Eneabba: A $2b Disaster in Waiting?

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The Christmas countdown is on.
Two weeks to go but we ain't

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stopping now.
We've got an eye look at Iniaba

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Deep Love Spectacular today you
boys, It's all happening

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alright.
It's one of those, one of those

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stories earlier that just makes
me angry, mad, disappointed,

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frustrated.
All of the feelings.

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A lot of feelings, yeah.
Just it's a, it's a head

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scratcher on a whole bunch of
levels, which we're gonna get

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into.
But yeah, one thing that maybe

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didn't make you unhappy or or us
unhappy was your weekend.

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How was your weekend, Ellie?
It was.

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Good.
So I was at the the CBH over the

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weekend.
So for our non Western

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Australian listeners, that's the
Cottesloe Beach Hotel, right in

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the heart of the infamous 6011.
And I was waiting in line for a

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drink at the bar when I saw
something very peculiar on the

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back wall which I didn't think
to say.

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So here's a picture.
Can you guys spot it?

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Am I looking at a hat with a
little blue logo on it, Ellie?

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I think that might be the one.
Wildcat.

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There's a Wildcat hat on the
back of the bar, which is you'd

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only say that in the six O1 1,
so I love that.

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But there's actually something
else in that picture.

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So if you take a closer look.
Look at that.

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It's true, but having a tuner so
drew from K Drill, he can meet

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up with you anytime, anywhere in
the six O1 one or beyond to help

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sort out your 2025 drilling
contract.

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With K Drill.
It's been a bunch of ASX small

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caps.
We've been saying doing the

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heaps of last last minute raises
for the year to sort of set

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themselves up for a strong start
to 25 S to all of those

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companies.
Make sure you've got Rhino,

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Sullivan and the rest of the
casual tape up at your site in

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the new year punching RC and
Diamond.

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Holes, Ellie, It's like Patrol's
colours are red.

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It's Christmas.
It's Christmas theme.

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Yeah, you've got Rhino doesn't
take a break over Christmas.

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He he's punching RC and Diamond
holes through Christmas.

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He's punching them every day of
the week, punches them in his

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sleep.
So make it your new New Year's

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resolution to get K drill up in
your site punching RC diamond

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holes.
Get in contact with Juba.

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His details in the show notes.
Thanks for your support K Drill.

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Go K drill.
Alrighty, let's talk about Iluka

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resources, guys.
This was a big one on Friday.

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The funding package that has
been sort of long negotiated

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between Iluka and the government
came through and the market did

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not like it down 10 percent.
So wow, it, it was fascinating,

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right?
The the call had a lot of

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interesting questions.
Analysts trying to piece through

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the call was put on a relatively
short notice with a lot of info,

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a lot of assumptions baked into
it, a lot of footnote footnotes

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that you have to go and read.
So we've got we've got plenty to

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chat about on this one for.
For context, JD like what?

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What is like the, you know, the
background to this whole, you

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know, any other railroads
facility in the funding package

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with the government?
Yeah, Let's give a bit of a

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recap on everything that's kind
of happened because it's been a

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few years in the process now,
right.

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So in early 2022 you had I look
at pressing go on the Enieba

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rare earths refinery to the
north of Perth in WA.

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Now final investment decision
was taken with the aid of a 1

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billion and 50 million non
recourse loan from our

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government.
So this was done through the

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government entity of Export
Finance Australia.

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Now I look at the time would
contribute $200 million plus the

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any other any ABBA stockpile.
So that is a stockpile that had

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been building for a number of
years goes back quite, quite a

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while now.
So this refinery importantly

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would be designed to handle not
just the any other stockpile,

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but any other Aluca feedstock.
So we've got a few projects in

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the works which which had about
there plus potential third party

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feed.
That was, yeah, that was, it

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was, it was, it was interesting
at the time.

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I don't know if too many people
were expecting this FID.

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It kind of just popped up out of
the blue, and I think it was it

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popped up the week before the
standing government went into

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caretaker mode.
So kind of go figure.

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And the the whole, you know,
the, the loan that was provided

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at the time by the Australian
government was so like the terms

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were so out of market with any
concessional finance that had

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been kind of provided at all in
any, you know, critical minerals

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like area whatsoever by a mile.
It was, it was, you know, kind

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of remarkable at $1.05 billion
non recourse loan terms were

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sweet as all hell.
You know, I didn't have to repay

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it forever, but it was just
everything was was honky Dory

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about it.
But interestingly, at the time

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when they when they did announce
that, that FID, they talked up

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the prospects of also being able
to process their, some of their,

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their, their deposit at Wimmera
through this reverse facility as

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well.
Wimmera, these are the Wimmer

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project is 1 of it.
Like, you know, they've got a

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bunch of these Wim style
deposits in their portfolio.

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They're in Victoria.
They were actually kind of

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delineated by Conzink back in
the 80s.

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They haven't been developed yet
for must have been a long time,

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right?
But they haven't been developed

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for a few big reasons.
First one is incredibly fine,

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which makes separation of the of
the zircon really, really

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challenging.
And the other one is that

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they've got high levels of
impurities, which makes

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purification of a salable kind
of zircon product really, really

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challenging.
On that first point I look at

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they figured out a, a solution
to to separate the, the zircon

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in 2018.
But the second point on, on the,

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on the impurities that they've
done some kind of purification

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or zircon purification in a lab,
but they still need to prove it

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up.
It's sort of scale and they're

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doing a demonstration plan now.
But there's no guarantees

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though.
And the attractiveness of those

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of those whim style deposits is
actually they're high zircon

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great.
So despite all this, and the

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challenge is to actually get a
saleable kind of zircon product

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out of it.
I look at they did put a reserve

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on Winrar in 2022 and that
assumed that would mine it sell

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the kind of lowish value
ilmenite products produce a rare

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earth concentrate which would go
to any other.

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But the zircon product isn't
assumed to be recoverable for

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the purposes of the reserve
there.

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And you Fast forward to Friday's
announcement, we get a bit of an

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indication of how Luca might
actually be thinking about its

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feedstock options here.
Because you in the, in the

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interim since they announced
FID, you know, a few things have

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happened.
They did a deal with, with

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Northern Minerals in 2022 to, to
try and get some supply from

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their Browns Range project to
feed any other refinery.

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They also progressed their Bell
Reynolds mineral sands project

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in NSW.
And hence the scenarios that I

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look actually put forward on
Friday were impacted by these

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developments.
So Trev, what the sort of three

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scenarios that Aloka have have
put forward now in the context

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of all those what they had and
those recent developments in the

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last few years?
If you if you look at like you

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can see the the pictures of that
kind of they show here.

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So 3 scenarios, one just you
know, 35 year life

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underutilised, you know,
refinery because they're only

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assuming that it's using Aloka's
any other stockpile, Al Reynold

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concentrate from Al Reynold and
when there are I'm constant

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concentrate as well.
The second scenario is the same

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as above, but now they kind of
they throw in northern minerals,

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but look at what happens when
they include northern minerals

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as feedstock.
It actually displaces Wimera to

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later in the refineries life and
I think that's telling

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personally.
And then the last scenario, they

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call this the financing case,
which only processes any other

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stockpile and Bell Reynold, no
Wimera.

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So just like look at those 3
scenarios have changed.

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I think there is a read through
that there are doubts about the

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economics or timelines or both
of Wimmer, which makes a pretty

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big impact when that was kind
of, you know, your big baseload

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long life part of the feed of of
our Lucas.

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And Trev explained to me and
probably the other money minders

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who are as clued up about
mineral sands and the rest of it

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and and whereas Bell, Reynolds
and Wimmer are mineral sands

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projects.
So why are they getting talked

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about in the context of a rare
earths being feedstock for rare

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earths refinery?
Is it some sort of byproduct?

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Exactly or absolutely yeah, when
when you're when you're

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processing mineral sands that
you're often times a typical

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byproduct of that process is a
is a monocyte concentrate.

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That monocyte concentrate is, is
is is is often times, you know,

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rich in rare earth elements,
which if you, if you plug it

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into a, a refinery, which is,
you know, you're cracking and

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leaching and, and also also a
hydro net plant, you, you can

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get some, some separated
railroad oxides out of it.

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So to to round out on the
assumptions put forward, the key

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point of the negotiations
happening over the last year is

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because the CapEx blew out.
So initially that was pinned at

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1 to $1.2 billion, hit a
stumbling block in late 23, blew

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out to 1.7 to $1.8 billion with
320 million of that money being

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spent to date.
So you had a bit of a stalemate

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as Iluka and the government
battled over who's going to chip

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in and fund the the rest of it.
And to clarify guys, this CapEx

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relates to this indie ABBA
refinery.

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So any CapEx to bring online
this Wimera project which I

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think is currently at DFS stage,
that would be in addition to

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that, right?
Yeah, Wimmer's CapEx is not

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insignificant.
It's like I think they're sort

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of PFS assumptions, nearly a
billion dollars there from my

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memory.
So yeah, that's they're actually

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this is exactly right.
That's not included in this.

