Ann: BFS supports strong commercial case for developing Sconi, page-201

Thanks for a reasonable post. I agree with some of your justifications but not others, and not with your overall sentiment.

Agree, weaker initial BFS than hoped but the signals were there (delays etc.). That said, it provides a lot of clarity regarding capex and operating cost, and despite the IRR being on the low side, this can be offset where there is stronger certainty.

I have mentioned a few times that the best thing SKI could provide is a metal price underwrite in their off-take. I wonder, given where metal prices currently are, whether this will be considered. To me, if I were in SKI's shoes and given how embedded nickel and cobalt is to its growing battery strategy, I would be heavily vested in seeing this mine hit production. This means helping out the financiers by de-risking the project. One way to do so would be to assist-finance using pre-sales, but that requires a lot of up-front capital (even by SKI's measures). Hence, perhaps a better way to do so would be to provide a price underwrite, and maybe as a quid-pro-quo Auz could offer a discount to metal prices should they reach a premium to our investment case.

I don't quite understand your FX point. The capex and revenues (and ideally, any debt) will be denominated in USD so there is a natural partial-hedge there. The only 'at risk' component should be Opex, paid in local AUD (which is approx. 40% of revenues, noting the EBITDA margin % above 50%) and equity (but that depends on an individual shareholder's local currency). Overall I don't think FX assumptions are a game-changer.

Overarching this though is my view that, assumed metal prices aside (and there is plenty of research to argue the assumed prices are reasonable), this is an ok base case BFS. Provided JORC results are aligned to the snippets of assays we've seen, I would expect the optimised BFS to improve the returns significantly, via lower C1 costs (due to better mining mix), longer LoM, etc.

Overall, relatively neutral feeling and feel the share price reacted appropriately. However I do see this as a box being ticked towards the more important milestones of SKI buy-in (a 15% IRR at 8% discount is good in Sth Korea given its low interest rates and high EV multiples) and eventually finance, which IMO will trigger the next large and sustained SP improvements.