Yangi 2-Stage DFS Update Analysis

Making a rod for my back but thinking of working through the Yangi 2-Stage DFS Update on a dedicated thread for anyone interested in my workings and thought process. Many don't trust keyboard warriors, and why would you, but it's hard to argue with facts you can see and follow. Typically, HAS DFS updates have enough information to tease at what the critical assumptions and outcomes are, while making it very difficult to actually understand what is really going on. Difficult for someone with a technical background means probably impossible for the non-technical investor... just how it was intended. I tend to lump brokers, broker clients, politicians and their public servants into the latter.

Some company feasibility studies are really clearly laid out with all relevant information easily assessable, even some of HAS old studies are fairly clear and detailed. That helps in providing evidence and guiding what variables/assumptions are realistic or not. Comparing against industry competitors and norms is key to judging what is reasonable, possible or very unlikely. Key variable assumptions in any feasibility are revenue and costs, with much of the technical variables locked in reported over the journey.

So to start off, I want to know what the revenue pricing assumptions are because that's the easiest way to juice up value. Below is the Stage 1 LOM revenue over 17 years, working through the Ore Reserve, recoveries, producing 34,500tpa mon-con etc, which derives the required A$/Kg TREo price at 0.68c FX to achieve the reported LOM $7,201M net revenue and $423.5M avg annual revenue. Different FX rate past 10 years may change prices slightly, but immaterially.
So to start off, I want to know what the revenue pricing assumptions are because that's the easiest way to juice up value. Below is the Stage 1 LOM revenue over 17 years, working through the Ore Reserve, recoveries, producing 34,500tpa mon-con etc, which derives the required A$/Kg TREo price at 0.68c FX to achieve the reported LOM $7,201M net revenue and $423.5M avg annual revenue. Different FX rate past 10 years may change prices slightly, but immaterially.


Should be easy to follow. LOM averages 34.5ktpa concentrate from the reserve over 17 full years, LOM Kg of TREO into LOM Net Revenue etc is simple maths. The only discrepancy is an average US$30.9/Kg TREO payable to HAS is higher than the guided "REO price: Stage 1 (Assuming profit sharing model whereby HAS receives a price (real terms) of $18-28/kg)"... I'm going to trust the maths, you can't generate more revenue than product allows. Probably a sloppy error where the "$18-28/kg" was supposed to be annotated as first 10 years only like it was for the Stage 2 price description.

So, A$45.5/kg TREO in con is the price HAS receives on average LOM to reach $7201M net revenue. We need to work out what ex-China quoted Nr-Ox price that reflects to see how reasonable this assumption is. That relies one very important other assumption... 'Payability' to HAS of the TREO Basket-value contained in the mon-con (ie, what % of the TREO value in the monazite con is paid to HAS). Update plan confirmed 90% of the basket value is NdPr, so we need to work out what price NdPr-Ox, divided by 90% for other 10% value, at what payability delivers our $7201M LOM net revenue. The Update said years 4-14 of Stage 2 averaged US$129/kg NdPr, so we know it can't be too far away from US$130/kg LOM avg with 3 years bit lower, and 3 years higher at the end of 17 year mine life.

Goal-seeking at US$130/kg (and not removing 13% China VAT tax) I get basket value Payability of 58.5% to deliver on the Stage 1 project finaincial metrics as below.

As you can see, using the projects NdPr ratio at 90% basket value, TREO % in Con, 34,500tpa avg annual mon-con the project the financial metrics match well with company Update, including EBITDA and Free Cashflow based on sensible assumptions just to see how it comes together. Obviously items like free cashflow are completely different year by year in reality (starts very negative during build then goes up), but the averages are still worthwhile considering.

What I'm really interested in isn;t that all the metrics make sense and follow on from the pricing and cost assumptions (although they didn;t in the Feb'22 DFS) but what the pricing assumptions really mean and compare to industry standards. US$130/kg LOM is fairly standard for the better quality RE deposits (think ILU, LYC, PEK, ARU) and will be sufficient for the better discoveries like LIN and the Barzilian ionic clay deposits like MEI and Sierra Verde. 58.5% payability in monazite con is most certainly not standard, it's way higher than historical pricing, especially for a lower value concentrate like Yangi is compared to traditional 60% TREO min sand mon-con, or 45% TREO bastanite con.

Historically, monazite concentrates are paid about 30% of contained TREO value. That figure would rise to mid or high 30's depending on the quality of the RE-con and RE prices of the day. I'm done for a Friday. Something to consider before I look at how realistic that 58.5% payability really is (well, A$45/kg TREO regardless). Keeping the 13% VAT as an 'outside China price premium' is the new black and fair enough. It's a two edged sword though, because opex for hydromet plants outside China are a lot higher and costs more than 13% VAT extra imo.

By way of example, below is VHM Goschen Mar'23 DFS on their Victorian min sand project for mon-con product Stage 1. Used 37.5% payability on a lower TREO/kg basket price (note, below is USD) for a concentrate that is approx 20% lower 'real' than Yangi mon-con per Kilo. However, Goshcen is much higher value con on account it's 61.5% TREo instead of Yangi's 27% TREO%. Iluka's new Eneabba hydromet plant will be a good place to test against what sort of payabiltiy Australian operations can 'Profit Share' with HAS and if 58.5% leaves anything left for the toll treater (or even covers costs)?

PS.. can't be bothered proofing today, happy for any errors to be pointed out.