We can agree that the transport cost from minesite to processing...

We can agree that the transport cost from minesite to processing site is going to be higher for AVL than if they were exporting V205 directly from minesite, an obvious point under this new change in focus of AVL. Obviously the offsets are the key, which is what I have been focussing on. We obviously disagree on a few aspects so I will put my thoughts down and we can agree to disagree after that, so I'll answer your various posts with this one and leave it at that.

Lets start with the role of the ERA from our lastinteraction.The ERA regulates and setsaccess charges to pipelines that come under the Gas Access Act 1998, and asamended in 2009.This Act was enacted aspart of the sales process for the Dampier to Bunbury Pipeline back in the 1990s,and now covers the Dampier to Bunbury Pipeline, the Goldfields Gas Pipeline andthe Midwest Gas Pipeline.

https://www.slp.wa.gov.au/statutes/swans.nsf/(DownloadFiles)/Gas+Pipelines+Access+(Western+Australia)+Act+1998.pdf/$file/Gas+Pipelines+Access+(Western+Australia)+Act+1998.pdf

The current access charge to the pipeline for those purchasing gas from a producer or wholesaler (i.e. not purchasing from AGIG) for 2019 on the Dampier to BunburyPipeline is $1.33 per GJ.

https://www.erawa.com.au/cproot/19877/2/Dampier%20to%20Bunbury%20Natural%20Gas%20Pipeline%20-%20%20Annual%20Reference%20Tariff%20Variation%20-%201%20January%202019_Redacted.pdf

So what does that mean.Well industrial customers like Alcoa and Synergy and a host of otherscan buy gas from a gas producer directly (like Woodside) and/or a gaswholesaler and move that gas down the Dampier to Bunbury Pipeline paying onlyAGIG the $1,33 per GJ access tariff.

Now AGIG cannot force anyone to buy gas from itself as ameans to access the pipeline – this is one point I disagree with you in one of your previous posts – because that isdeemed anticompetitive and hence why there are rules in place. And btw the closest pipeline isn't AGIG's anyway - see below

In terms of the ERA’s role insetting wholesale gas prices and retail prices for small users, against thepipeline access charge, foravoidance of doubt the regulated gas prices are only for small users and householdswhose total gas consumption per year is not more than 1 TJ of gas per year- https://www.canstarblue.com.au/gas/natural-gas-suppliers-wa/.

That covers you and I (as households)and a lot of small business , but well AVL’s gas consumption based on the December 2018 PFS –page 43 Post #: 36902221– is 6 TJ per day meaning AVLs cost of gas wholesale/retail price is not regulated by the ERA (or anyone apart from the $1.33 per GJ access charge which is regulated) because at 2190 TJof gas need per year it is well and truly above the 1 TJ threshold.So like Alcoa, AVL (and TMT) are going tohave to get access to gas from a producer or wholesaler and it doesn’t have tobe AGIG.All they will do is pay AGIGthe $1.33 per GJ pipeline tariff if they buy gas from a producer or anotherwholesaler for access to the pipeline.
ATCO is someone whoactually sells gas in that region btw as well, meaning AVL/TMT might buy theirgas from them if not directly from a gas producer.The fact of the matter given TMT/AVL gas needis above 1 TJ per year (infact theirs respectively is greater than 6TJ per day and most of that gas is used in the processing stage, not at the mining stage due to the energy need of conversion to V2O5)they are not protected by any regulations on wholesale and retail gas prices inWestern Australia.

https://www.aemc.gov.au/energy-rules/national-gas-rules/gas-scheme-register/wa-mid-west-and-south-west-gas-distribution

And there is evidence that those industries needing gas insufficient quantities may actually enter into contracts directly with a gasproducer – page 17 of http://www.erawa.com.au/cproot/8515/2/20100503%20D29252%20DBNGP%20-%20Submission%208%20-%20Annexure%205%20-%20Domgas%20Alliance%20WA%20State%20Energy%20Initiative%20-%20Domestic%20Gas%20Action%20Plan%20Submission%20to%20the%20SEI.pdf

