How long will it take to see the big picture and put in place...

How long will it take to see the big picture and put in place the obvious, pride defeating solution in place?

• Simple answer - Spend the elements of the A$13.4m of expansion capital that doubled production capacity on the processing element where the blockage exists so processing at over 365kt+ can be achived.
• E25's answer - Lose $10's of millions in margins as you try to get the equipment to work at designed throughput.

E25 has a comparatively simple operation, Dig, wash, sort, truck to port, ship & receive money to fund the operations. At present they have a problem that in the wash / sort area of the business is not achieving design capacity (name plate). When faced with a process blockage you initially look to refine processes to fix it, but sometimes you just need to add capacity so that the rest of the business operates normally.

How long does E25 try to redefine processes before they simply add capacity?

• If they added capacity to this step, 365kt and higher throughput would appear to be achievable, it might even be 500-600kt
• The capex to add capacity to just this area should be $13.4m or less, because that was the estimated capex to double/tripple capacity
• This capex would be required to push beyond 365kt anyway
• Given the lost revenue from reduced throughput, the payback on investing this $13m is measured in months, not years.
• E25 has the cash to implement the doubling capex intiative now
• The focus needs to be what is required to get the $75m revenue, not how much is the $11.5m / $4.7m processing cost.

If processing was the highest cost element in the business structure, adding capacity for the same or less than expected capacity increase would destory the business model, but processing was only ever a modest element of the cost structure. Increasing capacity in the area of the processing cost structure that doesn't work properly would increase costs, to perhaps $20m. That would reduce profitabilty, but not destroy the $10's of millions of market cap that has come from the current solution.

The spreadsheet below takes a September 2020 presentation slide that had a cost breakdown of US$2.80/dmtu. Figures are then converted to AUD at 0.70 and multiplied by 365 to get an annual cost. Annualised revenue and cost budgets are established.

• Shipping is included at $30/t not the lower figures that should come from a Baltic Dry in the 2000's or the higher costs that came in the HY
• Revenue is only included at only US$6/dmtu, not the most recent US$7.86/dmtu spot
• While smelter credits assist the profit, they are not essential to delivering it. The model could deliver profits without them