...Only time will tell...It looks like today's announcement "
Appointment of Debt Funding Advisor" answers my leading question. At least our new "boutique" funding advisors ICA claim to have advised Illuka on funding for Eneabba phase 3, it would be nice if they could secure a $1.25B non-recourse government loan for ATR also! I think ATR actually need some marketing support to get the word out on Donald to prospective investors, our management doesn't even appear to have produced a glitzy chartpack of the DFS highlights to flog around to broker and merchant bank investor days.
It's really disappointing to see the ATR share price dropping to 18 month lows today and losing 25% post the Donald DFS release, particularly since VHM has seen their SP go up by 12% since the DFS release for their competing WIM project at Goschen, a far inferior project IM(and others better informed)HO.
I've reviewed the two DFS's to some detail and there some big differences I've noticed;
Donald's Phase 1 product pricing assumptions (Adamas for RE's, TZMI for HMC, same as Goschen) are based on CIF (basically delivered to the customers door), USA for the REEC and China for the HMC products, and there is a separate line item in 'Table 9 - Average annual operating expenditure' that details 'Transport - port to customer' of A$28.7m p/a; the second largest annual cost after 'Mining costs' and 17.2% of annual average OPEX. Add the 'Transport - mine site to port' (eq. to FOB) costing of A$13.3m and the total annual allowance for Donald product transport is A$42m p/a, or 25.2% of OPEX.
Goschen DFS doesn't state if their product pricing assumptions are based on CIF, FOB or ex mine, but they they do state that they allowed A$11.7m p/a for 'Product Transport & Logistics' for Phase 1, or 8% of annual OPEX...even allowing for greater product volumes from Donald it's difficult to see how their product transport expense can amount to 25%+ of OPEX when Goschen is only 8%... one of them must be wrong.
The uplift in Goschen DFS headline profitability from a pre tax IRR of 33% and NPV of A$700m for phase 1 (the REEC product) to an IRR of 44% and NPV of A$1.525B for phase 1A is based on the production of a MREC product via a hydromet circuit, costed at A$124m in incremental CAPEX over phase 1.
Despite including phase 1A financial metrices in the DFS, the CAPEX costing for the hydromet circuit has not been costed to a typical DFS level standard of AACE Class 2 (-15% to +20%) accuracy range, but to a Class 5 range (-50% to + 100%)...so the final cost of the hydromet circuit could be anywhere between A$62m - A$248m. To allow for this costing range they have included a contingency of A$8.7m or 7.5%...
Same thing for the phase 1A incremental OPEX costing of $57.6m, a Class 5 range of -50% to +100% gives an annual OPEX cost range of anywhere between A$28.3m to A$113.4m...
As AACE Class 5 estimates are not considered sufficiently accurate for a scoping study or PFS I don't believe they should have been included in the Goschen DFS, and they call into question the claimed IRR of 44% and NPV of A$1.5B for Goschen phase 1A.
Finally (cos I gotta get to bed...) have a look at the radiation and material handling procedures specified for the REEC/REMC product. Donald has a automated REEC packing facility in which the REEC is packed into 450 kg metal drums, washed, sealed, labeled as Class 7 Radioactive Material and then packed into shipping containers for delivery via truck to port. Goschen Phase 1 has a picture of a truck labeled REMC...more work required methinks!