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Absolutely.
This is just the refinery.

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And so that brings us now to
last Fridays announcement.

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So what's been the funding
update that's come through

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recently?
So to get them there, EFA are

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going to contribute for $400
million on the same terms as

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that 2022 agreement.
And you've got Iluka adding $214

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million in cash equity.
That includes $82 million for

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working capital once the plant
is built, but you're waiting for

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that first cash flow to come in
the door.

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So in total, from an Iluka
perspective, there's another

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$300 million that needs to go
out the door because.

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From their pocket.
From their pocket because that

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initial 200 million is not all
yet spent.

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So just looking at the, you
know, in simple terms, the

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amount of money going forward
versus the proportions that were

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paid up in 2022, Iluka is
contributing a greater a greater

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portion.
And if you start to look at of

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how cash flows are going to kind
of be distributed, it gets

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pretty interesting The annual
interest charges.

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So like you said Travis super
friendly, but you know we won't

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go through the full waterfall,
but you still need to pay that

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back.
And there will be an annual

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interest charge of about $116
million per annum on the fully

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drawn debt plus accrued interest
that doesn't leave much cash

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flow from the sweep in the in
the first four years.

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So that is just using the
stockpile scenario, that

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scenario C as we showed in the
chart just before.

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And that's also making a big
assumption which we're going to

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talk about a good bit that the
ramp up goes smoothly.

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We've said it many times in the
past, rarest, rarest processing,

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just not simple by any stretch
of the imagination.

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And I think you could almost
comfortably take the other side.

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That ramp up is going to be a
smooth process here.

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Yeah, well, that's that's the
interesting point though, right?

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Is like it is, it is a big
interest rate.

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You do have to pay that back.
But keep in mind this loan is

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non recourse.
So it's like to the extent you

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know, the Australian government
has a has a claim, it's it's

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it's I think it's limited to
that refinery code.

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It doesn't extend to other good
other assets.

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Yeah, which you know the
management are keen to keen to

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point out and I think one of the
analysts sort of called it, you

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00:11:56,600 --> 00:11:59,520
know, in a sense it's an it's an
option on rare risk prices

225
00:11:59,520 --> 00:12:01,520
ticking up because you don't
have that recourse to the rest

226
00:12:01,520 --> 00:12:03,920
of your balance sheet.
Yeah, I described that tweak to

227
00:12:03,920 --> 00:12:05,760
the funding.
It's kind of like, yeah, there

228
00:12:05,760 --> 00:12:08,240
was this, this relative
relatively kind of, you know,

229
00:12:08,960 --> 00:12:11,200
commercial adjustment which
allowed for more money to go

230
00:12:11,200 --> 00:12:12,760
away.
But it wasn't, it wasn't skewed

231
00:12:12,760 --> 00:12:15,200
entirely in the government's
favour, but it was, you know,

232
00:12:15,680 --> 00:12:18,400
you're making this commercial
adjustment on an already kind of

233
00:12:18,400 --> 00:12:20,840
completely out of market
concession it.

234
00:12:21,640 --> 00:12:25,880
Was so, so friendly to, to put
it lightly, it was order of

235
00:12:25,880 --> 00:12:29,920
magnitude above any of the other
cheques we've seen written in,

236
00:12:29,920 --> 00:12:32,520
in Australia at least, you know,
the US, they throw about a fair

237
00:12:32,520 --> 00:12:35,280
bit of money to just round out
on that funding piece as well.

238
00:12:35,280 --> 00:12:37,920
There's $150 million cash
overrun facility.

239
00:12:37,920 --> 00:12:41,320
You know, it's worth mentioning
because we've already seen a not

240
00:12:41,320 --> 00:12:43,520
insignificant uptick in the
CapEx.

241
00:12:43,520 --> 00:12:47,440
So that would be split 5050
between Iluka and the

242
00:12:47,440 --> 00:12:49,000
government.
And then there's an important

243
00:12:49,000 --> 00:12:51,920
caveat as well that additional
funding is subject to offtake

244
00:12:51,920 --> 00:12:55,600
agreements that the Australian
government is happy with trading

245
00:12:55,600 --> 00:12:58,440
between the lines, not China.
So there was a good question

246
00:12:58,440 --> 00:13:00,960
that was asked about this in the
call that happened right after

247
00:13:00,960 --> 00:13:04,360
the announcement from a UBS
analyst asking where will the

248
00:13:04,360 --> 00:13:06,720
buyers emerge from?
And, you know, it's the right

249
00:13:06,720 --> 00:13:09,160
question to ask.
So Alluca came back and said

250
00:13:09,160 --> 00:13:11,360
there's a number of EV
manufacturers around the world

251
00:13:11,720 --> 00:13:15,080
looking at Korea, looking at the
US, there'll be a range of

252
00:13:15,080 --> 00:13:19,480
markets that we can sell into.
But you know, really thinking

253
00:13:19,480 --> 00:13:22,400
about who is going to buy this,
that there are no industrial

254
00:13:22,680 --> 00:13:27,000
buyers in Australia of this
project and the company.

255
00:13:27,160 --> 00:13:29,840
Of the product from the project.
Yeah, yes, yeah, yeah, that's

256
00:13:29,840 --> 00:13:31,960
right.
So the company said we're going

257
00:13:31,960 --> 00:13:34,680
to come out and announce these
off takes closer to the

258
00:13:35,160 --> 00:13:39,280
completion of the plant build.
But just looking around the

259
00:13:39,280 --> 00:13:43,440
world, right, you've got China,
we can't sell, but that is 8590%

260
00:13:43,520 --> 00:13:45,240
of the market.
Then you've got Japan.

261
00:13:45,560 --> 00:13:48,480
Japan is wrapped up by Linus.
Linus do everything they can to

262
00:13:48,480 --> 00:13:52,560
sell into Japan or sell into
Vietnam, which is kind of Japan

263
00:13:52,600 --> 00:13:55,880
owned facilities there as well.
Plus you've got MP materials the

264
00:13:56,000 --> 00:14:01,200
the US rail rest maker who are
very eager to sell into Japan

265
00:14:01,200 --> 00:14:04,760
too.
Korea and the US, they're just

266
00:14:04,760 --> 00:14:06,400
not there yet.
You know, you'd be making a big

267
00:14:06,400 --> 00:14:09,880
assumption that their markets
grow as you build this project

268
00:14:09,920 --> 00:14:13,400
and you can sell into them.
But that again is a big, big

269
00:14:13,440 --> 00:14:15,520
assumption.
So I mean, it kind of brings us

270
00:14:15,520 --> 00:14:19,200
to the Aussie government and are
they going to be the ones on the

271
00:14:19,200 --> 00:14:22,920
hook for putting up an off take
agreement and buying this after

272
00:14:22,920 --> 00:14:25,000
they wrote the massive loan?
I'm not sure if you guys have

273
00:14:25,000 --> 00:14:29,720
like thoughts on that, but it's
it's delicate situation, right?

274
00:14:30,120 --> 00:14:32,240
This is this is a big head
scratcher.

275
00:14:32,240 --> 00:14:34,840
How do you how do you, how do
you draw down your debt without

276
00:14:35,160 --> 00:14:36,640
off takes in place?
When it comes to niche

277
00:14:36,640 --> 00:14:39,480
commodities you need, you need
an off take that has some, you

278
00:14:39,480 --> 00:14:43,160
know, some degree of comfort for
the financier, which usually

279
00:14:43,160 --> 00:14:45,560
means it's got to be, you know,
the price link price flaws or

280
00:14:45,640 --> 00:14:47,960
something like that, right?
You know, you're not financing

281
00:14:47,960 --> 00:14:50,520
is not going to be comfortable
unless unless you've got like

282
00:14:50,840 --> 00:14:52,800
some degree of certainty around
what your price is actually

283
00:14:52,800 --> 00:14:55,840
going to be on on this.
I don't see where I don't see

284
00:14:55,840 --> 00:14:58,240
where they're going to be able
to get this off take from.

285
00:14:58,240 --> 00:15:02,960
But I but I have a I've been
putting together some dots and

286
00:15:03,600 --> 00:15:06,400
yeah, this is part of the reason
I get sick in my stomach about

287
00:15:06,400 --> 00:15:07,760
what could really be going on
here.

288
00:15:08,000 --> 00:15:10,240
Run us through it.
The whole financing case is is

289
00:15:10,360 --> 00:15:14,280
is based on bifurcated markets
by not not selling to to China.

