Ann: Coburn DFS Delivers Strong Financial Returns, page-9

Well the headline numbers look great all around but obviously nobody believes it. A few buying the rumour were happily sold into at 10c leading up to DFS release, surprising given the huge improvement in recoveries foretold of a big improvement to the project's economics.

I understand that min sands is a shadowy corner of the market few bother to look at but after one or two days at least would have thought some liked what they saw, digested and were looking to buy? A web site call **promotion blocked** gives summaries to every feasibility update or decent drilling result but crickets for STA. Maybe it just remains an undiscovered gem, maybe it is still a turd, I can't really explain the utter lack of any buying what so ever after the long touted and much awaited DFS update? Tough game this.

I did dig a little deeper into the numbers as is my want, and there is one variable I simply cannot justify. The price of Zr Concentrate has a LOM average price of US$871/t with 28% Zr and 11% TiO2. The LOM price of premium Zircon con is US$1480/t with 66% Zr. Now if you pay proportionally for the Zr in the 'dirty con' we get 28/66*1480= $628/t. If we assume the 11% TiO2 in the Zr Con is all high value HiTi90 (which of course it's not) then at LOM US$1014/t HiTi90 we get 11/90+1014=$124/t. Adding the two together we get US$753/t of VHM in the Zr Con. How can the DFS Zr Con price avg 15% more than the sum of it's 'premium' parts??

Not just does the Zr Con price equal more than the sum of it's parts, but a dirty con should attract a significant discount because, firstly it requires a customer who is interested in undertaking further separation of it's valuable constituents from the concentrate, which secondly has a lower recovery rate by definition because this is the Zr in concentrate which would separate in the dry plant first time (ie there will be unavoidable VHM losses to the tailings even after further processing).

For example, SFX Thunderbird DFS had Premium Zr (66% Zr) priced at US$1380 but a Zr Concentrate product containing 44% Zr (almost twice that of the Coburn Zr Con) priced at US$676, which also included 22% TiO2 (yes, twice that of Coburn). Simply put, I have seen other min sand DFS with almost twice the contained Zr and TiO2 VHM in the Zr Con being priced at 50% discount to the Premium Zr price. This heavy discount makes sense because a dirty mixed con cannot possibly be priced the same as clean, 'premium' products and the extra processing costs and losses associated with a mixed con should attract a significant discount.

Frankly the Coburn Zr Con with less than half the contained Zr and only 11% TiO2 should be priced at maybe one third that of the Premium Zr price. That is, the Coburn Zr Con should be more like US$500/t than US$871/t. Zr Con, a drop of 10% on the total LOM revenue for the project. That would drop the NPV by $150M from $550M to $400M according to the Sensitivity Analysis....

What have I missed?