots of customers to discuss the offtakes with, and a need to understand each customer’s requirements.
All the DP products are now in the money for the first time in years, previously when giving presentations there was lots of business, which had previously said they were going out of business, and in fact Molycorp did. Now these businesses are making profits.
ALK and most market observers believe the current price increases are a rebalance to a sustainable market price. The growth of electric cars in China is amazing when compared to the rest of the world.
It appears that by 2020 China will have to import RE magnets, the market demand for RE magnets is growing at a compound rate, Siemens for example has at least $18 billion Euro order book.
The largest issue for electric cars is the range, and the lightweight of RE magnets etc help to increase the range and are a necessary component of electric car motors.
There is a need to build a new Lynas facility each year just to keep up with the growth.
ALK at full production will still only produce ¼ of the Lynas output for RE magnets.
In respect to Zirconium, ALK is targeting Zirconium oxychloride and zirconium basic carbonate as well as advanced ceramics.
The Chinese are currently dealing with the massive environmental issues with zirconium production, including dealing with the uranium and thorium wastes.
ALK has a binding agreement with Treibacher, which feeds into the need for increasing demand for lightweight steel. It is currently worth 10% of the project revenue of the DP.
Finally most analysts current proscribe no value to the hafnium output, but in the next few weeks as a result of research work at ANSTO, there will be announcements that will change the markets perception.
There are new deals in progress but I did not catch what these related to.
NE stated that financiers want to see off takes, but it is not possible to force the customers to sign. Alk can only discuss until as NE stated that increased market pain of falling supply forces the customer to sign.
It was stated that the next Hafnium announcement would happen in the next month. ALK has been sending samples of the refined hafnium to many labs for detailed analysis. It appears that this is also happening for advance zirconium products. There was mention of a new business case in Feb next year, regarding the BFS modular work.
By Easter, there is expected to further regional exploration and in Northern Molong.
In answer to questions the following was discussed, it appears the El Paso resource is unlike the Tomingley project having most of the resources on the left side of the Newell highway.
The reason the share price is considered undervalued is event at ½ plant stage the financials with revenue of around $300m should give a PE far greater than the current price.
The DP is the best resource in the world that is ready for development. However, investment funds ae only happy to invest once the project is up and running. The is a lack of understanding of the markets, but as a paradigm shift to renewable from carbon based is occurring it is only a matter of time before this changes.
It was again pointed out hat the total output for RE magnets is only 1/5 of the Siemens wind turbine market or equivalent to the total Black and Decker requirements in the US.
ALK has been approached previously for some agreements but has rejected these as unsuitable as it did not meet the profit requirements
In the current market they are now been approached for contracts for zirconium products etc.
A 10-year shareholder highlighted the slipping timelines for the DP and asked why these timelines are presented if they cannot be met. IC stated that it was not an attempt to mislead but there is a need to provide projections for the purpose of financiers. He also added that this is the closest we have been in many years due to the current perfect market of rising needs and lower supply.
It was stated that the pain of customers needing the product and the approaching train wreck of limited supply will result is off takes and funding in the not to distant future.
Once funding is committed it will take 2 ½ years to production.
The planned funding model has not changed, e.g. JV, credit and export banks.
There have been multiple discussions with export banks in Japan, S Korea and Germany, but there is a need for off takes.
ALK is currently going to the boards of big companies discussing the supply chain and the coming shortages.
Finally IG stated he owned 21% of ALK, and is in it for the long term and want to have a dividend paying investment. He described how hard it is to discuss with what he called Gorilla companies, but stated many discussions are currently going on. There is already a shortage of products It was mentioned in passing that ALK will entertain any offers for their projects if the price was right but IG in particular would only accept a very good offer for the DP.
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