Ann: WAK - Stage 1 Progress / Delay in Full Production Rate, page-22

Access to a rail facility in 2025 potentially makes a big difference as to what value investors can ascribe to WAK. At https://www.felix.net/project-news/joint-200m-investment-to-fund-more-freight-rail-infrastructure-in-wa one can read:

“$72 million for the Southern Wheatbelt region towards the progressive recommissioning of the Narrogin-Kulin rail line and associated works to service grain and other potential customers in the Narrogin-Wickepin area via a Tier 3 line. The Narrogin-Kulin line was closed in 2013. The first stage of this project will be a study to assess the most useful way to make this investment for the benefit of all potential freight users and the community.

“The State’s new Kaolin clay mine – located near Wickepin – will also benefit from a potential rail freight service as the mine’s export production increases in the coming years.

“With funding now secured, planning and design can now begin, and the projects completed by 2025.”

Getting back to the notion of creating arrays of EBITDA values per tonne for different populations of K99 processing plants, we could, starting at January 2026, increase the number of plants by one every nine months until we decide to plateau the number to exhaust the 30.5MT reserve within some reasonable time, maybe 15 or so years hence. However, there is then no need to only consider the 30.5MT, we can consider the full resource at M70/1143, which is 109.1MT, or 78.6MT more.

A reasonable basis for a crude model is beginning to emerge. My instincts incline me to suspect that we should with reasonably conservarive assumptions derive a target SP north of 35 cents (the exercise price for executive options) and 60 cents, the number mooted by Breakaway Research (see do not advertise external links.au/...ing-wickepin-stage-1-construction-954200.html).

The 60 cents is just a plucked from the sky number, not a suggestion that I go along with how Breakaway Research derived its target SP. On one point, I do not think WAK will pursue its original wet-processing at Wedin idea, because that involved a slurry pipe to Wedin, and a recycled water pipe back to the mine. I may be wrong, but I am inclined to think that wet processing K99 kaolin may be better handled at the export end. One would be fairly safe working with K99 making $100 EBIT margin, or less, as the basis of an investment case, and assume that if wet processing at the Wedin, or the mine site, were to happen, it would only improve the valuation of WAK. Keep the thinking simple.

Breakaway Research suggests that WAK could produce 250,000 tonnes of wet-processed kaolin in a stage 1 some five years hence, and that could be doubled to 500,000 tonnes a year, which is in addition to the 400,000 tonnes of K99. To get to an approximate K99 equivalent of that, we should increase the number of plants from two to four by about 2026, and assume the transport capacity would be in place to allow that.