290
00:15:14,280 --> 00:15:17,800
So what they assume these long
term Atomus Atomus like

291
00:15:17,800 --> 00:15:20,400
forecasts of NDPR, which is like
what like three times the

292
00:15:20,400 --> 00:15:23,200
current spot price, their
thereabouts of NDPR, which is

293
00:15:23,200 --> 00:15:27,200
like, go figure.
But I'm not I'm not sure if you

294
00:15:27,800 --> 00:15:31,480
like read the news about the the
change in the future funds

295
00:15:31,480 --> 00:15:34,880
mandate a few weeks ago, JD and
Ellie, but this was like a

296
00:15:34,920 --> 00:15:37,280
pretty divisive topic.
The future fund, Australia's,

297
00:15:37,280 --> 00:15:40,200
you know, sovereign wealth fund
supposed to be kind of changed

298
00:15:40,200 --> 00:15:43,880
its mandate to include funding
national priorities, including

299
00:15:44,400 --> 00:15:46,400
building more housing,
supporting the green energy

300
00:15:46,400 --> 00:15:48,400
transition and improving
infrastructure.

301
00:15:48,400 --> 00:15:52,200
And while that sounds a little
bit, you know, innocuous, this

302
00:15:52,200 --> 00:15:55,480
is a a big deal.
And it was understandably kind

303
00:15:55,480 --> 00:15:59,040
of divisive because of the
perception the money gets to go

304
00:15:59,040 --> 00:16:01,560
towards potentially uneconomic
pet projects of the government

305
00:16:01,600 --> 00:16:04,000
of the day.
And a few months before the

306
00:16:04,000 --> 00:16:08,400
future funds mandate changed, I
had a had someone give me a call

307
00:16:08,400 --> 00:16:11,520
and they, they, they told me
something that they'd heard on

308
00:16:11,520 --> 00:16:13,440
the Grapevine or, or word on the
decline.

309
00:16:13,640 --> 00:16:16,440
I even put it in in Word on the
decline in our daily email a few

310
00:16:16,440 --> 00:16:19,360
months ago.
But you know what, what I was

311
00:16:19,360 --> 00:16:22,720
told is that a vehicle is
expected to kind of pop up

312
00:16:22,720 --> 00:16:25,400
backed by you know money of the
future fund which will

313
00:16:25,400 --> 00:16:29,120
explicitly underwrite the off
takes of rare earth projects.

314
00:16:29,640 --> 00:16:33,440
So the future fund potentially
agreeing to underwrite the price

315
00:16:33,440 --> 00:16:36,360
and volume of production to come
out of presumably any other and

316
00:16:36,360 --> 00:16:40,000
potentially other facilities to
to, to enable kind of that

317
00:16:40,000 --> 00:16:44,040
financing case to be comfortable
at, you know, potentially, you

318
00:16:44,040 --> 00:16:46,880
know, absurd, absurd prices that
could be up to like three times

319
00:16:46,880 --> 00:16:48,880
higher than whatever their
prevailing spot prices for

320
00:16:49,120 --> 00:16:52,400
product in China, assuming that
the green premium emerges in the

321
00:16:52,400 --> 00:16:54,920
West.
That's just a a kind of a kind

322
00:16:54,920 --> 00:16:57,400
of baffling, a baffling
proposition, don't you think?

323
00:16:58,080 --> 00:17:01,120
I could not agree more.
And it becomes a mechanism for

324
00:17:01,360 --> 00:17:05,599
one government entity to to sort
of save the potential

325
00:17:05,599 --> 00:17:09,000
embarrassment of another one
because they've made a hugely an

326
00:17:09,000 --> 00:17:11,760
economic bet.
And it brings out the question,

327
00:17:11,760 --> 00:17:15,480
should the future fund be
completely separate from the

328
00:17:15,480 --> 00:17:18,680
government just like a central
bank should be?

329
00:17:19,319 --> 00:17:22,480
Or is it going to be used for
the government of the day,

330
00:17:22,480 --> 00:17:25,480
whoever that might be, to fund
any sort of project at their

331
00:17:25,480 --> 00:17:28,600
whim that they want?
And you know it, it sets off

332
00:17:28,600 --> 00:17:31,160
massive alarm bells because the
future fund is, you know, it's

333
00:17:31,160 --> 00:17:33,080
the, it's the money of the
Australian people.

334
00:17:33,200 --> 00:17:35,920
It should be invested in the
future for the best return

335
00:17:35,920 --> 00:17:37,320
possible for the Australian
people.

336
00:17:37,320 --> 00:17:39,600
You'd hope you get a fucking
compound interest return on

337
00:17:39,600 --> 00:17:42,800
that, not just like throwing it
at things that you know what

338
00:17:42,960 --> 00:17:47,000
under it's anyway.
Like this is still like weird on

339
00:17:47,000 --> 00:17:48,920
the decline that this would
happen, but if it does come to

340
00:17:48,920 --> 00:17:51,320
fruition I'll be particularly
fucking pissed off mate.

341
00:17:51,320 --> 00:17:53,520
Like as a taxpayer, what a
fucking joke.

342
00:17:54,640 --> 00:17:58,520
If it if it sees the light of
day, though, it's sort of would

343
00:17:58,520 --> 00:18:02,320
explain why our Luca may be so
adamant about pushing ahead with

344
00:18:02,320 --> 00:18:04,600
the project.
I think they've sold off 10%.

345
00:18:04,600 --> 00:18:07,040
I think a lot of the, the
rhetoric and and commentary

346
00:18:07,040 --> 00:18:08,720
about it is this project
uneconomic?

347
00:18:08,720 --> 00:18:11,400
Why are you pushing ahead with,
with financing?

348
00:18:11,400 --> 00:18:13,040
It makes no sense, right?
And.

349
00:18:13,400 --> 00:18:15,240
Do they know something We.
Don't do they know something we

350
00:18:15,240 --> 00:18:18,120
don't?
I look isn't run by numbers like

351
00:18:18,320 --> 00:18:20,440
I look as directors for decades
have had a lot of connections

352
00:18:20,440 --> 00:18:23,600
with W farmers, right?
Tom O'Leary, the current CEO

353
00:18:23,640 --> 00:18:30,160
since 2016 ex W farmers and and
as we can see report in the West

354
00:18:30,160 --> 00:18:32,840
last week, W farmers are even
exploring for rare earths in the

355
00:18:32,840 --> 00:18:35,120
gold fields themselves.
Like none of this capital

356
00:18:35,120 --> 00:18:39,200
allocation makes much sense, and
Wesley's pride themselves on

357
00:18:39,640 --> 00:18:42,240
being best in business at
capital allocation doesn't make

358
00:18:42,240 --> 00:18:44,400
sense unless you have high
conviction about the government

359
00:18:44,640 --> 00:18:48,480
underwriting higher prices,
hence underwriting their

360
00:18:48,480 --> 00:18:51,600
downside.
So the thing like the thing that

361
00:18:51,600 --> 00:18:55,040
sort of confused me about all
this and I guess a bit of a

362
00:18:55,040 --> 00:18:59,160
question a lot to put to you to
is, you know, everyone's always

363
00:18:59,160 --> 00:19:04,680
banging on about Australia needs
to, you know, invest and develop

364
00:19:04,680 --> 00:19:09,280
its downstream, you know,
capabilities and industries and

365
00:19:09,280 --> 00:19:13,520
things like that.
You know, which would inevitably

366
00:19:13,520 --> 00:19:16,480
involves some sort of, you know,
government, you know, assistance

367
00:19:16,480 --> 00:19:19,480
or incentives or in some sort of
form.

368
00:19:20,160 --> 00:19:23,640
But then trying to reconcile and
balance that with, as you guys

369
00:19:23,640 --> 00:19:26,800
have talked about, sensible
capital allocation.

370
00:19:28,280 --> 00:19:33,280
If if this is not the right way
or the best, the best way to go

371
00:19:33,280 --> 00:19:36,360
about setting up these
industries and investing in

372
00:19:36,360 --> 00:19:40,480
these industries in Australia,
how else, how else can we do it?

373
00:19:40,480 --> 00:19:44,840
Is there is there other ideas or
ways we could go about it?

374
00:19:46,000 --> 00:19:51,960
This is a picking winners
strategy, right And I think the

375
00:19:51,960 --> 00:19:56,320
way we've spoken about it in the
past which I stood a standby is

376
00:19:56,320 --> 00:19:59,440
setting up the infrastructure if
you are going to allocate the

377
00:19:59,440 --> 00:20:02,640
capital to have.
You know, it be to the benefit

378
00:20:02,640 --> 00:20:06,480
of a market based sort of system
that can still sort of allocate

379
00:20:06,480 --> 00:20:10,200
capital effectively as opposed
to just allocating 2 billion

380
00:20:10,200 --> 00:20:13,200
bucks to a project and saying
here you go try and try and make

381
00:20:13,200 --> 00:20:15,360
it happen.
That's in in an in a nutshell,

382
00:20:15,720 --> 00:20:18,360
how I kind of think about it.
The price mechanism is a

383
00:20:18,360 --> 00:20:23,160
tremendous tool at, at, you
know, at filtering what is and

384
00:20:23,160 --> 00:20:27,720
isn't financeable and, and, and
do we want to distort the price

385
00:20:27,720 --> 00:20:29,320
mechanism?
Well, guess what, we're going to

386
00:20:29,320 --> 00:20:32,680
end up like regretting that with
taxpayer money.

