I mentioned that I was running some numbers on the starter plant, truth be told I have had little time and to cross reference so many things take time.
In order to come to some figures I’ve had to make assumptions; I appreciate it is bad form to be optimistic and better form to discount, but I’ve attempted to make the figures realistic. Some could be higher and some could be lower.
Running on DFS figures, problems arise due to sunk costs with the plant. A road is a road, you simply cannot save and build 1/3 of a road. 1/3 revenue cannot be paired with 1/3 costs.This means that our third throughput is often associated with 100% capital costs. ADN estimates this at 58M for the starter, and around 105M for Stage 1, just over half.
Another problem is that the majority of product is KCM90, and it has the least margin of all – couple this with sunk costs and the numbers do not look riveting.I ran the number for DFS stage 1, and it is a cash cow which will quickly provide the revenue for Phase 2 and beyond.
The goal is to get to DFS Stage 1.
-> I have used DFS Pricing for revenue (BOAs are actually higher than this - but this is a pessimistic scenario)
-> DFS Shipping costs were close to the peak during Covid, in fact they have dropped around 72%, I'm a pessimist
-> HRM is a game changer, I am making the assumption that they will supply somewhere between the target and maximum output (I probably should have made this 50% between the 2)
-> Coorporate costs I believe reasonable, as there will be money left over (which could go towards plant, MEP costs were several million, and they can take the foot of Eyre Peninsula if need be). I think this is reasonable
-> This assumes a horrible CR/SPP at 0.05c. I doubt very much this will happen.
-> I've included a Grant for 10M. This could also be Gov Loan, Prepayment, it doesn't matter. Increase the loan if you wish
-> As I assume ADN will max HRM, the rest is KRM. I have therefore used the max red column, and added a new KRM line (for new BOA)
The above is not fantastic, but it has taken time for me to understand why this path has been taken.
The reason for the Starter PlantCurrent BOA have not been forthcoming, we are aware they in the pipeline. Anyone who runs a business will also understand that these BOAs are sometimes difficult to achieve without face to face contact, a brand name, and with no guarantee of delivery. Problem Solved.
Starter Plant 1011) Start with a lower MC, to open the door for better funding options for DFS Stage 1. Nope, the starter plant will NOT be significant enough to fund DFS Stage 1 - but it may contribute
2) Time to establish the Andromeda Brand and reputation. James mentioned at the AGM that this industry replies on brand and reputation. Once you have this, it becomes much easier.
3) It puts the negotiating power into OUR hands. 'We know you need offtakes - we will offer this' is now off the table
4) Meets all running costs of the business wiht a little spare
5) Allow commercial more serious tonnnage of product to be shipped around the world for future offtakes and research etc
6) Along with reason 5, BOAs, and the world opening up, we will be able to secure sufficient BOA's on great terms. Wait, where did James go? To achieve this goal
With this now in mind, I can live with the above, knowing it is a stepping stone for a limited time. I suspect that once enougth BOA's are signed up for DFS 1, Andromeda will upscale this Starter Plant and move at Godspeed to DFS Cash Cow Stage 1.
This is why the starter exists.....
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The figures above I believe are pesimistic - below the same spreadsheet, but with figures I think are closer to the mark.
Shipping Rates reduced acording to freight index
KCM a modest $25 increase (above DFS)
HRM a modest $25 increase (we know it between $1000 and $1500). My pessimistic case probably should have used $1000
Share Price at 10c, and only at 10% raise
Best Guess at figures to the Starter Plant
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| Starter | Starter | Starter | Starter |
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| $/T | AISC $/T | Income $ | AISC $ |
| Output DMT |
| Min | Max | Target |
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| IMCD | HRM | 5,000 | 10,000 | 7,500 | 1,125 | 199 | 11,250,000 | 1,994,200 |
| Planton | KCM | 7,833 | 12,833 | 10,333 | 500 | 258 | 6,416,500 | 3,309,374 |
| AMR | KCM | 9,000 | 14,333 | 11,666 | 500 | 258 | 7,166,500 | 3,696,194 |
| PRM |
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| ? | CRM | 0 | 0 | 0 |
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| 0 |
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| ? | ? | 28,167 | 12,834 | 20,501 | 500 | 258 | 6,417,000 | 3,309,632 |
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| 50,000 | 50,000 | 50,000 |
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| 31,250,000 | 12,309,400 |
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| AISC Summaries |
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| HRM | KCM | CRM | PRM |
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| Mining | 33 | 36 | 32 | 32 |
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| Processing | 106 | 90 | 104 | 115 |
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| General | 20 | 24 | 17 | 17 |
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| Trucking | 0 | 49 | 44 | 44 |
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| Transport | 3.42 | 47.88 | 47.12 | 48.26 |
| Freight index to China at 3250 at DFS now at 1255 a 71% drop |
| Royalties | 31 | 5 | 17 | 20 |
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| Corporate | 5 | 6 | 2 | 4 |
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| Sustaining Capital | 1 | 0 | 4 | 4 |
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| AISC | 199.42 | 257.88 | 267.12 | 284.26 |
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| Voodoo Calculations - could be better or worse |
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| Shares on issue and Loan Details | 3.19B | Assuming a 10% dilutive raise at 10c |
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| Equity raised in CR/SPP |
| 29M | $ raised |
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| Debt Facility |
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| 20M |
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| Grant/Gov Funding |
| 10M | Partnership/Gov/Grant |
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| Rights Issue during SPP/CR |
| A possibility to accelerate to full DFS1 - seriously needed |
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| Loan |
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| 20,000,000 |
| Interest Cost say 6% |
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| 1,200,000 |
| Coorporate Cost - not including exploration |
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| 8,000,000 |
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| Profit |
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| 9,740,600 |
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This is much more attractive and IMHO I think we will be looking at something like this.
