Ann: Quarterly Activities/Appendix 5B Cash Flow Report, page-11

The all-in Chinese JV and offtake is not ideal, but you are being too simplistic about their options... they couldn't have sold 100% to China because of FIRB and nobody in the west wanted to partner with TB so you love the one you can get.

I want to explain and amend my sentiment from yesterday, it was more a personal response than unemotional analysis. Those who read my posts know I was waiting on the Qtrly head grade and other stats to clarify what was going on beyond the apparent 'block model reconciles well with HMC' statements being dribbled out for 6 months without any facts to substantiate it (below 2th June update)



For at least 4 months we have been told that RHF grade and thus production is higher than predicted to help offset the 25% drop in RHF U/size sand going to the WCP because OS is up ~30% of mined ore feed. Never have they actually released all, or at least enough of the metrics required to reconcile production to the orebody model, despite saying there is more HM in feed to the plant than predicted and we're not sure why.. but we are sure the block model and recon is good Clealry, this upside of more Hm in RHF than designed is a huge positive and maybe the only upsdie keeping SFX afloat in the LT?

Thank you Bruce for the RHF and other charts in the Qtrly, really helps clarify the situation... if you know what your doing. What wasn;t helpful was not releasing the mining head grade like last 3 Qtrs and like every other min sand company does. Also not helpful was not releasing the simple 'overall' recoveries which would make a comp against the BFS model possible. Instead, we get only 'RHF Recovery', which doesn;t tell us how overall recovery stands against design Ilm and Zir recoveries as published in the BFS? No ore mined HM grade, no overall recoveries...


Min sand assays work by measuring HM in sand between 1mm down to 38 micron (ie the rougher head feed, even though the WCP is fed <2mm), and dividing that figure by the total weight of sample including the Oversize and Slimes that are removed before sample assay (ie OS and Slimes are removed in-pit and in the Wet Plant before RHF is sent to the spirals for HM separation). You cannot easily measure the HM lost in OS because it's lumpy OS, and so it is not assayed. The HM in RHF is always higher than the sample HM because of the dilution of OS and Slimes. Increase the OS from ~14% (probably closer to 13.5%) to ~30% and by definition the HM in Ore Mined drops due to the maths (eg BFS to Block Model below)


If the HM is evenly distributed through the ore, then the OS will have the same HM content as the friable sands, so that increasing OS will not change the RHF HM%. If there is less HM in the higher OS, then the RHF HM% rises and the HM% in Ore doesn;t fall by as much compared to a uniform distribution (ie Actual RHF vs Block Model HM). It could also mean the orebody was underestimated in HM% and the higher RHF is simply a factor of block model grade under call, but this can be determined by analysing the HM undercall vs OS over a shorter time series. Let's assume it is a factor of more HM reporting to the friable sands undersize sent to the WCP not a MRE undercall...

MAr Qtr 13.6% HM Ore Grade reported got me excited because that calculates back to a RHF of 25.5%, which is ~20% lift in RHF and thus production potential, which is a very nice offset to the 15-20% ore lost to OS right. Turns out Mar Qtr probably couldn;t have been 13.6% HM in Ore because the maths is way out with the reported RHF HM%, it was more likley 12.6% HM. I have to make unrealistic assumptions to get 13.6% given the RHF of 23.5% reported...

Long story short, I am just sick of the games companies play when things are not going well whereby they tell us enough to make it look good but not enough to see what is really going on. The head grade being mined is around 13.9% by my calcs, which is similar to the Stage 2 grade when they start mining the lower grade T1 halo ore that surrounds the HG T2 main body. It looks to me they have moved to mining more, lower grade ore to reduce costs and DMU moves, overburden removal etc and increase mining efficiently while they try and sort out the OS situation. Similar strategy to STA who moved to the thickest but lower grade dune to sit and mine more cheaply while they tried to work out the water mounding and DMU issues...

There are implications for all sorts of things in this strategy, some good some bad, and we won't know for a while how it will turn out. They are cashflow negative even after adding back the sales that went to Acc Receivable instead of cash in bank, but should be opex cashflow positive next Qtr given that one-off $15M cash delay won;t be repeated Sep Qtr. That won;t cover interest payments or corp OH or additional capital for whatever fixes they end up implementing though. The zir-con is obviously poor quality and copping a large discount ontop of low ZrO2 and TiO2 grades.

There is a lot more I could throw up for discussion, but for this post I'll conclude by saying the Qtrly was pretty much as expected aside form the lower HM head grade ore mined and the refusal to outline all the critical data required to really comp production against design... Changed my sentiment back to hold, nothing has really changed except my desire to play the mushroom over the journey.

GLTAH