Ann: HPMSM Feasibility Study Update, page-22

It will be interesting to see what financing package is established.

Some of the past slides have noted debt financing but with the lack of profitability from the Manganese ore exports, I'm not sure that's a goer at present (at least as bank debt. OEM/battery supplier debt aka Ford/LTR may be a possibility).

There's the large capital raise. With the current share price - eeek.

The third one option that I find quite interesting is the possibility of combining financing and off-takes. There's a lot of ways this could be configured but if battery makers/OEM's want price security one obvious pathway is to lower the sale price for an upfront capital contribution. There is enough margin in the HPMSM scoping study so that a good margin could remain for a big first plant while securing the capital necessary for the plant. The spreadsheet below is a simplified version of a 100kt operation and explores this option to the max (fully financing the project). Scoping study revenue is $1,950/t*100kt = $195m/yr. Costs are $558/t*100kt = $56m/yr. Capital is $149.9m + $85.6m. This generates a net margin of $139m/yr (the scoping study had some other revenues from fertilizer grade so boosted cash flow to $141m/yr).

Lets assume customers were prepared to secure supply at the scoping study price of $1,950/t. Lets further assume E25 negotiated a $500/t fixed price discount for 10 years and allowed this to be discounted by the OEM/Battery maker at 15% pa in determining the upfront payment. This would present value to $251m. (If the OEM/Battery maker needed to, they could borrow the money and come out ahead). Now you are looking at a $15.4m positive contribution towards working capital after funding capital costs. The values would clearly change if a long-term contract price was below $1,950, if monthly discounting was done, with different discount rates and different levels of discount but there is sufficient potential margin that many workable combinations exist where limited to no upfront cost exists for E25 shareholders.

If E25 can swing this (or something even remotely close), E25 doesn't have a large capital raise coming but starts having something approaching, if not over A$100m/yr of pre-tax earnings. With only 153m shares on issue you are looking at a share price many multiples of the current one.

Then there is the multi-plant strategy. Assuming the same customers want more later this decade or another OEM/Battery maker wanted 50kt or 100kt, the same deal could be done again. If the build is after 2025, profits from the first plant could be used. Butcherbird is big enough to supply the ore for 500kt/yr of HPMSM.

Now I'm not really believing that they can swing a deal like this, but what if they did?

And given what's happened to the price of Lithium when there was a shortage, a 10-year fixed price for inflation reduction act compliant HPMSM would seem a deal that OEM's/battery makers could sell to their board for signoff. They may however decide to take a 10 to 19.9% stake in E25 knowing that if a deal like this was signed, the share price is only going one direction. The cash from the equity stake could fund the DMS.