The message is quite clear now. Management have chosen to take...

The message is quite clear now.

Management have chosen to take the staged approach starting with the DMS circuit leading into SXEW down the track, rather than jump straight into SXEW.

After reflection as a shareholder I'm happy to see they have pulled the trigger on this.

The reason I'm happy is firstly the DMS circuit has both a higher IRR, much faster time to payback, therefore cashflow positive sooner, and much lower execution risk.

Secondly this decision brings pressure to bear on Huayou.

Why is there pressure on Huayou:


1 - There is a huge difference in cobalt output between the DMS (Staged approach) vs straight to SXEW (not staged), 1500ktpa vs 2700ktpa in cobalt metal equivalent. Noting that the overall cobalt yield from mine to hydroxide is also much lower going from DMS to convertor vs straight leach and SXEW.

2 - Nzuri will take the best offtake deal provided for the DMS concentrate and Huayou will struggle to compete with the terms offered by competitors just 40km away in Kolwezi.

Huayou will need to intervene in one of three ways:

1 - Make Tembo an offer for Nzuri they can't refuse.

2 - Make Nzuri management an offer on SXEW financing and grid power they can't refuse.

3 - Make Nzuri management an offer for the DMS offtake that involves exposure to the increased margin on upgraded / refined product to make up for the increased transport costs. Giving us high exposure to cobalt chemical market with no capex required.

Note I don't believe this is all about putting pressure on Huayou, I think management are making the best decision after considering all the information and variables.

I also don't think Huayou is the only one under pressure. In my discussions with a different privately held mid tier cobalt / copper producer in Katanga, there are many western companies, including car companies, attempting to desparetely A - secure cobalt assets and B - secure offtake. I can't say if any of these entities are talking to Nzuri (no leaky ship here) but I assume given we have the product, and the product is both gecamines and artisanal free, there would be wider interest.

Fundamentally we have never looked stronger.

P.S copper looking good again! I will update my m0del if it gets to $3.20.