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FYI Resources Limited 31.03.2021

FYI HPA Project NPV increases to US$1.014bn

 

Key points

 

-          Updated DFS results in increase in NPV reflecting technical and commercial progress of FYI’s HPA Project development and positive value re-rating

 

-          FYI’s innovative HPA process technology and process design validated through extensive test work and pilot plant trials

 

-          Updated DFS results in compelling project metrics demonstrated in revised NPV

 

-          HPA product marketing research confirms strong HPA industry growth and pricing support

 

FYI Resources Ltd (ASX: FYI) (FYI or the Company) is pleased to announce its updated definitive feasibility study (Updated DFS) of the Company’s high purity alumina (HPA) Project resulting in an increase in net present value (NPV). The Updated DFS has been prepared by the Company in conjunction with selected industry specialists. The resulting NPV increase reflects the major technical improvements, substantial Project de-risking and other key commercial developments accomplished since the initial DFS announcement on 11 March 2020.

 

The Updated DFS and revised NPV have confirmed the HPA Project is not only technically and financially robust, but the development work completed since the initial DFS in March 2020 demonstrates continued project de-risking and positive value re-rating. 

 

Following the release of the Company’s initial DFS, enhancements that have been made to the Project include detailed flowsheet advances, process redesign, production optimisation and extensive supporting testwork (including multiple pilot plant trials) to optimise and de-risk the integrated HPA strategy.

 

After taking into account the technical and commercial improvements, market applied metrics relative to its peer group, updated inputs (exchange rate) and discount rate (8%) FYI has updated the base NPV of the project by 87% to US$1.014 billion.

 

Major Highlights of Updated DFS and NPV

FYI’s Updated DFS highlights an increase in the forecast financial returns and a de-risking for the Company’s HPA Project. The points are summarised below:

 

-          Sensitivity analysis demonstrates robust project economics

-          Updated DFS inputs are supported by additional pilot plant trials and data validation

-          Updated DFS conducted by leading hydrometallurgical experts

-          The Updated DFS and financial analysis was completed to an overall accuracy of -10% to +15%

-          Updated key project NPV metrics include:

  • post-tax NPV8% of US$1.014 billion
  • project post-tax IRR 55%
  • annual production
    • 8,500 tpa 4N HPA (99.99% Al2O3)
    • 1,500 tpa 5N HPA (99.999% Al2O3)
  • average selling price US$26,400/t (basket 4N and 5N pricing)
  • annual project revenue US$261m
  • annual project EBITDA US$186m
  • project capex US$202m
  • project opex US$6,661
  • project payback 3.2 years
  • AUD:USD exchange rate of 0.75 (from 0.70)

 

FYI Resources Managing Director Roland Hill said: “The update to the Company’s initial DFS was an obvious progression in the development of our HPA project strategy. The quality and robustness of our HPA Project was demonstrated in our initial DFS released in March 2020. Since then, the Company has continued the evolution of the Project through further process design improvements, detailed test-work via numerous pilot plant trials and other supporting activities to assist in de-risking the Project. There has also been a number of external factors such as the AUD:USD exchange rate movement that has had an impact on the economics of the project.  It was evident that a more up-to-date financial case be presented to the market.

 

The Updated DFS outcome represents a persuasive economic case and demonstrates the merit of the Project in being developed as potentially one of the HPA sector's highest quality, lowest capital and operating cost projects”.

 

FYI believe the increased NPV outcome is a more appropriate reflection of the HPA Projects achievable potential and signifies the greater confidence in the Project given the progress accomplished by the Company in the last 12 months.

 

It should be noted that the level of detailed work and supporting inputs into the Updated DFS and financial forecast (NPV) is substantial and is the outcome of a further 12 months of development progressed from the Company’s initial DFS.

 

Key changes to Updated DFS and NPV 

Discount rate

Revised from 10% to 8% reflecting further Project development resulting in increased project confidence

HPA annual production

Revised from 8,000tpa to 10,000tpa based on expected HPA market growth

HPA product mix

Sales assumptions includes 8,500tpa of 4N and 1,500tpa 5N. FYI has demonstrated that 5N production is possible and will likely become a material contribution to future sales

HPA pricing

Product pricing has increased from US24,000/t (100%4N) to an assessed basket price of US$26,400/t (85% 4N / 15% 5N) reflecting a conservative selling price

Exchange rate

The AUD:USD exchange rate has moved from 0.70 to 0.75

Capex

Exchange rate has impacted the project capex from US$189 to US$202 due to the AUD component of the cost base (expressed in US$)

Opex

Exchange rate has impacted the project opex from US$6,217/t to US$6,661/t due to the AUD component of the cost base (expressed in US$)

 

Intangible Improvements to FYI’s HPA Project

-          Further attraction of major industry participants and potential off-take parties to FYI’s HPA strategy (including Alcoa of Australia)

-          Advancing of product marketing and potential off-take party assessment

-          Progressing Project financing alternatives providing visible financing options

-          WA Government recognition of HPA Project status through granting of Lead Agency support

-          Environmental, Social and Corporate Governance (ESG) and carbon footprint targets designed to lower Project carbon emissions.

