Below is an expanded version of the list of points that I had scribbled for myself while waiting to be tested at my local hospital. The original list was written in memory-jogging style (often just a few words) in no logical order, and the expanded version below has no order to it either. Also, Management may well have thoughts that would not be made known for both commercial reasons, and ASX regulations.
If you mention additional points, I'll consider them when I edit the list. Plus I will look at earlier posts for possible additions to the list. Paring the list is something that I have not considered, but that is difficult, so I'll probably leave that to you. I have often given clients a draft report, and they have asked me to restate points that I had edited outlater. Trying to empathise what other people regard as relevant is not easy.
$300+ prices
Where better-tan-expected pricing has been mentioned in the media, whether that was FOB or CIF was not mentioned. Could you give an opinion on pricing achieved, or expected, in CIF or FOB terms? Related thereto, could you comment on container size, tonnage per container, and shipping costs to a typical East-Asian destination?
Paper filler
Is the market for kaolin as a paper filler a genuine market for WAK, or is it a brightness benchmark that allows WA Kaolin to know that it can easily supply product to other less demanding sectors,like tableware, plus being a reference-selling sales pitch?
I understand kaolin as a paper filler has to be wet processed, so can WA Kaolin sell dry-processed kaolin to a business that owns a wet-processing facility, thus delaying WA Kaolin's investment in wet processing?
Non-East-Asian export markets
Competitors from the USA and Brazil would have a disadvantage exporting to Indian-Ocean countries, but aside from the likes of Pakistan, Bangladesh, India and Sri Lanka, there are small markets like Mauritius, which has a paint manufacturing sector, where there is probably a shipping advantage from WA.
Australian market
How significant is the Australian market, and how does it differ from the export market in terms of selling product not suited for export? Other than building products like plasterboard, does WA Kaolin have an interest in manufacturers of white cement and sanitaryware, and perhaps farming and gardening (poultry feedstock pellets, soil wetting agents and insect sprays)?
Business Diversity
Given that WA Kaolin has a range of quality kaolin, does it plan to optimise the extraction economics by tailoring customer take-off? Also, can this be achieved by dealing with importers who have kaolin processing plant that can optimise the grading to suit customer-specific requirements? I understand that this is what CMP Tianjin does in China, and its final product could end up in markets beyond China. Is the tableware quality-kaolin also sold to processors who supply to manufacturers to specification?
Exporting at the low-end grade
Is WA Kaolin focusing on selling the lower-end grades of kaolin, because it is easy to sell top-end product at premium prices into Japan? Do the Vietnam and China markets play into that lower-end thinking?
Importers' enthusiasm
Is the enthusiasm to secure supply evidenced in Stanco's early behavior still high? Has similar enthusiasm emerged elsewhere?
Cost escalation
I would think that the near-uniqueness of WA Kaolin's product, and importers enthusiasm, would ensure that WA Kaolin can maintain a target profitability. Is this the case?
Expanding production and break-even
The Prospectus mentions expanding the plant capacity from an initial 200,000mt to 400,000mt in the first three years, and then by 200,000tpa steps if justified by market demand and the availability of CAPEX funding. Does Management have a realistic hope of achieving a target capacity in mind for a known future, say FY24 to FY32, in 200,000tpa steps?
Does WA Kaolin have a rough idea of when it hopes to switch from loss-making to profitability.
Fibreglass filler
I have read that users of kaolin fillers are finding supply crimped by two factors, decrasing supply and increased demand for kaolin filler by the fibreglass sector. Is there a suitability overlap in the filler market (rubber, paint, plastic, fibreglass)?
Option funding
The 25c per share option funding is unlikely to be forthcoming unless the SP eclipses 25c. Would Management consider a market update report to encourage the option funding to begin soon?
WAK Price at posting:
22.0¢ Sentiment: Buy Disclosure: Held