387
00:20:32,680 --> 00:20:34,960
Like to your point exactly,
there's, there's two things that

388
00:20:35,400 --> 00:20:37,280
we could do.
And you know, we, we had a

389
00:20:37,280 --> 00:20:40,720
conversation like like before,
before turning on to these exact

390
00:20:40,720 --> 00:20:44,400
two points #1 why, why, why
would we be uncompetitive in

391
00:20:44,400 --> 00:20:46,440
this industry?
A huge part of it is our

392
00:20:46,440 --> 00:20:50,600
nonsensical energy, energy black
landscape in Australia and WA.

393
00:20:50,720 --> 00:20:51,880
It's baffling.
Its bizarre.

394
00:20:52,320 --> 00:20:54,400
East Coast, no exception.
East Coast, no exception.

395
00:20:54,400 --> 00:20:56,920
We should focus on an energy
abundance that actually gives us

396
00:20:56,920 --> 00:20:59,440
a, you know, a competitive
downstream industry in the 1st

397
00:20:59,440 --> 00:21:01,280
place.
There is no way we would have a

398
00:21:01,280 --> 00:21:06,080
competitive downstream industry
in in WA with with our like

399
00:21:06,520 --> 00:21:09,920
without without cost of energy.
Like unless you focused on like

400
00:21:09,920 --> 00:21:13,080
energy abundance, all forms of
energy and like invested reduce

401
00:21:13,080 --> 00:21:15,440
the timelines to make that
happen, like real capital

402
00:21:15,440 --> 00:21:17,560
investment in in energy
projects.

403
00:21:17,560 --> 00:21:21,000
Then like, like say goodbye to,
to, to that proposition and the,

404
00:21:21,080 --> 00:21:26,280
the other, the other point is
like on creating the settings

405
00:21:26,280 --> 00:21:29,040
that enable the private sector
to make its own investment

406
00:21:29,040 --> 00:21:30,840
decisions which stack up on its
own merit.

407
00:21:31,120 --> 00:21:34,120
What does that look like?
Well, you know, an example is,

408
00:21:34,120 --> 00:21:36,560
is what Indonesia's done with,
with Marwali, right?

409
00:21:36,840 --> 00:21:40,240
We had 53 joint ventures.
Are there they, they provided,

410
00:21:40,720 --> 00:21:43,640
you know, a special economic
zone, which, which enabled like

411
00:21:43,640 --> 00:21:46,760
tax breaks for a tax holiday of
like 7 years that encouraged

412
00:21:48,240 --> 00:21:51,400
phenomenal capital investment to
really build out a downstream

413
00:21:51,400 --> 00:21:55,080
industrial sector there, which,
which like, you know, it's, it's

414
00:21:55,080 --> 00:21:58,240
just got like that's the private
sector moving.

415
00:21:58,240 --> 00:22:01,560
The private sector is, is, is
like looking OK, the settings

416
00:22:01,560 --> 00:22:03,680
are right for us to make
investment decisions in this

417
00:22:03,680 --> 00:22:05,800
area.
You saw that in, in, you know

418
00:22:06,080 --> 00:22:08,560
what the, what Rio Tinto and
both BHP have talked about

419
00:22:08,560 --> 00:22:11,760
investing in, in Argentina in
the, in the last six months.

420
00:22:12,040 --> 00:22:13,960
It's the policy settings in
Argentina that are very

421
00:22:13,960 --> 00:22:16,080
attractive right now and it's
why they're comfortable

422
00:22:16,080 --> 00:22:18,600
investing in, in that
jurisdiction in that country.

423
00:22:18,920 --> 00:22:22,320
We've got the exact opposite
situation in, in most of

424
00:22:22,320 --> 00:22:24,480
Australia.
It's completely unattractive to

425
00:22:25,000 --> 00:22:27,680
commit significant like private
capital for projects when you

426
00:22:27,680 --> 00:22:31,440
have uncertainty, high cost of
energy, like, you know, tax

427
00:22:31,440 --> 00:22:33,680
regimes and royalties that keep
going higher and higher.

428
00:22:34,120 --> 00:22:36,200
There's there's there's no
incentive for the private sector

429
00:22:36,200 --> 00:22:38,520
to like, like, you know, come up
with it's private projects that

430
00:22:38,520 --> 00:22:40,760
stack up on its own merit.
Focus on that and you'll have an

431
00:22:40,760 --> 00:22:43,040
abundance of competitive
projects that all want to like

432
00:22:43,040 --> 00:22:45,200
come and invest in their own, do
their own thing.

433
00:22:45,240 --> 00:22:49,040
But if it doesn't stack up on
private metrics, then you just

434
00:22:49,040 --> 00:22:53,560
like limit yourself to like
perpetual subsidisation of of

435
00:22:53,560 --> 00:22:55,320
something that will never be
competitive in the long run.

436
00:22:55,320 --> 00:22:57,840
Like that's not good for anyone.
It's like, should the government

437
00:22:57,840 --> 00:23:00,840
pay people to just dig a hole?
Like, no, it's got to be

438
00:23:00,840 --> 00:23:04,560
productive.
Yeah, agreed that the money's

439
00:23:04,560 --> 00:23:06,280
going to come somewhere at the
end of the day and it comes from

440
00:23:06,280 --> 00:23:08,840
the tax base pocket.
So to to continue on with that

441
00:23:08,840 --> 00:23:11,080
and to make it, you know, draw
it back in with Ilook and the

442
00:23:11,080 --> 00:23:14,720
project, we should provide the,
the economics and how they kind

443
00:23:14,720 --> 00:23:16,960
of stand in the scenarios that
the company is given.

444
00:23:17,880 --> 00:23:19,480
There's a few really important
pieces here.

445
00:23:19,480 --> 00:23:22,400
So obviously you've got the
price assumptions, then plant

446
00:23:22,400 --> 00:23:24,320
utilisation.
It's different under each

447
00:23:24,320 --> 00:23:28,400
scenario as we've been through,
but that is a super, it's a high

448
00:23:28,600 --> 00:23:33,400
sensitivity aspect of whether
the economics stack up here and

449
00:23:33,400 --> 00:23:35,480
commissioning.
Another one we'll touch on in a

450
00:23:35,480 --> 00:23:37,960
moment.
We'll start quickly with the,

451
00:23:38,000 --> 00:23:40,880
the revised economics is
Elucasies and just read out a

452
00:23:40,880 --> 00:23:43,600
couple points.
So they're using 8.25% discount

453
00:23:43,600 --> 00:23:45,960
rate.
You've got 2 broad scenarios,

454
00:23:45,960 --> 00:23:48,440
pricing scenarios that is.
The first one is this Adamus

455
00:23:48,440 --> 00:23:51,720
one, which we've commented on a
few Times Now.

456
00:23:51,920 --> 00:23:56,240
They are a price forecaster and
you know by and large they are

457
00:23:56,840 --> 00:24:00,040
higher prices than the second
scenario, which is the 10 year

458
00:24:00,040 --> 00:24:03,280
average price.
So just quickly, under scenario

459
00:24:03,280 --> 00:24:07,280
A, you've got $1.7 billion,
under scenario B you've got 3.3

460
00:24:07,280 --> 00:24:10,720
billion, and under scenario C
you've got $870 million.

461
00:24:11,240 --> 00:24:15,160
Then under the 10 year average
price assumption, the economics

462
00:24:15,160 --> 00:24:18,320
fall back dramatically.
You've got $650 million in

463
00:24:18,320 --> 00:24:23,840
scenario A, 1.9 billion scenario
B and $230 million in scenario C

464
00:24:24,280 --> 00:24:28,240
noting that the scenarios
exclude the $320 million that

465
00:24:28,240 --> 00:24:32,240
have already been spent, so they
are MPVS from this point in

466
00:24:32,240 --> 00:24:34,880
time, not taking into account
the sunk capital.

467
00:24:34,880 --> 00:24:36,240
Well, it's been already done,
yeah.

468
00:24:36,240 --> 00:24:38,960
And to be clear, all these
scenarios now include the

469
00:24:39,400 --> 00:24:42,680
processing of monozite
concentrate from Bell Reynold as

470
00:24:42,680 --> 00:24:44,160
well.
All of them.

471
00:24:44,240 --> 00:24:45,720
All of them include Bell
Reynolds as well.

472
00:24:45,720 --> 00:24:46,680
Ally.
Yeah, yeah, yeah, yeah.

473
00:24:47,080 --> 00:24:50,480
And Bell Reynold isn't your
usual kind of mineral sands

474
00:24:50,480 --> 00:24:53,240
mine, is it, Trev?
It's it's actually, yeah.

475
00:24:53,240 --> 00:24:56,440
It's like different conventional
mineral sands operation that the

476
00:24:56,440 --> 00:24:58,280
norm is, is like, you know,
surface mining.

