Alcoa will be committing US$240m to phases 1, 2 and 3. And yes, they will need to be confident on the market for the product before they proceed with FID. But that is a far cry from the sort of offtake agreement that FYI would have needed without Alcoa.
If FYI had to do their own funding, then the funding would need to have been supported by a long term (maybe 25 years), cast iron, offtake agreement from a bankable grade customer. The funders would need to know that they will get their money back plus the return and would need to rely on the offtake agreement to supply the funds for that. It would be a heavy commitment for the offtaker, who would know that FYI needed them and so would squeeze the terms, hard. The overall outcome may have been less favourable than the Alcoa deal. I'm sure that Roly would have explored this in discussions with potential customers.
Now with the Alcoa deal, Alcoa just need to know that they can justify the capex of US$240m plus say US$20m costings of internal resources applied to the project. So say US$260m all up.
Based on sales of US$24k per tonne and production costs of less than US$7k per tonne for 9,000 tons pa, Alcoa's revenue share would be about US$99m per year. So a payback period of less than 3 years for all of their capex costs. So they just need to ensure that there is a reliable, sufficient market for that. Perhaps more to justify the FID decision, but you get where I'm going.
They would have assessed the market already as part of their DD, and the Alcoa announcement said "the HPA market, which is expected to have a compounded annual growth rate of nearly 20 percent to 2028". So they have probably done much of that work already. I imagine that Alcoa reassurance that there is at least a sufficient market demand at the right price, won't be that hard.
FYI Price at posting:
53.0¢ Sentiment: Hold Disclosure: Held
