Andromeda Metals Limited (ADN) Earnings Call Transcript & Summary

Hello, everyone. My name is Bob Katsiouleris. I'm thrilled to be here. Thrilled to be here in Sydney, give you all a really good investor update and what we've been doing in the last 60 days. Very busy, lots going on. Lots going on in the market. Lots going on within Andromeda and some really good technical news that will really position us going forward. And that positioning and how we place our company in this market, which is very unique, it's what I want to talk about today. How it impacts our project? How it impacts our plans for the next quarter through the end of the year and certainly how it plans -- how it works into our funding plans and what we want to do in the marketplace? So we're thrilled to share all that with you. Questions later. A lot of information to go through, right? And I want to really share the detail of it with you, so you understand how important it is to our business and what it means for how we position our company. And what it also means for shareholders, stakeholders, employees and our future, right? So just take our time, let's go through the materials and let's really think about what this means for our future, which I think you'll agree, is very bright. So looks standard disclaimer on forward-looking statements. There's a lot of work here. It has a lot of implications for our business. So I'll be very careful in terms of what it means in terms of pricing and price potential, that we'll avoid that because what's more important to understand is what does it mean from a demand profile for the customers in the markets we want, and how we're going to segment into those markets to create long-term value and sustainable growth, right? So look, really important to start with our partners, our First Nations and an acknowledgment of country where we are, Eyre Peninsula, I think paying our respects to the nations that are involved. It's a very important part of our past, our present and our future. So I think we'll -- I think that especially on the peninsula and where we're planning on mining and being long-term partners and owners, both with the landowners and the traditional owners, a very, very big part of who we want to be in our community. Our team, I think you're across all of the team, I think it's a very good team. Have been in the chair for about 2 months; Mick, Melissa and Austen on our Board; Sarah, our General Counsel; Tim and Joe Ranford, who's our Chief Operating Officer, [indiscernible] an outstanding team for ops and for our capital project. James has really taken to the sales and marketing role. He'll be in China on the 17th. He's busy, he's enjoying it. And look, we've known each other a long time. It's been in Industrial Minerals a long time, and I think we're off to a great start, and it's a great partnership. So good team. We're still actively looking for a Chief Financial Officer, a very, very important role for our company. I want to take our time. I want to take my time to find the right person to be part of that team because that role will be absolutely critical. Not only is my right hand, but really someone who's going to represent us in multiple markets, shareholders, financials, stakeholders, the whole thing. So really, really important that we get that role properly identified and properly filled. So look, what is it that attracted me to be here. I've known about the Great White deposit for a long time. And I know a couple of very, very basic assumptions and basic things I want to share with you. First of all, it's the last Great White deposit left. It is great because it's unique, right? And it will make us The Great White mineral company. That's very, very important, right? Because a Great White mineral company typically sells to plastics, typically sells to paints and typically sells to paper. We are not selling to any of those markets. And what's really important to understand here is we're not planning on selling to those markets. And that's what makes us great and will make us great because that's not who we want to be, right? We want to create value, to be great in areas that are end user-driven, consumer-driven. For those of you who joined us last night at the Porcelanosa showroom, I think it was an eye-opener for all of you, right, to see that product has driven by consumer that depends on our product. And what's really powerful is not me standing up here telling you that, "Oh, you know what, kaolin and the short supply, that Ukrainian situation." So forth and so on. I think it's very different. When Richard Earp got up last night and said, "You know what, I am the exclusive distributor of Porcelanosa here in Australia. And my biggest worry is kaolin supply to Porcelanosa in Spain." It's very different when he says it, and I say it. So the markets there, we'll go through the details a little bit later, but that's the opportunity for us. That's the vision. So how does that come together? What are the 3 main pieces of pulling all that together. The Great White Project, commercializing it the right way, and we'll talk about what that means. What is commercializing something in the right way means? It means when there's an opportunity in the market, you evaluate it. And if that adds value to your life of mine and your mine plan, you do it. If it destroys value over the long term, on a life-of-mine basis, you don't do it. It's that simple. It's a driving principle of our company and certainly will be forward as we develop this project. And we want to be and aspire to be the best. The best means what? It means the best in terms of supplier of choice, partner of choice and employer of choice. That's what we aspire. We aspire to be Porcelanosa supplier. The best supplier to the best porcelain tile maker in the world that supplies, the best tiles to the most important markets in Sydney, Melbourne, Brisbane and across Australia. We can aspire to be that company. And that's my message. In the center of all that is what we want to do. I'm going to focus a lot on the commercial piece today. We'll talk about the project towards the end, project time lines and so forth and so on. But I think I really want to focus on the building blocks of commercial excellence, right? Commercial excellence just doesn't happen. It needs a lot of work. We spent a good part of the last 60 days doing that work, motivating the position, building the commercial strategy map that responds and identifies the market opportunity. As a market opportunity is not hope, and it's not luck. It's hard work to if where you want to play and with whom. Where we are, right? We sort of had a commodity mindset, price sensitive, and we're defining product and market portfolio. What we want to be? I don't want to be the BHP or Rio Tinto-like minerals. I don't want to commoditized our product. I like the fact that our product is opaque. I like the fact that the value in use and pricing is for us to determine in terms of the value we're selling to, right? And I want to be