477
00:24:58,280 --> 00:25:00,280
You see that a lot like kind of
be down South.

478
00:25:00,440 --> 00:25:03,360
The other, the other common some
type of mining is dredge mining

479
00:25:03,360 --> 00:25:05,400
with with mineral sands.
Like, you know, Tronox does a

480
00:25:05,400 --> 00:25:06,720
fair bit of that over E for
example.

481
00:25:06,720 --> 00:25:09,520
But bell rental is is neither of
those two.

482
00:25:10,480 --> 00:25:13,440
It's it's, it's actually quite a
lot higher grade than the the,

483
00:25:13,480 --> 00:25:16,320
you know, the typical mineral
sands project that comes online

484
00:25:16,320 --> 00:25:18,360
these days, But it's that's
because it's underground.

485
00:25:19,440 --> 00:25:21,120
Yeah, right.
Underground mineral sands mine.

486
00:25:21,400 --> 00:25:23,080
Jeez, you want to make sure
they've got some sand, big

487
00:25:23,080 --> 00:25:24,600
ground sport all over that
joint.

488
00:25:25,360 --> 00:25:28,680
I would have thought so Ally, I
would have, but the mining

489
00:25:28,680 --> 00:25:32,840
method is it's a bit bit funky
to you know what we used to talk

490
00:25:32,840 --> 00:25:34,360
about.
I'll read this from the DFS.

491
00:25:34,360 --> 00:25:37,520
It says a novel internally
developed underground mining

492
00:25:37,520 --> 00:25:40,440
method utilising directional
drilling technology has been

493
00:25:40,440 --> 00:25:42,680
developed.
It says underground mining will

494
00:25:42,680 --> 00:25:47,480
use mining unit plant MUP and
ancillaries, mobile mining plant

495
00:25:47,480 --> 00:25:50,480
MMP and subsurface equipment.
So you're not, you're not like

496
00:25:50,480 --> 00:25:53,160
using a jumbo kind of thing
alley these, you know, it's

497
00:25:53,160 --> 00:25:56,440
these big kind of bulks
processing infrastructure, but

498
00:25:57,000 --> 00:25:59,920
you could be on to something I
think because I also read this

499
00:25:59,920 --> 00:26:03,280
bit in the DFS, it says an area
of poor geotechnical conditions

500
00:26:03,280 --> 00:26:05,440
has been identified in a
geological zone above some

501
00:26:05,440 --> 00:26:09,280
sections of the ore body.
Mining this material during T3

502
00:26:09,280 --> 00:26:11,800
proved problematic and it's
estimated that only 30% of ore

503
00:26:11,800 --> 00:26:13,960
was recovered in the trial.
There's also this bit here I

504
00:26:13,960 --> 00:26:15,800
read too.
It said Stokes are designed with

505
00:26:15,800 --> 00:26:17,720
one metre pillars separating
each stoke.

506
00:26:17,720 --> 00:26:20,840
Every 10 Stokes make a panel
with one stoke left in situ for

507
00:26:20,840 --> 00:26:24,360
ground support between each
panel Geo ticket issues leading

508
00:26:24,360 --> 00:26:27,720
to to poor or recovery in situ
Stokes for ground support.

509
00:26:27,720 --> 00:26:30,960
If if anything can can fix that
alley, you know what can.

510
00:26:31,280 --> 00:26:33,360
It's sandpit ground support they
can do.

511
00:26:33,400 --> 00:26:36,200
It's in the name, literally
ground support.

512
00:26:36,360 --> 00:26:39,240
I mean, and then now they've
even got that new odour free

513
00:26:39,240 --> 00:26:41,840
resin that Maddie's been telling
everybody about.

514
00:26:41,840 --> 00:26:43,480
How good's that?
Excellent points.

515
00:26:43,600 --> 00:26:45,360
It's not.
It's not just meshing bolts,

516
00:26:45,440 --> 00:26:48,520
alley injection resins and
foams, mineral products for rock

517
00:26:48,600 --> 00:26:50,680
reinforcement, resin, capsules
and other chemicals.

518
00:26:51,400 --> 00:26:53,920
Love it.
Hit up Derek Heard from Sandvik

519
00:26:53,920 --> 00:26:56,680
Ground Sport.
Get one more Sandvik order in

520
00:26:56,680 --> 00:26:58,760
before Christmas.
Go Sandvik.

521
00:26:58,960 --> 00:27:00,280
Thanks guys.
Cheers, Derek.

522
00:27:00,840 --> 00:27:02,240
All righty.
So we got to talk a bit more

523
00:27:02,240 --> 00:27:05,760
about pricing.
This is a super, super important

524
00:27:06,040 --> 00:27:11,200
detail, very pricing.
Prices rather are very depressed

525
00:27:11,240 --> 00:27:12,360
at the moment.
No secret.

526
00:27:12,360 --> 00:27:15,800
You listen to any Linus call or
a Luca call for that matter over

527
00:27:15,800 --> 00:27:19,440
the the past few quarters, past
couple years now.

528
00:27:19,440 --> 00:27:21,680
And yeah, you hear it all the
time.

529
00:27:21,680 --> 00:27:23,360
So Aloka have been encouraging
everyone.

530
00:27:23,360 --> 00:27:24,960
They said it again on the call
on Friday.

531
00:27:25,160 --> 00:27:26,960
They actually contract with
buyers.

532
00:27:26,960 --> 00:27:30,600
Now that kind of gets back to
the green premium and all these

533
00:27:30,600 --> 00:27:33,040
sorts of things that we've
touched on already.

534
00:27:33,040 --> 00:27:36,640
But for those that don't follow
rare earths closely, it's a

535
00:27:36,640 --> 00:27:39,000
highly, highly manipulated
market.

536
00:27:39,000 --> 00:27:42,840
It is dominated by China.
We're talking 90% China

537
00:27:43,160 --> 00:27:46,280
dominated.
And the NDPI price right now is

538
00:27:46,280 --> 00:27:48,800
about US 58 bucks last time I
looked per kilo.

539
00:27:49,080 --> 00:27:53,080
That includes VAT.
That said, you've got to make a

540
00:27:53,080 --> 00:27:56,560
price assumption when you're
putting out a study like this.

541
00:27:56,560 --> 00:28:00,800
So at current prices, any Abbott
does not make any money.

542
00:28:01,240 --> 00:28:05,680
And the question to ask is how
do Iluka have the confidence

543
00:28:05,920 --> 00:28:08,760
that they will receive an
economic price so that they can

544
00:28:09,160 --> 00:28:12,080
make FID or continue building
the project.

545
00:28:12,080 --> 00:28:14,680
And I know they're getting a
very, very friendly loan as

546
00:28:14,680 --> 00:28:17,120
we've touched on, but they are
still putting hundreds of

547
00:28:17,120 --> 00:28:19,440
millions of dollars on the table
here.

548
00:28:19,440 --> 00:28:22,400
And you hope they're not
suffering from any sort of sunk

549
00:28:22,400 --> 00:28:27,600
cost fallacy.
I should say we rather, and I

550
00:28:27,600 --> 00:28:30,000
really hope we're not suffering
from any kind of sunk cost

551
00:28:30,200 --> 00:28:33,160
fallacy here and I and I use the
word we pretty deliberately

552
00:28:33,160 --> 00:28:37,040
because our government again is
contributing hugely.

553
00:28:37,040 --> 00:28:40,480
Taxpayers should be asking the
question, is it right for

554
00:28:40,600 --> 00:28:43,120
Australia to write a cheque of
this sort of magnitude?

555
00:28:43,120 --> 00:28:47,720
The the life of mine NDPR price
assumptions for scenario A&B are

556
00:28:48,000 --> 00:28:53,280
US $148 a kilo, bearing in mind
I just said 58 bucks is where

557
00:28:53,280 --> 00:28:57,840
we're at right now.
For scenario C, it's US $129 a

558
00:28:57,840 --> 00:29:01,120
kilo, but that is more than
double, you know, nearly sort of

559
00:29:01,120 --> 00:29:05,360
triple in the prices we're at.
And as we kind of touched on,

560
00:29:05,360 --> 00:29:07,600
maybe the company pulls a rabbit
out of the hat.

561
00:29:07,720 --> 00:29:11,040
It's it's very hard to see in
terms of an off take.

562
00:29:11,360 --> 00:29:13,440
I just don't know where that
kind of comes from.

563
00:29:14,000 --> 00:29:18,480
How does how does assuming like
those those prices long term

564
00:29:18,480 --> 00:29:21,600
price assumptions?
How is it a financing case to

565
00:29:21,600 --> 00:29:25,240
assume prices bifurcate?
Like, how is that a financing

566
00:29:25,240 --> 00:29:28,400
case?
Like, like, like who who's

567
00:29:28,440 --> 00:29:30,960
making these decisions?
It's just like it's nonsensical

568
00:29:30,960 --> 00:29:32,480
in my opinion.
I think they the only reason

569
00:29:32,480 --> 00:29:34,400
they can do it is if they, if
they have line of sight to.

