Afaict:
Rio has an advantage due to being a much larger company - they have more flexibility wrt pushing through tough times and soldiering on towards the longer-term goal.
They obviously see longer-term value in their Rincon project, which they aim to confirm (somewhat) via the 3ktpa plant currently being built.
Will their 3ktpa produce profitably at product pricing of $15k/t, $12k/t, $10k/t…?
We simply do not know yet.
They have their eyes on a larger prize; that being a larger plant that they obviously estimate will be nicely profitable over the longer term, and in itself be a financially viable component of their business.
Yes it does ultimately need to stand on its own merits as an individual project.
Similarly, AGY’s plan is a +10ktpa operation, which we see as being nicely profitable once in production.
Look at my earlier post - in late 2020, just prior to securing funding for our 2ktpa plant, product pricing was down in the $7-8k/t range…and even lower.... but we pushed ahead because it would be at least 18 months until we would be selling any reasonable quantity of product… and we expected pricing to improve over time. You know the rest.
So, what will Rio do IF pricing falls further from here in say 6-12 months from now, and their operation - assuming it is producing then - can’t operate profitably? Will they hit pause also?
Will they produce and stockpile product?
Will they feed a longer-term offtake with the protection of floor pricing accepted by the customer for longer-term benefit/trade-off..?
Only time will tell.
But imo they have more options than us simply due to their bank balance. They won’t be forced into a risk-based pause like we were due to uncertainty; they can ride out the storm more easily and potentially even produce straight through it pending constant reassessment of the market and forecasts. They can “carry” the Rincon project through the lull if need be, of course up to a limit defined by financial assessment of the entire longer-term project.
We don’t have that luxury, unfortunately, and our board has obviously determined that (rightly or wrongly, only time will tell) the risk appears too high to run down our limited capital and potentially put us into a difficult position if recent pricing forecasts (dyor) come to fruition. As some have noted, it is arguably a sensible/prudent decision, as unfortunate as it is in the short term. The longer-term survival and prospects of the business have to be the priority.
Anyway, we have learnt from experience, and learnt from some failures, and are undoubtedly in a better position now than if we had simply remained a skeleton crew all along just pointing to a 10ktpa “plan” and waiting for someone to fund us.
Rio’s progress will be interesting, as secretive as it is, and we’ll see how they get on with their production, costs etc. I doubt we’ll ever get much detail, at least until their operation looks “good” wrt output/costs etc.
(20min delay)