Re Shorts, E25 has ever had the severe shorting issue that some...

Re Shorts, E25 has ever had the severe shorting issue that some other battery materials companies have experienced. Shortman.com.au shows a few days delayed information. There was a short interest of 0.02% (53,964 shares) at 16 Sep 2024 which is basically nothing. The current price wasn't caused by shorting but there is also basically no meaningful short covering to occur.

Re Grade
There are several ways of describing the Butcherbird ore which include:

• The full chemical mix including percentages of Manganese, Iron, Silica and other minerals
• As high-grade ore given E25's confirmed ability to commercially convert the ore to HPMSM at a sensible price
• As high-grade ore given E25's concentrate ore has been aligned to the 44% Mn benchmark price in offtake agreements (presumably due to its chemical mix) rather than the lower grade 32% benchmark South African product
• As higher-grade ore because after washing off the clay its over 20% Mn before any physical concentration of the rock ore
• As lower grade ore because as dug out of the ground including embedded clay its ~10%.

I find it no surprise at all that Rocket has chosen the last of these options to use in describing E25 as low-grade ore. This removing clay issue is at the heart of the existing Butcherbird operational issues. While the flow sheet selected can remove clay, it has struggled with the level of clay to be removed. The optical ore sorter has also struggled to reach the performance levels that an ore density sorter (DMS) reliably achieves. E25's expansion case of Jan 2024 is not only about expanding production and therefore lowing fixed operating costs, its about installing capital equipment that has a higher price point but is known to address high clay issues better.

Profitability of existing operations
Rocket has previously accepted E25 is viable at high price points like US$7/dmtu or higher (and possibly at US$6/dmtu or higher). The statement E25 will never be profitable is incorrect, but it is correct that on the existing equipment configuration high prices are needed to be profitable. It is a useful warning and would be a major problem if there wasn't a solution but there is and it was outlined in the expansion case noted above. The combination of expansion lowering fixed site costs per unit and a realistic potential to reach nameplate could have E25's butcherbird operations producing strong profits in addition to those that are expected from the HPMSM. The expansion case noted an anticipated C1 cost of US$2.76/dmtu or US$84/t.



The Butcherbird expansion case doesn't provide a full breakdown of this C1 cost by type. It does however provide a full breakdown of the more comprehensive C2 cost by type and estimates that to be US$3.03/dmtu including trucking transport logistics. Transportation logistics are one of the largest costs. This cost would be lowered if rail freight to port were an option but if E25 can deliver a cost structure around A$150/dmtu then it will be profitable in almost all likely prices. While its not 100% clear, I think these C2 costs are to a FoB point and market prices are CIF so there's also shipping costs from Point Howard to consider in profitability calculations and any grade discount from the 44% benchmark. While E25 has indicated silica credits to reduce this grade discount/shipping cost a better working number is probably ~US$1/dmtu meaning US$4/dmtu is needed (and a bit more if shipping prices spike). If shipping 1.1Mt of 32% ore, a $1/dmtu margin at US$5/dmtu may be around ~US$35m of annual profitability from butcherbird (and more if E25's US$5.75/dmtu long-run price estimate is used).



The April 2023 HPMSM feasibility study noted that market prices were used so for the modest proportion of Butcherbird ore sent to the 1st HPMSM facility, there is an inbuilt market price that is achieved on the Butcherbird ore sale. If market prices increase then the HPMSM facility pays more to E25's butcherbird operation. If market prices decrease, HPMSM gets cheaper ore so it would appear one side balances out the other.