SFX (ASX) Ann: Quarterly Activities/Appendix 5B Cash Flow Report

Originally posted by Franpower: ↑

Hi 2ic, I was about to post my bullish take on the presentation, especially the content contained in the opening 5 minutes where Bruce stated that given the current ramp up profile and how well it's progressing (minor equipment breakdowns which occurred, fixed and non recurring), that he expects the mine to be at the top of the ramp-up curve by the end of June24 and that FY25 (starting in July this year) should be a full production year with circa 10mil tonnes mined. That looks to me like the potential of hitting nameplate in only two full quarters of operation.

Before, dealing with more of the positives in the presentation, I'd like to understand a bit more of your thinking regarding recoveries if I may?

Regarding the starter pit THM grade (13.3% vs 15%), Bruce definitively stated that, irrespective of the numbers in the quarterly, the grades in the starter pit section they have mining are inline with their very detailed internal models of the starter pit. So that should put the THM grade discrepancy issue aside until we hear otherwise.

As far as recoveries go, did you hear Bruce's answer to the question about oversize where he specifically stated that to date observations have been that they are not loosing HM to oversize (33min in presentation)?

He noted that the HM in the oversize is typically low mineralisation and/or poor quality mineralisation and therefore did not contain a lot of value. They continue to observe that in areas with oversize that the valuable mineral in the undersize fraction still reports to what should be contained in the total fraction (ie, not much HM in the oversize and therefore effective grade remains inline with forecast). As a result the focus is to prevent overloading the DMU with oversize to avoid losing undersize in an overloaded scenario.

"We're seeing nothing there that suggests we've got this wrong and that there is something going on in the orebody that we didn't expect."

So then we have the issue of potentially losing HM to tailings via the WCP and final products being lost to waste in the CUP, right?

We know that the CUP is a piece of equipment that requires the most fine tuning, I've heard Bruce talk about 4 to 6 months of trial and error to optimise the CUP settings. So even if the recoveries for the first two months were 40% (upped from 35% due to the fact that there is inevitably unprocessed product in the HMC stockpile), achieving a first year average recovery of 56% is still highly achievable if we know we are dealing with a fine tuning process that takes an extended period to dial in (all these ramp up constraints have been factored into the forecast cashflows, so doesn't put shareholders on the back foot).

We see recovery targets increase from 56% to 62% in year 2 due to the fact that it's expected for recoveries in the early stage of year 1 to be below the average target for year 1. So what we are seeing is not unexpected. The biggest risk was the loss of HM to oversize, but Bruce has addressed this point directly as referenced above.

I agree they have the information and I agree that recoveries after the first two months have been below the yearly recovery target of 56% but there is a reason that companies choose to not give a blow by blow description during ramp up. Inconsistency and teething issues are bound to be there and reporting more than is required during ramp-up can create a misleading picture and unneeded volatility, and often these issues will be rectified in the next month with normal troubleshooting practices (unfortunately not the case for Strandline, but that is not the norm).

Production numbers will need to be observed going forward but for now I'm happy with Bruces view that we are likely to see the figures line up better with forecast in the coming two quarters of production followed hopefully by a full year of production in FY25 (hopefully with full recoveries and grade).

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