 

Summary of Updated DFS

The Updated DFS is based on the initial DFS of March 2020 which considers FYI’s innovative, low temperature, low pressure leach and precipitation process flowsheet for the production of high quality HPA. The Updated DFS combines detailed technical and financial inputs that result in the study having a   -10% + 15% degree of accuracy and confidence - suitable for this level of study. 

 

FYI’s process design basis was the adoption and advanced refinement of a conventional leach and precipitation flowsheet which was adapted and optimised to commercialise the production of high quality, high purity alumina. The process refinements are specific to FYI’s unique feedstock and its amenability through the innovated flowsheet resulting in excellent production characteristics including achieving lowest cost quartile for both opex and capex.

 

A revised financial model and resulting NPV was completed based on all the initial DFS, pilot plant trials and other supporting studies used in calculating and estimating the project capital and operating costs as well as all other operating parameters.

 

FYI is continuing to progress the development of its HPA Project strategy and advancing to the final engineering stage for the HPA Project. The Company’s updated DFS confirms the Projects potential ability to generate outstanding financial returns over the initial modelled life of 25 years.

 

Purpose of Updated DFS and revised NPV

-          to provide the market with quantifiable project development progress and de-risking measurement 

-          the Updated DFS defines a clear pathway for development to commercial production of HPA

-          the Updated DFS and supporting pilot plant testwork demonstrates production of high quality, high purity 4N and 5N HPA suitable for LED and Lithium-ion battery markets

-          the ongoing process refinements and optimisations to the process design suggest potential for further improvements

-          to demonstrate the technical and financial robustness of the HPA project via continued process development testwork and trial production

-          the response from potential customers to FYI’s high quality HPA is very positive

 

The initial DFS established an outstanding set of financial results for the Company’s HPA project. The initial DFS demonstrated the quality of the innovative flowsheet and the robustness of the Company’s HPA project and outlined the clear pathway forward to developing an integrated HPA refining business in the favourable operating jurisdiction of Western Australia. FYI has taken the foundation work and improved the overall project metrics by a further 12 months of continuous project improvements.

 

The Updated DFS and revised NPV demonstrates the progress achieved with FYI’s HPA Project.

 

          Key DFS assumptions and outcomes include:

DFS version

Initial

Updated

Discount rate

@10%

8%

NPV (post tax)

US$543Mn

US$1.014Bn

IRR (post tax)

46%

55%

Payback period (years) (post tax) (inc ramp up)

3.6

3.2

Assumed exchange rate A$/US$

0.70

0.75

Modelled DCF Life of Project (years)

25

25

Total Sales (initial 25 years) no escalation

US$4.7Bn

US$6.1Bn

Total Project net operating cash flow (25 years)

US$2.Bn

US$3.3Bn

Annual EBITDA (average)

US$133Mn

$186Mn

Cash flow after finance and tax

US$88Mn

US$131Mn

Shares on issue (as at publication of the DFS)

212.77Mn

321.09Mn

Capex (US$) (8,000 tpa)

US$189Mn

US$202Mn

Capex/t (US$/t)

US$23,575

US$20,200

Opex (US$/t) - Life of Mine C1 costs, FOB Kwinana

US$6,217

US$6,661

Tonnes Processed (initial 25 years) (kt)

189

247

Production Target (tpa) (initial 25 years)

8,000

10,000

Proven + Probable Ore Reserves (@ 24.8% AlO kt)

3,205

3,205

Ore Reserve life (years)

25

25

JORC Resources (million tonnes)

11.3

11.3

           

Click here to view the full ASX announcement:

https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02359268-6A1026837?access_token=83ff96335c2d45a094df02a206a39ff4

 

Authorised for release by Roland Hill, Managing Director. 

 

For more information please contact:

 

Roland Hill

Managing Director

Tel: +61 414 666 178

roland.hill@fyiresources.com.au

 

Simon Hinsley

Investor & Media Relations

Tel: 0401 809 653

simon@nwrcommunications.com.au

 

Cautionary Statements

 

Substance of DFS and Updated DFS

 

The initial DFS and Updated DFS referred to in this announcement is a study of the potential viability of the production of high purity alumina from feedstock form the Cadoux Kaolin Project.  It has been undertaken to understand the technical and economic viability of the Project.

 

The initial DFS and Updated DFS assumes as a 25-year Project life based only on Proved and Probable Ore Reserves (100%). The initial DFS and Updated DFS is based on the material assumptions set out in the initial DFS announcement of 11 March 2020 and updated assumptions set out in this announcement.  These include assumptions about the availability of funding.  While the Company considers all of the material assumptions to be based on reasonable grounds, there is no certainty that they will prove to be correct or that the range of outcomes indicated by the feasibility studies will be achieved.

 

To achieve the range of outcomes indicated in Updated DFS, funding in the order of A$202 million will likely be required.  Investors should note that there is no certainty that the Company will be able to raise the amount of funding when needed.  It is also possible that such funding may only be available on terms that may be dilutive to or otherwise affect the value of the Company's existing shares.