But now lets get to the other issue.The closest pipeline to TMT (and AVL) if theyprocessed at minesite is actually the Midwest Pipeline located 160km away, a pipelineowned by the APA Group (not AGIG). And that pipeline is actually connected tothe Dampier to Bunbury Pipeline, and that Pipeline also has its own regulatedaccess tariff by the ERA.TMT (or AVL) would not connect into the Dampier to BunburyPipeline from minesite because it is further away than the Midwest Gas Pipeline,meaning a much higher capex cost to connect into AGIG’s Dampier to BunburyPipeline than the MidWest Pipeline.

https://www.apa.com.au/our-services/gas-transmission/west-coast-grid/mid-west-pipeline/

The Midwest gas pipeline is actually close to Mullewa andthere is also a railway by the way from Geraldton to Mullewa, so will beinteresting if that railway forms part of a strategy as well, but don’t thinkso meaning suspect road transport is what will be used by AVL for moving productbetween Geraldton and its processing site (noting trucking is the only optionto and from processing plant and minesite).Basically AVL’s processing is between Geraldton and Mullewa to put it mildly,and probably very very very close to APA’s Midwest Pipeline (which the map inthe Ann itself clearly shows).The mapbelow just shows the railway link Geraldton to Mullewa.



The other thing of interest is this pic in the latest presentation:

Just wondering what savings the exiting road, rail, waterand gas provide near Geraldton over a mine location option to offset the trucking cost ofmoving concentrate to the processing site as against a finished V205 product toport that is produced at minesite.And what does it mean forapprovals processes – timelines in particular, because again the latestpresentation still stipulates a 2021/22 production start date (which impliesthey are not foreshadowing timeline extensions from the previous proposedproduction start date, which more details are certainly required IMO on that approvals front).

And for avoidanceof doubt I certainly think VA has mismanaged this project IMO especiallythe continual delays in meeting project timelines (starting of with the delayin the PFS itself) to these continual changes in project specifications of the lastyear.So yes I for one am very weary of whathas been proposed but will see what the project economics stacks up to be.Certainly not planning to increase my stakehere at all until I see a way forward, and the start of that is an improvingvanadium price and meeting project timelines and delivering what you saidshould be delivered.

So to reiterate:

1.Yourstatement, in an earlier post, around the water pipeline was 50km from AVL and they were going tobuild one so why is gas pipelines a problem to the minesite now, as per yourearlier post on this thread is not relevant here.Well here goes why – firstly the gas pipelinewill need to be 160km if AVL processed at minesite, three times longer than thewater pipeline you described, and at theend of the day project feasibility is about reducing your capex and opex cost acrossthe project and it doesn’t matter where that is done as long as it makes commercialand financial sense.Been so so closerto the Midwest Pipeline and closer to Geraldton actually means the pipeline capexcost is substantially reduced as is the access charge btw because they will notbe paying an access charge all the way to mine site (read access charge notcost of gas).What the cost of gas iswill still need to be negotiated with a supplier or wholesaler and the pipelineaccess charges will need to be added to that.

2.The fact they are proposing that new processingsite, the next question is what other costs are reduced in capex and opexterms.Is water cheaper at that site,than processing at minesite?Ultimately when theDFS comes out that will provide the gauge.The Ann talks about lower costs so would like to know what these are.

3.Timelines – from the announcement I note thatthe proposed processing site land will cost about $2.8 million to acquire, andnot all the site will be used.Infactthey talk about some of the land potentially been returned as farming land foruse – appears too me the principle at work is akin to the buffer zone conceptof the Kwinana industrial estate btw, but been 50km out from Geraldton well Isuspect rezoning the land to industrial will not be difficult given Geraldtonwants jobs, full stop.But I suspect theapprovals will still take some time from an EIS process, and the thing thatgives me the craps is these AVL change in scopes mean that prior work is nowsimply a cost too and will be particularly annoyed if timeline to productionpushes out beyond the previously assumed 2021/22 start date.If they had scoped the project properly inthe first place these issues should not have arisen hence why in my own post Istated the December 2018 PFS is simply a redundant document now.

