Damn but time is too short. I want to get this Yangi Analysis done, happy to talk on related tangents, permanently distracted by all matter of other interesting stuff... all while life goes on.
@jv123 makes the succinct point that marginal to uneconomic RE projects (like LYC was back in 2015-16) have received government subsidies... so why shouldn't HAS and if/when they do, why doesn't that then make HAS-Yangi valuable to shareholders? At further distraction and cluttering up my thread, I'm going to post a reply to this because it does link into the critical importance of NdPr price assumptions and margins for various projects in the industry.
i looked into the history of LYCs Japanese loan, given in Oct 2016 after Molycorp's Mountain Pass went bankrupt and based on realty LYC was losing money and go the same way without help. The Japanese were taking all of LYC's production from Mt Weld-Malaysia, so given the Chinese restricted Japanese RE-imports in 2010 they would stand by and allow that strategic weeakness to happen with LYC going broke. Cheap loan, no repayments for 6 years, covered losses until RE-prices rose and LYC became profitable again in 2017-18. Job done, and to 'some extent' we are seeing history repeating, and thus HAS great hope that grants, subsidies and sweetheart off-take deals will fund their unprofitable project as jv123 alludes to.
Some differences worth noting between LYC's situation and HAS today:
- LYC is profitable above US40/kg (FY15, 16, 17 and 20 were loss making). Higher cost than Chinese and other Asian ionic clay production for sure, but otherwise lowest on the cost curve for ex-China hard rock deposits. LYC is and was worth subsidising for strategic reasons.
- LYC shareholders suffered despite subsidised loans and equity investment, trading around 6c in 2016 post Japanese loan (pre-10 for 1 share consolidation 2017). Subsiding critical production doesn;t mean subsiding decent profits... it means life-support for the off-taker unless you are industry competitive.
- Based on my analysis of HAS Yangi Update, i have labelled the NPV breakeven NdPr price for Stage 1 at US$87.5/kg (assumption not real-world costs obviously), and other price assumptions in the Update. We all know price assumptions to make bank are very high historically, but it's sobering to see it in chart form (why did HAS not include price charts of NdPr assumptions in the DFS Update I wonder
). Further, HAS like others presume that Chinese prices as charted will be paid in full, not after 13% VAT tax has been deducted as with sales into China. - HAS price assumptions are "2023 REAL"... that mean they do not reflect the actual price after inflation each year compounds them much higher again. I have seen studies on other RE deposits use higher NdPr prices, but all I see is substitution writ large...
- Ionic clay deposits will make out like bandits at US$130/kg (eg MEI, Sierra Verde and a multitude of SE Asian deposits within and outside China). Ionic clay deposits are also hihgly scalable for high NdPr tonnage production (plus sweet DyTb credits)
- Mineral sand monazite bi-product deposits will make out like bandits at US$130/kg even less 13% selling into China (ie Rio, BSE, Tronox, Kenmare etc)
- Quality hard rock deposits like Mt Weld, Ngualla, Kangankunde will scale up multiples and make good money at US$130/kg
- Mid-tier cost operations like ARU will struggle but still make it up at US$130/kg imo.
- HAS looks to be at the wrong end of the cost curve, without the deposit style/size to truly scale up. Prices might go exponential and stay there, but it looks one hell of a risk for all concerned, not just the first loss equity investors. Why tie your critical off-take NdPr supply to a mine already so close to going broke and with a deposit style that looks high-risk for operational difficulties (hitting ore-sorting and beneficiation targets from skinny, low grade, hard rock).
Yes I'm obviously bearish on HAS, and more so after the last Update. I just see a lot of NdPr production coming to the west from Moutain Pass (back to USA), Mt Weld expansions (current and future), ILU min sand dominant player, other min sand players potentially stepping outside China, Brazilian ionic clay deposits like MEI will be cheap, very large, long-life producers, LIN's Kangankunde will be a large, low cost producer... and many other deposits are in the pipeline or currently being explored for. That's my take on the supply side.
On the demand side, all I see is the military looking after themselves (as they do) but western auto makers looking to extract themselves form RE-Perm magnet supply risk because the western supply simply non-existent ex-Japan now, will not be there for many years even if all the RE mines get up soon because there isn;t the downstream industry or capability (being 2 decades behind China tech/experience and 2-3 times the cost base). It takes 10 years to design, test and approve a new auto model, buildout the parts machinery for the new model, produce/sell the new model before it's time to retire it for the next new thing. They are all quietly doing what Tesla is doing loudly... accepting some small extra cost or performance loss for the certainty of getting through the 10 year cycle profitably instead of having it grind to a halt like it did during the covid semiconductors shortage.
This isn;t the post for details about alternative EV motor developments (brushed induction or brushless non-RE perm magnet), new magnet alternatives, RE thrifting in magnets etc. I simply look at the deals auto companies are doing to lock in lithium supply, but not doing to lock in NdPr supply to know what their strategy is. Plain fact of the matter is RE-perm magnets are not as critical and non-substitutable as many would think, but time will tell. There will always be a market for RE-perm magnets until a cheaper new magnet like Niron's Iron-nitride is perfected in commercial quantities... just not at any price, nor at any supply risk imo.
This posts highlights the importance of commodity price vs industry peers and substitution risk for any feasibility study, and HAS specifically. I have posted accurate analysis of the price assumptions for Yangi, that's now done to death. I really want to consider the opex of mon-con and MREC production at Yangi and across the industry in a similar fashion to test this 'profit sharing' model...
GLTAH
(20min delay)
