With the risk of offending any WR1 shareholders, it would take a...

With the risk of offending any WR1 shareholders, it would take a change of chairman and CFO before I'd trust them in the slightest. This may sound like a disgruntled Core shareholder but I'm still a shareholder in Core and accused on those HC threads of being overly optimistic.

Unfortunately, some of the tricks SB/SL used to secure the investment to get Finniss operational are being repeated at WR1, albeit with minor modifications.

Trick 1 - Do the initial met test work on ore with high Li2O grades. This will show stronger recovery rates and may create the illusion that the ore body has superior recovery rates.
This is one tWR1 have played to the extent of being bizarre. Particularly within lithium DMS processing there is a grade-recovery curve. Higher grade ore enables higher recovery rates because the concentration percentage required is less so among other things, you can set the lower threshold of the SG in the DMS and accept more mid-grade product before the overall grade fall too much (if the feed grade is high).

What did WR1 do? They did their initial test work on sample grades of 2.57%, 2.16%, 1.81%, 1.38% and 1.17%. With an average deposit grade of 1.15% only the last two of these met tests would provide any sort of idea of the future mine's recovery rates. The first 3 were just a smokescreen to create the appearance of a deposit with high recovery rates. The recovery rates in the same order were 78.4%, 81.9%, 80.5%, 75.9% and 66.4% (for SC6). Investors (using the term loosely) started talking about high 70% DMS only recovery rates being achieved with this also achieving high concentration grades. When the scoping study comes out a life of mine 67.2% is used for SC5.5. More realistic but possibly optimistic.

Trick 2 - Don't report met test work that doesn't get the grades/recoveries you want to report
If you look at Figure 1 of the 20 Feb 2024 announcement you will note they drilled 3 met test holes (AD-23-M001, M002 and M003). From table 2 they either did not do test work with AD-23-M003 (in which case why drill it?) or these results were sub-standard for the high-grade impression they wanted to create. From Table 2 of that announcement, all the results released were using just the first two met test holes.

Trick 3 - Drill lots of pegmatite intercepts that have little chance of being commercial but create the impression of scale.
Many lithium companies are guilty of this one, but if you have an open pit operation there are few good reasons why the size of the scoping study should not have high alignment to the size of the measured and indicated resource (if the JORC is within a pit constraint). All the ore is needing to come out of the pit and go somewhere. WR1 had May 2014 defined an indicated resource of 61.4Mt @ 1.14%. When they put out a scoping study in September 2024, they were only able to get 35.8Mt into that study and I'd suggest the real figure is actually nearer 28.8Mt. From the JORC resource, the project looks big. Put financials on it and it shrinks in size as a lot of that volume has marginal economics.

Trick 4 - Quote in the fine print that your reference price is FoB not CIF and use SC5.5 (not SC6)From Piedment / Sayona commentary the shipping cost from port of Quebec to China is expensive and one update I saw gave the impression it was over US$100/t. Using US$100/t the study assumption was US$1,600 CIF for SC6.0 but is being stated as US$1,375/t (FOB Port of Quebec SC5.5 basis) because this looks a lower, less optimistic price assumption


Trick 5 - bury costs either before the start of the active production period or bury costs after the end of the active production period
I believe SB/SL started to master this technique within Core by having 3 buckets of costs. Pre-production capex, Pre-production opex, In production opex. The C1 costs quoted were from the commencement of commercial production. Capex costs stopped when there was recovery of ore from mining. This means that if you were to expend $10's of millions building a stockpile of ROM before you start the DMS, the costs of doing this are neither Capex or C1. They fell into a non-reported zone enabling the quoting of low capex and low open (C1). Truthful on the definitions used, but misleading.

I'm not sure whether SB/SL are putting costs into the pre-production space, but they are avoiding the recognition of costs after commercial production. If you look at the scoping study the first clue is discussion of APP (Active Production Period). This isn't the life of mine.

• From Table 5, the APP involves 28,800kt of ore being processed with a grade of 1.33% and a 68.6% recovery rate for 4.79kt of SC5.5
• From Table 5, the LoM involves 35,800kt of ore being processed with a grade of 1.24% and a 67.2% recovery rate for 5.37kt of SC5.5
• From this we know the post APP period involves 7,000kt of ore. The lithia content of APP is 383.04 and LoM is 443.92 meaning the post APP period involves lithia content of 60.88. The average grade in this post APP period is 0.87%
• From this we know the post APP period only achieves 580kt of SC5.5 from this ore. The recovery rate that balances 7,000 * (0.87/5.5) * X = 580 is 52.5%. The post APP period involves processing ore below the grade of Bald Hill for a recovery rate that is also low. The APP period is going to be a massive C&M risk unless spod prices are very high.

Knowing roughly 20% of the ore plans to be stockpiled rather than processed, where is the ROM pile for this. What is the accounting treatment? Is it being booked at cost meaning 20% of costs avoid being reported through the P&L. That's rather convenient for ore that may not be commercial. Additionally, the US$85m of mine closure costs get deferred by 4 years. Only a rocks in their head regulator is going to allow WR1 to not have a huge restoration pre-payment leading into those later years as the chances of C&M following the CPP period are high. That $85m is being paid much earlier than modelled.

Trick 6 - Take operating costs and call them sustaining capex.
I've got no problem with replacement plant as it wears out being called sustaining capital. Within Core's operation they created and ultimately wrote-off a "stripping asset" that reflected a period when the cash being paid out to mine was higher than the life of mine average cost. You have a stripping ratio of 20:1 but the life of mine is 10:1 so you take half the waste ore mining costs and call it sustaining capex in the financial accounts.

There's an extremely compelling argument that this sort of sustaining capex is simply a period when the mine's opex is expensive. It didn't work for Core and I'd be surprised if it worked for WR1 as a strategy to show low costs. This "sustaining capex" starts in year 1!





Trick 7 - Don't discuss fines even if buying a DMS only plant
If you go back to the really early Core Lithium met test work, it was DMS plus flotation. The flotation was presumably needed to get good recoveries out of the crushing fines / DMS middlings. Core didn't provide information on them, just when the Finniss plant started they were a major part of the reason for low recoveries. What happens if WR1 has crushing fines? With a DMS only converted gold plant there are no recoveries from that material. If DMS plus a back-end flotation plant are need to get high 60%, low 70% recoveries then there's a bunch of missing capex/opex in the study.

Wider implications
And this is where it gets annoying. If you don't play all these games, your financials look poor when compared to the financials of game-playing entities. This has potential consequential impacts including a lower share price and more difficulty raising capital.