Now......... I believe the starter plant is short lived, as soon as those BOAs exceed DFS 1, they will proceed to Stage 1, this possibly may mean the starter may live for 12 18 months only. I will be sending some comments to Andromeda, my feeling is that should a CR/SPP need to occur Id love to see a non renouncable rights issue - this in order to largely fund Stage 1 proportionally across all shareholders.
Below is the final spreadsheet including DFS Stage 1.
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| Starter | Starter | Starter | Starter | DFS 1 | DFS 1 | DFS 1 | DFS 1 | DFS 1 |
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| $/T | AISC $/T | Income $ | AISC $ | $/T | AISC $/T | Output | Income $ | AISC $ |
| Output DMT |
| Min | Max | Target |
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| 153,000 |
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| IMCD | HRM | 5,000 | 10,000 | 7,500 | 1,125 | 199 | 11,250,000 | 1,994,200 | 1,125 | 199 | 15,000 | 16,875,000 | 2,991,300 |
| Planton | KCM | 7,833 | 12,833 | 10,333 | 500 | 258 | 6,416,500 | 3,309,374 |
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| AMR | KCM | 9,000 | 14,333 | 11,666 | 500 | 258 | 7,166,500 | 3,696,194 |
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| PRM |
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| ? | CRM | 0 | 0 | 0 |
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| 0 |
| 775 | 267 | 138,000 | 106,950,000 | 36,862,560 |
| ? | ? | 28,167 | 12,834 | 20,501 | 500 | 258 | 6,417,000 | 3,309,632 |
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| 50,000 | 50,000 | 50,000 |
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| 31,250,000 | 12,309,400 |
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| 123,825,000 | 39,853,860 |
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| AISC Summaries |
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| HRM | KCM | CRM | PRM |
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| Mining | 33 | 36 | 32 | 32 |
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| Processing | 106 | 90 | 104 | 115 |
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| General | 20 | 24 | 17 | 17 |
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| Trucking | 0 | 49 | 44 | 44 |
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| Transport | 3.42 | 47.88 | 47.12 | 48.26 |
| Freight index to China at 3250 at DFS now at 1255 a 71% drop |
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| Royalties | 31 | 5 | 17 | 20 |
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| Corporate | 5 | 6 | 2 | 4 |
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| Sustaining Capital | 1 | 0 | 4 | 4 |
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| AISC | 199.42 | 257.88 | 267.12 | 284.26 |
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| Voodoo Calculations - could be better or worse |
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| Shares on issue and Loan Details | 3.19B | Assuming a 10% dilutive raise at 10c |
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| Equity raised in CR/SPP |
| 29M | $ raised |
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| Debt Facility |
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| 20M |
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| Grant/Gov Funding |
| 10M | Partnership/Gov/Grant |
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| Rights Issue during SPP/CR |
| A possibility to accelerate to full DFS1 - seriously needed |
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| Loan |
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| 20,000,000 |
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| 70,000,000 |
| Interest Cost say 6% |
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| 1,200,000 |
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| 4,200,000 |
| Coorporate Cost - not including exploration |
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| 8,000,000 |
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| 10,000,000 |
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| Profit |
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| 9,740,600 |
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| 69,771,140 |
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Phase 1 is likely to include some remaining KRM, especially if Stage 1 is brought forward, so take a little CRM off if necessary. I also have added 50M bank funding, this of course could be grants, SPP, RIghts - too far in the future to consider this.
Finally, Andromeda is not a one trick pony.
I expect Andromeda will contribute to the Cobra JV - they can afford this, and we want this. Cobra is shaping up to be a significant SA project, with Gold, and an overburden of Rare Earths (how convenient is that? - your overburden is a payload). Cobra's tenements remains open and significant upgrades have been mentioned. Andromeda also has 2 Copper projects, one being sold, but, Copper is entering a bull run, and Andromeda is lucky to have a foot in this space.
Finally there are all these bla bla NNT opportunities, at their own time some of these will come through. CC is progressing and should this come off will be a company maker on its own. Secondly, our new CEO Bob, knows his way around HPA. Coincidence???? Doubt it.
To be confirmed, but should BOA exceed 50mt I believe the design of starter is semi flexible, so we may be looking at larger tonnage, perhaps 60? 70?. I will try to confirm this.
I need to say
This is not investment advice, please do your own analysis, do your own research
(20min delay)