570
00:29:34,880 --> 00:29:36,640
Yeah, like the government
underwriting the off day.

571
00:29:36,800 --> 00:29:42,000
They just love to be a fly on
the wall there and hear whether

572
00:29:42,000 --> 00:29:45,320
they actually seriously spoke
about not going ahead with the

573
00:29:45,320 --> 00:29:48,640
rest of the build, $320 million
has already been spent.

574
00:29:49,080 --> 00:29:50,960
It's not a negligible amount of
money.

575
00:29:51,280 --> 00:29:54,360
It's, you know, it would be to
the detriment of Aluca as well

576
00:29:54,360 --> 00:29:59,480
as the taxpayer, but you, you
don't really get the impression

577
00:29:59,480 --> 00:30:02,480
that that was seriously
considered at all.

578
00:30:02,960 --> 00:30:06,920
There's just so many, like
assumptions on assumptions on

579
00:30:06,960 --> 00:30:08,640
assumptions here.
Like a lot.

580
00:30:08,640 --> 00:30:10,080
A lot of things have to go
right.

581
00:30:10,080 --> 00:30:13,560
And who knows, maybe the rarest
price will get that one day.

582
00:30:14,520 --> 00:30:17,960
Who will wait to comment or know
that you know it's but the

583
00:30:17,960 --> 00:30:19,800
thing.
Is your financing case like?

584
00:30:19,840 --> 00:30:23,920
But it's yeah, to use that as
your sort of base case price,

585
00:30:24,920 --> 00:30:29,160
you know, in a, in a model to,
to make a decision on this where

586
00:30:29,160 --> 00:30:32,760
I don't know if you'd call it
spot, but perhaps the whatever

587
00:30:32,760 --> 00:30:37,600
the current prices are today, it
makes you a bit nervous, right?

588
00:30:38,080 --> 00:30:41,040
And that's yes, they've got this
extra money in the door, which,

589
00:30:41,360 --> 00:30:46,480
OK, that's all lovely.
But all these, you know,

590
00:30:46,600 --> 00:30:50,040
projected economics and things
like that are still on the basis

591
00:30:50,160 --> 00:30:54,720
of these prices two to three
times without today, not as at

592
00:30:54,720 --> 00:30:57,720
today A. 100% your base case
scenario is double.

593
00:30:58,200 --> 00:31:01,680
It's double it's and you know,
the analysts were really

594
00:31:01,920 --> 00:31:05,000
touching on this in the in the
questions they were asking.

595
00:31:05,000 --> 00:31:07,480
So Glenn Lawcock from Barry and
Joey, he asked some great

596
00:31:07,480 --> 00:31:10,120
questions and he was really
quizzing management on these

597
00:31:10,280 --> 00:31:13,320
points, sort of getting at how
long is the market going to be

598
00:31:13,440 --> 00:31:17,440
in the dark on whether this
project makes money, IE when are

599
00:31:17,440 --> 00:31:20,600
we going to get an uptake, an
update on the offtakes.

600
00:31:21,160 --> 00:31:24,640
So you know, if you look at the
the analysts, what they've kind

601
00:31:24,640 --> 00:31:28,080
of said or what they're
reporting, any other is carrying

602
00:31:28,080 --> 00:31:33,000
a negligible or negative in some
cases value in the NAV

603
00:31:33,200 --> 00:31:35,520
assessments that a lot of the
equity research analysts have

604
00:31:35,560 --> 00:31:37,720
have put out and.
That's even including the, you

605
00:31:37,720 --> 00:31:39,280
know, the the generous
concessions.

606
00:31:39,280 --> 00:31:42,200
They're basically saying, yeah,
the including the NAV to Iluka

607
00:31:42,200 --> 00:31:44,040
per share is negative.
Yeah, and.

608
00:31:45,000 --> 00:31:50,280
The the long term consensus for
a lot of these analysts is 20-30

609
00:31:50,280 --> 00:31:52,200
bucks higher from where we are
today.

610
00:31:52,200 --> 00:31:57,080
So you know, let let alone at
what spot is right now and it's.

611
00:31:57,320 --> 00:32:00,560
Still a fair bit lower than what
seems to be assumed.

612
00:32:00,800 --> 00:32:02,960
Than what the company has
assumed yeah, yeah, that that

613
00:32:02,960 --> 00:32:04,480
that's right.
And the company again they'll

614
00:32:04,480 --> 00:32:07,320
they'll point to this growing
market they put a number of

615
00:32:07,320 --> 00:32:10,880
slides in the the presentation
comparing 2024 the size of the

616
00:32:10,880 --> 00:32:15,080
market to 2035.
They spoke to this in the in the

617
00:32:15,080 --> 00:32:17,800
Q&A.
Again, like you said Ali,

618
00:32:17,920 --> 00:32:21,800
another big assumption to just
assume that the market grows to

619
00:32:21,800 --> 00:32:26,960
this very, very big level.
And you know what you're banking

620
00:32:26,960 --> 00:32:31,000
on massive EV adoption and wind
turbine adoption amongst the

621
00:32:31,000 --> 00:32:33,840
other, you know, uses of these
these magnets.

622
00:32:33,840 --> 00:32:39,840
And I mean, forecasting anything
11 years out is it's almost a

623
00:32:39,840 --> 00:32:41,760
mug's game, right?
It's super, super hard.

624
00:32:41,760 --> 00:32:46,440
Like forecasting commodity
prices is very hard.

625
00:32:46,440 --> 00:32:49,280
That's why we look at where we
are in in the cost curve and in

626
00:32:49,280 --> 00:32:51,280
the cycle.
And you can't really do that

627
00:32:51,280 --> 00:32:54,960
with this stuff because there's
not really a normal cycle.

628
00:32:54,960 --> 00:32:56,880
Very tricky because it's so
manipulated.

629
00:32:56,880 --> 00:32:59,640
So yeah, again, I think we kind
of come back to the point.

630
00:32:59,640 --> 00:33:02,200
Maybe there are details and
maybe we're talking way out of

631
00:33:02,200 --> 00:33:03,800
school because there's things
we're just not Privy to.

632
00:33:03,800 --> 00:33:06,760
Maybe, maybe there are
agreements that the company has

633
00:33:06,760 --> 00:33:09,360
come out with, you know, with.
Well, even if that's the case,

634
00:33:09,360 --> 00:33:12,360
like it's either it either makes
no sense from a capital

635
00:33:12,360 --> 00:33:16,080
allocation perspective from our
Luca, or it makes no sense from

636
00:33:16,080 --> 00:33:17,680
a capital allocation perspective
for the taxpayer.

637
00:33:17,680 --> 00:33:19,600
Either one, you've got to ask
questions like, what the fuck's

638
00:33:19,600 --> 00:33:20,960
going on here?
Yeah.

639
00:33:20,960 --> 00:33:23,280
And, and, and if the government
does like kind of underwrite it

640
00:33:23,280 --> 00:33:26,520
or the taxpayer underwrites it,
maybe maybe that's because they,

641
00:33:26,600 --> 00:33:29,560
they can underwrite, they've got
these agreements to distribute

642
00:33:29,560 --> 00:33:30,840
these strategic stockpiles to
the West.

643
00:33:30,840 --> 00:33:32,720
And this is going to be the
source of strategic stockpiles

644
00:33:32,720 --> 00:33:36,880
of like an NDPR oxide like and
there's your bifurcated market.

645
00:33:36,960 --> 00:33:37,720
Yeah, great.
Thanks.

646
00:33:37,880 --> 00:33:39,600
Cool.
How about, how about telling

647
00:33:39,600 --> 00:33:41,680
that to us?
Like, just not, you know,

648
00:33:41,920 --> 00:33:43,000
there's a lot to be filled in
here.

649
00:33:43,040 --> 00:33:45,840
That, that stockpile point is
one that that comes up and up

650
00:33:45,840 --> 00:33:48,640
and up and it's something the
Chinese have done, you know,

651
00:33:49,040 --> 00:33:50,680
very well.
They've been great over the past

652
00:33:51,120 --> 00:33:53,760
two decades.
It just hoovering up commodities

653
00:33:53,760 --> 00:33:57,480
when they're, they're at Lowe's.
There's not, not the situation

654
00:33:57,480 --> 00:33:59,080
here.
It's not really how it's been

655
00:33:59,240 --> 00:34:00,920
pictured.
You wouldn't be scooping up

656
00:34:00,920 --> 00:34:03,760
prices when they are super low.
You know, the Australian

657
00:34:03,760 --> 00:34:04,920
government would almost do
better.