It is also possible that the Company could pursue other "value realisation" strategies such as a sale, partial sale or joint venture of the Project.  If it does, this could materially reduce the Company's proportionate ownership of the Project.

 

General and forward-looking statements

The contents of this announcement reflect various technical and economic conditions, assumptions and contingencies which are based on interpretations of current market conditions at the time of writing.  Given the nature of the resources industry, these conditions can change significantly and without notice over relatively short periods of time.  Consequently, actual results may vary from those detailed in this announcement.

 

Some statements in this announcement regarding estimates or future events are forward-looking statements.  They include indications of, and guidance on, future earnings, cash flow, costs and financial performance.  Such forward-looking statements are provided as a general guide only and should not be relied on as a guarantee of future performance.  When used in this announcement, words such as, but are not limited to, "could", "planned", "estimated", "expect", "intend", "may", "potential", "should", "projected", "scheduled", "anticipates", "believes", "predict", "foresee", "proposed", "aim", "target", "opportunity", "nominal", "conceptual" and similar expressions are forward-looking statements.

 

Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, such statements involve risks and uncertainties, and no assurance can be given that actual results will be consistent with these forward-looking statements.

 

The contents of this release are also subject to significant risks and uncertainties that include but are not limited those inherent in mine development and production, geological, mining, metallurgical and processing technical problems, the inability to obtain and maintain mine licences, permits and other regulatory approvals required in connection with mining and processing operations, competition for among other things, capital, acquisitions of reserves, undeveloped lands and skilled personnel, incorrect assessments of the value of projects and acquisitions, changes in commodity prices and exchange rates, currency and interest rate fluctuations and other adverse economic conditions, the potential inability to market and sell products, various events which could disrupt operations and/or the transportation of mineral products, including labour stoppages and severe weather conditions, the demand for and availability of transportation services, environmental, native title, heritage, taxation and other legal problems, the potential inability to secure adequate financing and management's potential inability to anticipate and manage the foregoing factors and risks.

 

All persons should consider seeking appropriate professional legal, financial and taxation advice in reviewing this announcement and all other information with respect to the Company and evaluating the business, financial performance and operations of the Company.  Neither the provision of this announcement nor any information contained in this announcement or subsequently communicated to any person in connection with this announcement is, or should be taken as, constituting the giving of investment or financial advice to any person. This announcement does not take into account the individual investment objective, financial or tax situation or particular needs of any person.

 

Competent Persons Statements

 

Ore Reserves

 

The information in this announcement that relates to Ore Reserves is based on information compiled by Mr. Steve Craig, who is a Fellow of the Australasian Institute of Mining and Metallurgy. Steve Craig is a full-time employee of Orelogy Consulting Pty Ltd and has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity which they are undertaking to qualify as a Competent Person as defined in the 2012 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”. The information is extracted from the Ore Reserve announcement released 29 October 2018 and the DFS announcement released 11 March 2020 and are available to view on the Company’s website at www.fyiresources.com.au .  The Company confirms that it is not aware of any new information or data that materially affects the information included in the original announcement and that all material assumptions and technical parameters underpinning the estimates in the relevant market announcements continue to apply and have not materially changed.  The Company confirms that the form and context in which the Competent Person’s findings are presented have not been materially modified from the original announcements.

Mineral Resources

 

The information in this report that relates to Mineral Resources is based on information compiled by Mr Grant Louw, under the direction and supervision of Dr Andrew Scogings, who are both full-time employees of CSA Global. Dr Scogings is a Member of the Australasian Institute of Mining and Metallurgy and a Member of the Australian Institute of Geoscientists. He is a Registered Professional Geologist in Industrial Minerals. Dr Scogings has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as Competent Person as defined in the 2012 Edition of the “Australasian Code for the Reporting of Exploration Results, Mineral Resources, and Ore Reserves”. The information is extracted from the PFS announcement dated 25 September 2018 and is available to view on the Company’s website at www.fyiresources.com.au . The Company confirms that it is not aware of any new information or data that materially affects the information included in the original announcement and that all material assumptions and technical parameters underpinning the estimates in the relevant market announcements continue to apply and have not materially changed.  The Company confirms that the form and context in which the Competent Person’s findings are presented have not been materially modified from the original announcements.

Metallurgy

 

The information in this report that relates to metallurgy and metallurgical test work is based on information reviewed and compiled by Mr Daryl Evans, a Competent Person who is a Fellow of the Australian Institute of Mining and Metallurgy (AusIMM). Mr Evans is an employee of Independent Metallurgical Operations Pty Ltd, and is a contractor to FYI.  Mr Evans has sufficient experience that is relevant to this style of processing and type of deposit under consideration, and to the activity that he has undertaken to qualify as a Competent Person as defined in the 2012 Edition of the “Australasian Code for the Reporting of Exploration Results, Mineral Resources and Ore Reserves”. Announcements in respect to metallurgical results are available to view on the Company’s website at www.fyiresources.com.au .  The Company confirms that the form and context in which the Competent Person’s findings are presented have not been materially modified from the original announcements.

 

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