4.You simply focus on trucking costs.I am seeking to focus on the whole pictureincluding not been confused as to the journey ahead for AVL (and TMT) insecuring gas supply contracts btw (whether at producer or through a wholesaler)and to go back to an earlier post, the only thing both can know with anycertainty is the gas access tariffs they will pay (not the cost of gas but theuse of the existing gas pipelines) for the Dampier to Bunbury Pipeline andMidWest Gas Pipeline.The other costsfor buying the gas and any gas pipeline extension infrastructure costs is alsosomething they will need to factor in – and in terms of the MidWest GasPipeline I suspect the pipeline extensions will be done and operated by thepipeline owner, been APA Group not AGIG , but the funding most likely will bepaid by the miners.

5.Taking an example not vanadium but lithium, whatAVL is proposing is not unprecedented.Both Tianqi and Albermale,whoare the JV owners of Greenbushes are proposing to convert the spodumeneconcentrate to hydroxide at Kwinana and Kemerton respectively, and obviouslyclose to populated areas, which is a couple hundred kms from Greenbushes.A hydroxide train of 48,000 tpa that Tianqi isproposing at Kwinana is equivalent to 300,000 tonnes of 6% grade spodumeneinput that needs to come from the Greenbushes mine – i.e. 6.5 tonnes of 6%grade spodumene produces 1 tonne of hydroxide – why this, both Kwinana and Kemerton areright next to the Dampier to Bunbury Pipeline because gas is a significantinput to that production of hydroxide and other support infrastructure, i.e. note the concentrate they are transporting is 6.5 times the hydroxide they are producing all those km away, justlike gas is important in producing V205.So my point remains what are these benefits for AVL in having a highertransport cost for moving concentrate to be processed to V205 at another site.

disallowed/business/companies/world-s-biggest-lithium-plant-switched-on-south-of-perth-20190910-p52pvm.html

6.My preferred option (preference) was thatAVL/TMT work together and see where they could have shared infrastructure atminesite, but this is now superseded by AVL proposing to move processing off minesite.That is, AVL’s moves for processing at another siteremoves that option of sharing some costs like for the pipeline extension fromthe MidWest Pipeline to minesite, or at least provide the pipeline owner acommercial option as to why maybe they should fund the pipeline extension oftwo producers needing gas at minesite, not one..

7.And to repeat “As to your transport costanalysis, I actually stipulate higher transport costs given processing atanother site in my own post. The question are the offsets as this is whatprovides the benefit overall. And my personal view is those offsets are capexbased plus some opex based ones but would be interested in what data AVL usedin their decision to move processing, and why having processing off minesite isa better option in financial terms or access to infrastructure terms. Your postfocuses on transport, whilst I am trying to look at the whole picture andreasons for the decision…” and “And the main benefit” fromrelocation of processing as I see it “- from a nominal sense the answermight negate, but from an NPV sense having lower upfront capex but higher opexcosts is likely to be a better outcome than having higher capex costs and loweropex costs”

8.We can agree to disagree, but I have said mypiece, as per point 7 above, which is the basis of this entire post.

I don't mind you bagging my posts - infact It helps me crystallise my thoughts - and yes I too would like to see how all the above reduces capex and opex costs for AVL, noting that trucking costs from minesite to processing plant will be higher, so I too would like AVL to quantify what these savings are.

To AVL holders - So the question is what is the NPV/IRR for the current project scope against simply doing all the activities at minesite. VA does need to explain this more fully as against just making statements to that effect, but ultimately the DFS will provide the answer I guess. For myself, I will simply continue to hold what I have but will not increase my stake further until I see some light at the end of the tunnel that a 2021/22 production start date is a reality. I participated in the CR but asI stated a while ago I had actually reduced my holding here in teh past because of what I feel was a mismanagement of the project (and I just hope this latest iteration is just not a continuation of the same).

All IMO IMO