658
00:34:04,920 --> 00:34:08,280
Just don't buy them now if they
can be getting them, getting

659
00:34:08,280 --> 00:34:13,639
them a bit cheaper.
So yeah, it's a it's a it's a

660
00:34:13,639 --> 00:34:15,880
super interesting one, right?
And it's even more fascinating

661
00:34:15,880 --> 00:34:18,719
in the context of the the news
in the in the past week or so

662
00:34:18,719 --> 00:34:21,600
with gallium, germanium and
antimony, again, you know,

663
00:34:22,159 --> 00:34:26,120
making headlines, just
highlighting that these product,

664
00:34:26,199 --> 00:34:29,920
these byproduct minerals are,
you know, strategically

665
00:34:29,920 --> 00:34:35,679
important around the world and
China, their ideology, we'll use

666
00:34:35,679 --> 00:34:39,320
these as utensils as sort of
pawns in a trade war.

667
00:34:39,320 --> 00:34:45,880
So these things are important,
but I'm not sure from the

668
00:34:45,880 --> 00:34:51,440
perspective of an ASX listed
company Pressing Go on a project

669
00:34:51,440 --> 00:34:54,199
like this with these sort of
assumptions makes complete sense

670
00:34:54,199 --> 00:34:56,920
to me.
I think the other point you, you

671
00:34:56,920 --> 00:34:59,680
know, we should really hone in
on, it's just like the

672
00:34:59,680 --> 00:35:02,520
assumptions on commissioning,
Like JD, this is an area where

673
00:35:02,720 --> 00:35:06,120
there's a tremendous amount of
risk in the spreadsheet, like

674
00:35:06,240 --> 00:35:08,840
not just not just commissioning,
by the way, but also just CapEx

675
00:35:08,840 --> 00:35:11,360
blowouts, like CapEx already
blown out.

676
00:35:11,360 --> 00:35:16,320
Like these, these projects
absolutely renowned for more and

677
00:35:16,320 --> 00:35:18,080
more CapEx blowouts.
Wouldn't surprise me to see that

678
00:35:18,080 --> 00:35:20,200
blowout again.
And what does that do to your

679
00:35:20,680 --> 00:35:24,560
Yeah, yeah, economics kills it.
But on commissioning you, you,

680
00:35:24,600 --> 00:35:26,200
you guys know about McNulty
curves?

681
00:35:26,200 --> 00:35:27,640
Oh.
Gee, it's been a while since

682
00:35:27,680 --> 00:35:30,480
we've talked about them.
Give us the rundown, Trev, for

683
00:35:30,480 --> 00:35:32,680
those who aren't familiar with
those.

684
00:35:32,880 --> 00:35:35,280
McNulty curves in in, you know,
mining ramp up.

685
00:35:35,280 --> 00:35:39,360
They used to model like the time
and efficiency required to to

686
00:35:39,360 --> 00:35:42,400
bring an operation from kind of,
you know, like the point it

687
00:35:42,400 --> 00:35:44,760
starts that when the plants
turned on into into full

688
00:35:44,760 --> 00:35:46,040
production, like how long does
it take?

689
00:35:46,320 --> 00:35:48,080
So like.
And importantly, the the steady

690
00:35:48,080 --> 00:35:49,920
state, yeah, you get to.
Get to how?

691
00:35:49,960 --> 00:35:51,640
How long does it take to get to
nameplate right?

692
00:35:51,640 --> 00:35:54,640
Like ramp up typically follows
this sort of like sigmoid S

693
00:35:54,840 --> 00:35:58,560
shaped curve starting sort of
slowly as you know, equipment's

694
00:35:58,560 --> 00:36:01,880
tested in that commissioning and
then and processes are refined,

695
00:36:01,880 --> 00:36:04,880
sort of accelerating as
efficiency improves and then

696
00:36:04,920 --> 00:36:07,640
like eventually kind of
levelling and tapering off at a

697
00:36:07,640 --> 00:36:09,960
steady state.
Like you talked about JD, but

698
00:36:09,960 --> 00:36:13,880
the these McNulty curve, they
put the time from the plant

699
00:36:13,880 --> 00:36:16,320
turning on versus, you know, the
plant output percentage of

700
00:36:16,320 --> 00:36:20,480
nameplate on the Y axis.
And the research on these, you

701
00:36:20,480 --> 00:36:23,720
know, McNulty curves kind of
categorises them into into four

702
00:36:23,720 --> 00:36:26,640
types of of curves.
Top one curves model the the

703
00:36:26,640 --> 00:36:29,840
ramp up of well established
processing facilities in

704
00:36:29,840 --> 00:36:32,520
locations where the technical
expertise is abundant.

705
00:36:32,520 --> 00:36:35,600
It's a well Trotten path.
You know, people, people who

706
00:36:35,600 --> 00:36:37,000
know what they're doing and
doing the job.

707
00:36:37,240 --> 00:36:40,320
And and then they then you can
expect these type 1 curves.

708
00:36:40,320 --> 00:36:43,280
Think conventional kind of gold
plants in, in WA.

709
00:36:43,280 --> 00:36:46,680
So you, you ramp up pretty fast
to nameplate honky Dory.

710
00:36:46,680 --> 00:36:48,600
You know, it's happy, happy
days.

711
00:36:48,800 --> 00:36:54,200
Then type 4 models the ramp up
of complex processing techniques

712
00:36:54,200 --> 00:36:58,280
for advanced commodities or
processing in in regions that

713
00:36:58,280 --> 00:37:01,360
also do not have inherent
technical expertise in these

714
00:37:01,360 --> 00:37:03,680
areas.
And, you know, built by

715
00:37:03,680 --> 00:37:06,280
contractors who maybe you know,
haven't, haven't built something

716
00:37:06,280 --> 00:37:08,600
like this before.
Think, think the, you know,

717
00:37:08,600 --> 00:37:13,400
lithium hydroxide facilities in
WA Type 4 curves are, are still

718
00:37:13,400 --> 00:37:17,440
in ramp up in, in year 3 and
they're still in ramp up three

719
00:37:17,440 --> 00:37:20,080
years after the plant turns on.
And they never actually get get

720
00:37:20,080 --> 00:37:22,360
to the name plate number that
was supposed to, they get to

721
00:37:22,360 --> 00:37:27,120
like far, far, far left less of
that over time, you know,

722
00:37:27,840 --> 00:37:32,040
processing methods and plants,
they can become, you know,

723
00:37:32,320 --> 00:37:34,520
better understood.
And a curve that was once a type

724
00:37:34,520 --> 00:37:37,560
4 can become a type one.
That's what happened with H

725
00:37:37,560 --> 00:37:40,880
pals, the 1st generation of
those H pal plants.

726
00:37:40,880 --> 00:37:43,360
You know, I think the ones in WA
Ravens thought Mara Mara and

727
00:37:43,360 --> 00:37:46,920
Coors Bulong, they were, they
were type 4 big disappointments.

728
00:37:47,800 --> 00:37:51,240
But the Chinese built on that
technology over decades, they

729
00:37:51,240 --> 00:37:55,720
got much better and efficient at
building them and that's what

730
00:37:55,960 --> 00:37:58,440
they built in Indonesia in a
phenomenally kind of efficient

731
00:37:58,440 --> 00:38:03,320
manner on tight capital budgets
and ramp them up super fast.

732
00:38:04,360 --> 00:38:06,240
Is these.
So now you can say hey to bounce

733
00:38:06,240 --> 00:38:09,320
over type 1 curve.
So apologies for waffling on

734
00:38:09,320 --> 00:38:13,720
about McNulty curve so much.
But if I look as spreadsheet is

735
00:38:13,720 --> 00:38:17,040
assuming anything other than a
type for McNulty for any ABA,

736
00:38:17,440 --> 00:38:20,840
they are kidding themselves.
This is like the, the most

737
00:38:20,840 --> 00:38:25,080
advanced, you know, stuff when
it comes like we all, everyone,

738
00:38:25,080 --> 00:38:27,520
everyone says where it's the
most, this is the most

739
00:38:27,520 --> 00:38:29,680
challenging, like
metallurgically challenging,

740
00:38:29,680 --> 00:38:32,000
like chemistry set stuff that
there is in our industry.

741
00:38:32,160 --> 00:38:34,960
This is this is super advanced.
And, and what they're going for

742
00:38:34,960 --> 00:38:37,560
is the full vertical integration
shebang.

743
00:38:38,240 --> 00:38:40,720
It's not just the cracking and
leaching bit, which Linus is

744
00:38:41,120 --> 00:38:44,280
done in Kalgoorlie and is
struggling with big time, but

745
00:38:44,280 --> 00:38:46,360
they want to build a hydromet
plant on top of that, which is

746
00:38:46,360 --> 00:38:50,640
like, you know, compounding the
complexity, complexity in a lot

747
00:38:50,640 --> 00:38:54,040
of ways.
So I just think what what

748
00:38:54,040 --> 00:38:57,800
happens here if inevitably ramp
up takes way longer than

749
00:38:57,800 --> 00:39:00,600
expected.
And so the working interim

750
00:39:00,600 --> 00:39:03,520
working capital is massive.
Like the cap explodes out to,

751
00:39:03,520 --> 00:39:07,120
you know, 2 1/2 billion plus and
you're and you're and it takes

752
00:39:07,120 --> 00:39:09,040
what if it takes like six years
and you're still not at at

753
00:39:09,040 --> 00:39:10,680
nameplate?
Like who's on the who's on the

754
00:39:10,680 --> 00:39:12,040
hook for that?
Right?

