Ann: March 2023 Quarterly Activities Report and Appendix 5B, page-10

Max1997

I too am happy to hold, but having passed the fourscore and two age, I want to exit WAK while I am still with the quick (those still alive). I'll think about an exit in 2024, so I want to see more positive news aaaaby 31/12/2023, or soon thereafter.

Nameplate capacity slated for EOY 2023

Management has said WAK would be at nameplate capacity et the end of 2023, and repeated that recently, so to expect it to be there now is asking too much, IMO.

Sales team and customer finickiness

WAK is unlike a business that has a sales team who have pep talks Monday mornings. WAK has distributors who buy what their customers want, and to avoid double handling, Distributors direct that delivery should be made to end users at times that suit them. A small distributor like Choko, does hold stock, and distribute it to small users.

WAK is planning to have ceramics experts in East Asia to horn in on a market that previously imported from Russia and Ukraine. The expertise of these guys to resolve customers' and would-be customers' technical issues. That is more important in the East Asian kaolin market than their glibness as hucksters.

A large end user could take months to check out the suitability of a product from a new supplier, because kaolin is often used as feedstock to blends, and blending is an optimising exercise (x% of X may not be white enough, y% of Y compensates for that, but the total viscosity is too high, Z% of Z solves the viscosity problem, but it has too much titanium dioxide in it, and so on until the blend is optimal). The other side of this is that once a product is deemed suitable, and the supplier reliable, the end user becomes very sticky, so repeat business occurs, subject to stringent specifications. The less discriminating market with a higher tolerance of contaminants and variation buy cheap kaolin mined in China and nearby countries. Freight costs preclude WAK from competing with them.

On the finickiness of end users, I recently read the lament of a small ceramics-business owner in the USA. He said the fibreglass sector had made it difficult for ceramics companies to source product, and the quality had dropped to the point that they now test every bag, and the rejected bags were significant enough to be a problem. A large ceramics business in East Asia would be very careful to find the right supplier who can consistently meet a stringent specification. They would take their time to asses the reliability of WAK.

Finding employees

I am concerned that WAK may not easily find local employees. Wickepin has a population of about 300 people, Andrew said that WAK employed 17 locals, and more are being sought for a second shift. Yet more must be found for a third shift to run the plant at full capacity. That's only for Stage 1, then we have Stage 2 to happen in 2024. I was interested to read that when the Cadam kaolin business started in Brazil, the entrepreneur behind the enterprise, Daniel Ludwig, had to build villages, roads and a power station. How much WAK would need to do to be a million-tonnes-a-year business with hundreds of employees is a longer-term concern.