Hey Peppie,I know your just being a devils advocate here to test...

Hey Peppie,

I know your just being a devils advocate here to test the waters, no worries. Yes there are lots of moving parts to supply, and the further out you looks the less clarity and confidence one has. As they say, the future ain't what it used to be. So there are lots of possibilities. one hundred possible new projects and expansions to match your Keysbrook and Nth Stradbroke closures.

I think you can be certain that Thunderbird will get funded one way or another, can't imagine it won't in the current high price market (TB is a huge ZR producer and it's DFS was done on US$1284 first 4 years then $1380 LOM, so what would $1822/t Zr do for the financials over the next decade?). Same reason Toliara will get funded, low cost world class deposit regardless of any shenanigans in the PFS. My point was to assume $1822 Zr prices for the next decade would guarantee new supply that pushes the price down, in fact at that price so much new supply would hit the price would probably crash. A one year price spike circa 2018 may not encourage long term new supply but over 10+ years it would.

So what do the industry experts (who are optimistic by nature) think is a long term Zr price that encourages enough new mine supply to keep the market in balance?

2019 Zr price is ~$1650, yet the Toliara PFS says LT=US$1450 (from 2035)
2018 Zr price is ~$1650, yet TZMI in SFX preso says LT=US$1450
2017 Zr price is ~$1000, yet the Thunderbird DFS says LT=US$1381 (from 2034)
2013/14 Zr price is ~$1000, yet the Keysbrook DFS says LT=US$1400 (from 2017)
The highest analyst I read recently says Zr LT=US$1500

Everyone seems to agree, regardless of the price of the day, that the long term Zr price which encourages funding of new mines is around the US$1450 mark. It doesn't really matter what small mines are stopping, starting or expanding because market forces will bring supply/demand balance back around the US$1450 mark.

In the very short term sure, mines go down or some other supply disruption of market tightness and the price goes up. The 2030 is not short term, and by then Thunderbird, Toliara for starters will be pumping out more ZR, Iluka will not slow down, and how many other 'shovel ready' projects like Coburn will get funded it the price jumps to US$1822 next year and (AUD stays around 71c USD) stays there?

If you can make an argument why the rationale supply response will not kick in at US$1822 when Indonesian supply kicks in at $1400 and all the experts agree that above $1450 new supply will get built I'm all ears? Iluka says between them and Indo swing mines the Zr market is now in balance so why is the price kicking up from $1650 instead of walking back down?

How about the demand side of this equation? I read a lot of macro stuff and everybody is talking about how long and low this global growth downturn is going to be, will the US and China be able to pull out of looming recession. The numbers are pretty ugly despite a lot of stimulus and easing being thrown around. Is this the sort of global economy that Zr keeps marching up 7 year record highs even further into substitution territory?

Just calling it how I see it, maybe there is a valid explanation why BSE are correct and everyone else including TZMI etc are wrong. Otherwise, it does make me wonder if management were as aggressive with the price deck in this PFS as it seems, then how aggressive were they with the capex and opex figures, if you catch my drift?

Cheers



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