Can't help myself, have to comment on the product markets and pricing in the SS.
The ilmenite is easy enough, a large and transparent market. HVY producing 6tpa of Ilmenite (or ilm-rich concentrate) is a teaspoon's worth where ex-garnet mineral sand mines round annual production off the 100,000t significant figure. Can't imagine an off-taker bothering to sign on or arrange shipping for once a year delivery of some bulka bags. Surely the thing is to sell the ilmenite in WA, except nobody in Oz processes sulphate or slag quality TiO2 53.8% is primary ilmenite. Obviously the outrageously optimistic price assumption of $450/t (at AUD=70c) is based on some spot cargoes during the epic early-2022 inventory re-stocking boom just before 2023 global recession hit and substantial new supply started to come on stream.
TZMI long term 2022 real pricing for good quality 50% TiO2 ilmenite at US$200/t, so generously let's say 54% TiO2 Ilm sells LT for US$225/t, or A$320/t,,, exactly half the SS price of A$640. In a downturn and/or rising global supply of ilmenite spot cargoes can be difficult to sell without a substantial discount. That's the other side to this last 18 month global shortage spike in spot pricing. If pigment producers are faced with sufficient or excess of contracted ilmenite from serious ilmenite miners, then why would anyone be in the market for a small, expensive to ship spot cargo of ilmenite form HVY? No, anything but a LT price assumption (ie A$320) is baseless top of the cycle cherry picking imo.
Garnet market is more complicated. Obviously there are sizing preferences and pricing etc, but it's the market size and functioning that's interesting. Take the TZMI supply/demand forecast. TZMI are always happy to produce sell-side optimistic forecast in my experience, like all consultants they deliver what the client asks for within reason. "Underlying Demand" means TZMI believe if there was more garnet in the market there would be more demand, thus a 'supply deficit'. That may be true, but historical pricing (eg 2017 to 2021 above) reflects the 'clearing price' to match demand to supply. What the above figure or the SS does not mention is the third variable in any supply-demand equation... price! Historical prices matched supply with demand, because underlying surplus demand (downstream users) chose to substitute different material instead of garnet (or couldn't make money closed down).
If supply approximately doubled (as the figure suggests) then how low would the price have to go to stimulate extra underlying demand and/or to substitute across to garnet (and out of olivine and staurolite)? Not sure but lower than the 2017-2021 historical price for half the garnet supply that's for sure. The garnet market as per above figure is around 500ktpa, although it varies considerably with global economic conditions (2016 looked a lot like 2020). It's really not very big in comparison to HVY wanting to muscle in with another 150ktpa, or ~25% of the market all at ounce, and HVY aren;t the only ones.
As per old HVY presso below, GMA already sells ~350ktpa or ~33% of world garnet production. The price spiked from 2019 according to their chart (based on USGS Minerals Handbook 2004-2022) but I also note Mineral Commodities was selling bulk unrefined garnet from their Tormin mine in Sth Africa at around US$100/t (taken from annual reports). Over 2018-19 Tormin produced ~250ktpa of garnet, which it was selling to GMA as things have it small world garnet is. GMA reneged on the off-take contract early 2020 but after the economy and prices started picking up GMA agreed to pay $23M to Tormin and enter into a new off-take agreement.
Also taken from old HVY presso is this figure showing GMA producing ~33% of global garnet supply (ie ~350ktpa), Tormin is the Sth Africa share. India came off in 2016 due to government ban on beach mining (big drop on above figure) but India looks like getting backj into the min sand mining business after the government stamped it's authority on the industry and it's poor environmental standards. If India gets back in there's your extra supply right there... BSE Toliara will be a garnet producer (eventually, 3-4 years hopefully) and another couple of Sth Island NZ mines looking to enter the market also (Barrytown and Westport).
Supply competition aside, the industry seems very much a top-down run imo. That is, companies with their own distribution networks (eg GMA) or with business clout to get in bed with major distributors ( eg Mineral Resources owned Australian Garnet supply deal with Burwell Technologies) can procure off-take deals and/or pricing power. Stand alone miners not so much. The prices quoted, especially for refined garnet, might prove just as intangible and it looks economically unsupportable.
Nothing wrong with HVY's deposit, just looks a tough industry to break into with prices likely to be well below SS assumptions if they do get up and running. Good luck to them, I have no exposure to garnet other than researching it for a friend as a favour once. This is not advice, just my opinion and I stand to be corrected etc.
HVY Price at posting:
17.5¢ Sentiment: None Disclosure: Not Held
(20min delay)