Ann: FYI Secures A$80M Funding, Delivers DFS & Upgrades Reserves, page-86

I had a look at the DFS and I think with these kaolin projects the differences in mineralogy, geology, grade, impurities between the deposits, that appear quite subtle, are actually rather important.

I am somewhat surprised by the OPEX being so low, but I guess that's a good thing. The CAPEX being lower than ATC, I guess that is also up for qualification as the quotations get tested during procurement. I have seen a lot of the blow-outs in project CAPEX on other mines being down to a difference between a supplier putting out a quote on a generic basis, with the sales guys driving the process, which then inflates as the real engineering is progressed, and real costs begin to get involved.

Another issue is that the DFS can mean whatever you take it to mean, there's no JORC for engineers. This study is definitive, but that's a point in time as further technical work continues and plant and equipment designs get updated, scope creepcan affect the final numbers.

But in this regard, ATC went first, into quite unknown territory, and lessons learned there, available via the grape vine, no doubt may save FYI some heartache. Or not, I guess, and we might see CAPEX creep up.

NPV is also time dependant. It's a measure of the value of $189M chucked in the pot today. If you chuck it in the poit in 12 months time after a protracted qualification, FEED and offtaking process, it's not applicable.

One risk which no one will talk about is the actual price of the 4N HPA under the offtake. The reality is, unless there is somehow suddenly a magic quotation of 4N HPA on the LME, no public, certain pricing information is available. The market prices quoted come from market research firms - one or two of them only - and all rely on the same limited pool of information. But you have to have something, so if everyone agrees that you analyse a 4N HPA project on the basis of US$24,000/t then, well, that's what you do.

In reality, offtakers know that paying $24,000 means FYI pockets $18,000 of that. The consumer knows what they can promise, to get the project funded, anf now hold a lot of power over FYI to lock them in to a mechanism whereby they pay less than US$24,000, in order to get it funded. Confidentially, of course.

The NPV, assessed on limited price information, will not by US$500M if the realised price is lower than US$24,000/t. Unless there's some kind of certainty in price, the real question about whether FYI is better than ATC might not be so much about DFS numbers, but ability to get funding, get offtakes, and realise high prices long enough to pay the mine off. Won't know that for several years.

Still, this is a solid set of numbers. The Gem con note is an innovative way of dealing with the equity portion of the funding, but if FYI's share price doesn't go up, it's cancerous to current holders. It's a field of dreams mechanism; raise the share price, and it will work and GEM will end up with 30% of the share capital. If that doesn't happen, they could end up with 70%. The reality will be somewhere in between unless some serious money comes out of the woodwork to fund it. Which if you look at equity markets, is somewhat unlikely.