755
00:39:12,040 --> 00:39:15,720
Like does the does the taxpayer
keep underwriting more

756
00:39:15,720 --> 00:39:18,320
advancements and more
advancements because otherwise

757
00:39:18,600 --> 00:39:20,640
the economics don't stack up or
does it leave other kind of

758
00:39:20,640 --> 00:39:24,280
precarious situation?
I just like, I think that's why

759
00:39:24,280 --> 00:39:26,160
the stocks come off.
It's just like people have run

760
00:39:26,160 --> 00:39:30,000
the roller over this and just
thinking like, what are you

761
00:39:30,000 --> 00:39:34,320
doing?
So I think that the TLDR version

762
00:39:34,320 --> 00:39:37,960
of what you've sort of gone
through, Travis, what I'm

763
00:39:38,440 --> 00:39:41,200
getting is essentially it's
naive.

764
00:39:41,440 --> 00:39:44,640
It's not to say that it can't be
done, but it's naive to think

765
00:39:44,640 --> 00:39:48,600
it's what without its
complexities, challenges, you

766
00:39:48,600 --> 00:39:52,080
know, potential cost and time
blowouts and things like that.

767
00:39:52,080 --> 00:39:54,400
So it's just important to keep
that in the back of your mind.

768
00:39:54,480 --> 00:39:56,360
Yeah.
And because the government's

769
00:39:56,360 --> 00:39:59,720
picked a winner like when you
have the the timing and CapEx

770
00:39:59,720 --> 00:40:02,400
like blow out like snowy
hydride, does that mean the

771
00:40:02,400 --> 00:40:04,000
taxpayers on the on the hook for
that?

772
00:40:04,200 --> 00:40:08,240
Like again, like I just think
that this is the the where

773
00:40:08,240 --> 00:40:10,920
things get really.
Like dubious in my opinion, by

774
00:40:10,920 --> 00:40:13,320
picking winners, like create the
policy settings that encourage

775
00:40:13,320 --> 00:40:15,560
private investment.
Don't pick winners.

776
00:40:15,560 --> 00:40:19,160
It's just fucking an easy, it's
an easy point to make, but it's

777
00:40:19,160 --> 00:40:21,720
also a very like easy philosophy
to bring to the table when

778
00:40:21,720 --> 00:40:24,960
trying to like like address
these complex problems I think

779
00:40:24,960 --> 00:40:27,200
today.
And recoveries was one of the

780
00:40:27,240 --> 00:40:31,680
other assumptions you guys
flagged as well to have a look

781
00:40:31,680 --> 00:40:32,800
at.
Yeah.

782
00:40:32,800 --> 00:40:35,920
I mean credit to Rare Earth
Observer for this one, but it

783
00:40:35,920 --> 00:40:38,640
just hammers home what what
you've said there, Travan.

784
00:40:38,680 --> 00:40:40,960
I mean, maybe it goes one step
kind of further.

785
00:40:41,360 --> 00:40:44,600
The company gave this worked
example on just the any other

786
00:40:44,600 --> 00:40:48,600
stockpile feed scenario and it's
just a sort of simple 90%

787
00:40:48,600 --> 00:40:53,960
recovery assumption.
That implies 90% overall, IE 90%

788
00:40:53,960 --> 00:40:57,600
after processing, after
cracking, after leaching and

789
00:40:57,600 --> 00:41:01,240
separation.
It's not 90% at each step of the

790
00:41:01,240 --> 00:41:04,400
way because that would be .9 *
.9 and so on.

791
00:41:05,440 --> 00:41:09,680
It's 90% all up.
That is a big, big assumption to

792
00:41:09,680 --> 00:41:12,240
make.
Again, to your point, Ali, just

793
00:41:12,240 --> 00:41:15,440
another assumption.
And yeah, coming out the back of

794
00:41:15,440 --> 00:41:17,720
this, we've probably sounded
pretty critical.

795
00:41:17,720 --> 00:41:21,480
I'm sure Iluka is well aware of
of the challenges.

796
00:41:21,480 --> 00:41:26,240
They they would understand this.
I mean, it's, yeah, it's very

797
00:41:26,240 --> 00:41:30,320
interesting from from their
perspective because they have

798
00:41:30,320 --> 00:41:35,400
gone from just, you know, they
go to mineral sands, play with

799
00:41:36,240 --> 00:41:40,160
iron ore exposure through their
doTerra shareholding to now a

800
00:41:40,160 --> 00:41:44,720
kind of convoluted, you know,
mineral sands, iron ore and this

801
00:41:44,720 --> 00:41:47,920
wacky big rarest thing.
It makes their investment

802
00:41:47,920 --> 00:41:51,040
proposition as a complete sort
of side note, a whole lot

803
00:41:51,040 --> 00:41:54,040
different.
And who knows what their their

804
00:41:54,040 --> 00:41:56,320
shareholders were.
You know, what they kind of

805
00:41:56,320 --> 00:41:57,440
think.
I mean, some of them voted with

806
00:41:57,440 --> 00:41:59,800
their feet last Friday what they
think about that.

807
00:41:59,800 --> 00:42:02,480
So I'm sure some were hoping
that this would have just gone

808
00:42:02,480 --> 00:42:05,320
on the back burner and they
would have called this Enyabba

809
00:42:05,960 --> 00:42:09,480
for a bit of a day.
But it's not been the case and

810
00:42:09,800 --> 00:42:12,040
some of them have left now.
Notice what They're not willing

811
00:42:12,040 --> 00:42:16,440
to part ways with JD.
So, so they've, they own 20% of

812
00:42:16,440 --> 00:42:19,560
the terror, the dividends from
the terror they they pass

813
00:42:19,560 --> 00:42:21,240
straight through to their own
shareholders.

814
00:42:21,240 --> 00:42:23,480
So the dividend that I look at
pays is basically what they're

815
00:42:23,480 --> 00:42:26,840
getting from the de terror
royalty that they they still

816
00:42:26,840 --> 00:42:28,960
own.
And they're not, they're not

817
00:42:28,960 --> 00:42:31,840
willing to monetize that stake
because too expensive.

818
00:42:31,840 --> 00:42:35,960
They said, well, whether it's
too expensive or like, think of

819
00:42:35,960 --> 00:42:38,040
what happened, like there's a
lot of.

820
00:42:38,320 --> 00:42:40,880
A.
Lot of shareholders, old stocks

821
00:42:41,200 --> 00:42:43,560
in Australia, superannuation
fast, blah, blah, blah, we'll be

822
00:42:43,560 --> 00:42:46,360
frank dividends, happy days.
Do you get rid of that?

823
00:42:46,400 --> 00:42:49,080
Where's the cash flow in this
business that actually goes back

824
00:42:49,560 --> 00:42:51,680
shareholders like it's it's not
there.

825
00:42:51,680 --> 00:42:53,160
It's absolutely for a very long
time.

826
00:42:53,440 --> 00:42:56,960
So like, I think, I think what
happens to share price if you

827
00:42:56,960 --> 00:42:59,280
got rid of that?
It's, it's the, it's the more

828
00:42:59,760 --> 00:43:03,240
unnerving thing.
Completely agreed.

829
00:43:03,320 --> 00:43:07,320
And yeah, I think that's that's
enough said for that one.

830
00:43:08,280 --> 00:43:11,440
Wow, I've learned so much about
mineral sands and rarest.

831
00:43:12,960 --> 00:43:14,960
Best way to learn, Ali, Just
don't nurse yourself in it.

832
00:43:14,960 --> 00:43:17,560
Absolutely.
All righty, We've got a couple

833
00:43:17,560 --> 00:43:19,800
partners to thank.
Thank you to Mineral Mining

834
00:43:19,800 --> 00:43:23,000
Services, Grounded Sandy Ground
Support, who we had in the show,

835
00:43:23,000 --> 00:43:28,360
CRE Insurance, Kaydrill, Dasat,
Saltbush Contracting and Get Wet

836
00:43:28,520 --> 00:43:29,840
Solutions.
Hodoro guys.

837
00:43:30,080 --> 00:43:33,640
Hodoro The information contained
in this episode of Money of Mine

838
00:43:33,640 --> 00:43:35,960
is of general nature only and
does not take into account the

839
00:43:35,960 --> 00:43:39,600
objectives, financial situation
or needs of any particular

840
00:43:39,600 --> 00:43:41,640
person.
Before making any investment

841
00:43:41,640 --> 00:43:44,680
decision, you should consult
with your financial advisor and

842
00:43:44,680 --> 00:43:47,840
consider how appropriate the
advice is to your objectives,

843
00:43:48,040 --> 00:43:50,040
financial situation and needs.