@Bali Hai yes sometimes there are simple explanations for why...

@Bali Hai yes sometimes there are simple explanations for why things are the way they are, and it's not always an indications of project or business model weakness as has been implied in some of the preceding posts relating to delays and off take partners.

- As another example, flatness around the fact that the recently announced off take partners were Chinese based rather than what some would consider more favourable partners from the US or Europe entirely overlooks the fact that the product that Kimberley Mineral Sands (KMS) is selling in those agreements is zircon concentrate and not zircon or premium zircon. Customers for zircon concentrate are not the same as the customers that want zircon and for reasons outlined below concentrate customers are not located in first world countries.

Zircon concentrate is sought by those in the business of profiting from the process of refining concentrate into zircon, whereas refined zircon is sought by customers that are not interested in making money through being a refiner but rather require zircon as an ingredient in the products they manufacture such as paint or ceramics.

The main reason that an industry for refining zircon concentrate has emerged is because there is a cost differential for refining zircon concentrate in some countries compared to the cost of refining it in Australia or other first world countries. This differential arises primarily because most of the concentrate refiners (other than those doing so as part of a vertically integrated mineral sands operation) are located in jurisdictions with lower operating costs (primarily power, equipment and labour) such as China.

In short this means that expecting zircon concentrate to be bought by customers in the US or Europe is like expecting a meat supplier to sell to vegetarian customers, and being disappointed when this doesn't happen.

- Another factor to consider is that these off take agreements are not entirely distinct from the already existing off-takes that SFX had signed previously. As a result it makes sense that the existing off-take partners were given priority over seeking new off-take partners. This means that not that much has changed from what was previously in place and known to the market, ie primarily Chinese based customers, and so a sudden bout of pessimism seems overkill.

- And finally, although we can't foresee what may happen in an escalating trade 'war', there is nonetheless a significant difference in a country such as China restricting imports of products which are contractually bound by long term contracts as opposed to the banning of imports which are not contractually bound.