Ann: Director Resignation, page-31

Don't think he was chasing anything, looked more like running...seen leaving HVY offices morning the SS dropped before investors looked into SS product price assumptions


Garnet's more opaque market than the ilmenite, but there are laws of commerce that contradict HVY's SS high garnet prices while support pricing evidence from other players. This table to summarise what I found on pricing.


My first issue is the assumption Burwell's price quote posted here by @Cookiemycat is some 'pass-through' favour with HVY receiving the full quoted price. Garnet consumption is all about the retail distribution network imo, there is simply no other way for bulk mines to market and supply a multitude of end users all over the globe. GMA has heaps of sales offices around the globe dealing with heaps of garnet users, which is why they can buy Tormins garnet for low prices (Tormin has no real alternative sales outlet) and make more money on-selling than bothering to make more garnet themselves. Likewise, Burwells would be glad to see competition for GMA come into the market and probably accepted a smaller on-seller mark-up to support RDG competition, but I very much doubt they do it for free... extra retail carrying and selling costs aside.


RDG is not selling 130ktpa of garnet in 25kg bags that's for sure. I averaged the 1t bulka bag price as a volume mid-point between the 4 product specs and came up with virtually the same average price SS used (A$728/t from RHS table). Assume 20% Burwell mark-up (minimum imo for RDG to muscle into the market) RDG would be getting USD$400/t avg wholesale price from Burwells. Still, GMA have Australian market stitched up and most of RDG (and HVY's) product would have to be exported in large bags (more expensive shipping counteracts some of higher price for bagged product).

From Nodric Mining's Engebo's DFS the following import pricing (assume China and/or US?) table to 2021 the CIF price (ie landed which would add ~$50t for shipping and logistics to imported compared to FOB depending on shipping rates etc) for bulk unbagged garnet topping out at US$300/t. FOB price for Engebo and Port Gregory therefore ~US$250/t....


Tormin only getting $105/t FOB by my calculation from Jun 22 Half Yearly, no wonder they want to re-write the contract and move up the value chain somewhat. Nordic Mining's Engebo DFS 2021 assumed US$230/t, more than Tormin probably because they produce a clean Two-Fraction garnet just like HVY. The only difference between Enbebo and HVY besides specific garnet sizing and angularity (both Almandine) is that HVY wants to bag while Engebo has chosen to just ship the fine and coarse garnet in bulk.





HVY reckon that an $14M capex increase to bag their garnet will add 44% to the NPV ($176M to $253M)... which is an unbelievably good return on investment. If lifting revenue to costs was as easy as adding a cheap bagging plant then why doesn;t everyone do it? The obvious answer is they don;t all have or plan to muscle into the retail distribution network thus have to sell garnet in bulk to clear off-take requirements, letting distributor-importers do the sizing, bagging and make the extra mark-up. Even by an Aug'22 release by Nordic Mining had still not closed their first 50kt off-take with US distributor Bartons which is still under negotiation. After Bartons they still have another 130ktpa of garnet off-take to lock in before the end of next year... hardly bowled over with deals.

Came across STA's 2020 Tarji minerals sand project SS which they raised $50M earlier in the year to help develop while doing a SFX comp. Don;t worry, doubt the project will hit the market for a very long time, but again STA assumed 75% of TZMi $200/t bulk unsorted garnet price to account for processing a mixed concentrate. Sure the market for garnet has been hot lie everything else 2021-22 but all the evidence i see says it the market pricing for Two-Fraction (fine-coarse) bulk garnet exports is around US$250 FOB 2022 real.

We know that between RDG who haven;t hit commercial production yet, Engebo who are another year out and Westland in NZ there is another ~350ktpa of 30% more garnet committed to the market soon, with potential for more from those three expanding production down the track and other possible entrants. Adding HVY 150ktpa would make jump the industry supply by 45%... Demand may be growing but I doubt it is growing that much into a global recession to drive prices higher in the medium term. Longer term who knows, certainly there is underlying deand growth. As for HVY, if we drop the SS garnet price by 50% from US$510 to US$255 NPV goes way negative. If we assume some bagged sales and only drop the average price by 35% to US$375/t, NPV drops to A$53M as per SS report. That could well be zero after a PFS updates more accurate capex and opex figures.

HVY has a cheap MC but it looks well justified imo. HC investors will make their own minds up on the SS and garnet market outlook etc. Wouldn't surprise me to see HVY still <$10M MC in three years' time still crawling through studies and cheap exploration programs much like another min sand explorer i know in Mozambique (where life stylers go to play). Grinding lower and going nowhere or some exploration success and maybe great return from relatively safe low MC.. who knows, but I'm moving on like Nic Matich...

GLTAH