Repost from above without the error.Hi Stirer.The IIR report...

Repost from above without the error.

Hi Stirer.

The IIR report details the OPEX is going to be around US$420 per tonne, I think this will blowout higher than SYR's opex which only needs to move 25-30% of the material. the current graphite prices as detailed in the IIR report are only US$1100 per tonne.

Lets just use their higher numbers as this based on the life of the project, the OPEX is US$420 and sale price of US$1300 per tonne, (profit per tonne US$880) x 40k tpa production = Total margin for the annual production is US$35mil. less tax and FCI (approximately 50%) = US$13.5mil free cash margin or $26mil AUD. (only 1 mil off IIR $25mil of freecash)

If you use the current graphite prices when working out the repayments,
The free cash margin based on the OPEX US$420 per tonne and current graphite price ofUS$1100 provides only US$27mil in revenues based on the 40ktpa production rate. Interest and repayments of loans are prior to tax, yet the profit margin still requires everything to work out as WKT intends to cover the debt and the interest.

We all know after commissioning there is a long period to ramp up recovery, where SYR is still only seeing 70-80% of the contained graphite recovered, if WKT sees this fate the production rate will drop, which will increase the OPEX and reduce the annual revenues by US$8mil.

If WKT also suffers flake size loss, the potential revenues in year one will be significant lower.

I can fully understand why IIR included the downside valuation for a 20% increase in OPEX (US$504 per tonne) and the lower basket price of only US$750 per tonne, both of these are highly likely to occur during the first few years of production. you only need to look at other companies feasibility studies to see their freecash margins have been significantly discounted when they get into commercial production.