the supplier and partner of choice to the segments and customers that I want to be, and I've identified them. I want to be your supplier of choice because I have chosen that segment. And that segment is a ceramic tile and the high end of the ceramic tile market. If it's porcelain tableware and if it's cement, then it has to be, there has to be a rationale that I can explain to you as my shareholders, why I'm playing there. That's the rationale. That's my job to pull that together, right? And I have to define a contestable market. Let's talk about that. What do I mean by contestable market? What is the market we're playing in? What's the potential size in that market? What can we get if we accept a certain price point and a certain value? What's the growth? And is it sustainable? Do you want to be a one-off player? Do you want to be a spot player say, hey, you want to have some stuff from the Peninsula once in a while, I can sell with the Southeast Asia is great? Is that your business? Is it contestable? Is it sustainable? And is it strategic? You have to answer those 3 questions as part of your commercial strategy. That underpins everything you do from the market to the mine, not going to worry about mine-to-market response until I can identify where I want to play in the market. Very important, right? And I should be able to explain that to you, my shareholders, to my stakeholders, to my employees and to the market itself. Last piece, which is very, very important. We talked about the mine-to-market, market-to-mine balance, right? The balance has to create value in the mine. The life of mine, the pricing, the value, the cost, the resource that we have, the value of that resource driven by the market opportunities has to be accretive, when we say, look, we're going to play in the ceramic market. We're going to play in the cement market. We're going to play in this porcelain market or we're going to do something different. We're going to play in this huge market, but we're going to use -- we were going to use distribution to address this market, but we're going to address this market on a direct basis. What's the impact to our mine life? What impact to our cash? What's the impact on our working capital? For a young company that's just starting, all those are critical questions driven by your commercial strategy. So our products, right? What have I done in the last 60 days? I said, look, for starters, I need to make this simple. I need everyone to understand what is our core focus. What's core? What's complementary? What's adjacent? High-purity aluminum, carbon capture. All of the technologies we've developed at Andromeda are still in play. The IP still belongs to us. But for right now, I want us to focus on core and complementary. What's core? Core is our, Great White ceramic CRM products. We've tested them. We've benchmarked them. We show you the results today. And they are world class. They are world-class for glazes, they're world-class for engobes, and they are certainly more than world-class for large porcelain tiles that we saw last night. Our HRM product for cement is being tested and validated. We'll have the results of that validation at the end of June. And that could be an incredible game changer for us. Why? Because it's low carbon. It decarbonizes the cement and concrete value chain. It allows companies in Europe and the rest of the world that are buying carbon credits typically somewhere in the EUR 70 to EUR 100 a tonne, to achieve carbon full scope free carbon reduction somewhere in the 5% to 7% range and their target at 11%. So that piece is being developed. It's been validated, and it's going to be part of our strategy. And the rest is adjacent, right? It doesn't mean we won't come to it. We'll come to it when we can afford it, when we're generating cash and when our core and complementary businesses have grown and are in a position that they need to be in. So how do I look at this, right? So how do you look at these mega trends and all that, right? So mega trends are important. What's happening in the micro and micro is important. Megatrends, geopolitical issue in the Russia, Ukraine, 3 million to 5 million tonnes of Ukrainian kaolin off the market. Large porcelain tiles are the mega trends. No one wants to use stone anymore because crystalline silica issues and respirable crystalline silica is making stoneware unattractive and ceramic tiles attractive, nearly the world's leading producer of ceramic kitchen and ceramic large-format stone just announced that they're going to open 10 stores in Australia in the next year, 10. This is an upfront, opening 10 stores. This is a Spanish ceramic kitchen producer, right, benefiting from the mega trend, which is sustainability, health and safety, crystal and silica, all of which our products participate in. Now why do I talk about return on invested capital and cash conversion cycle? Why am I so worried about that? Because I am worried about it. I'm going to dig a hole in the Eyre Peninsula. I'm going to dig stuff up. I need to process it. I need to put it on a ship. I need to send it somewhere and I need to get paid, right? Cash is king for us in the first 24, 36 months. We need to manage it carefully. We need to manage it weekly. We need to be careful. We need to see where and if we can get customers to prepay us for shipments because we are not an LME deliverable company. There isn't a bank that's going to collateralize kaolin. They will for aluminum, zinc, gold, silver, great. So we have to manage it carefully. That's a key area of focus, especially for team, for all of us need to manage cash carefully in the marketplace. And we want to be the best. We want to be able to move around between partnerships, resources, time and regions, right? If there's an opportunity for us to sell in our competitors' backyard, which is the Mediterranean, we'll do so if it makes sense, right? If there's an opportunity for us to develop the right partnership or the right distribution model in parts of the world that makes sense, we'll do it as long as we can afford it, as long as it adds value to our life of mine and as long as it makes sense and linked to our commercial strategy. So I've used this methodology. I was thinking about it the other day, sort of thinking before I joined Andromeda said, look, I've followed this commercial strategy map 26 times in my life. I'm happy to be done with it, right? So here, I am going through the commercial strategy map again as a core part of our business. Very simple, not rocket science. There are macro and micro trends. There are market opportunities. We look at that market to mine, we evaluate it through a strategic lens, which we just looked at, we develop an optimizer and we decide what the mine-to-market response is. Does that mean bag product, semi bulk product, big bags, bulk, bulk liners, packaging, [indiscernible] product, dry product, I don't know, right? But you have to evaluate these opportunities, co-opportunities, co-marketing opportunities through a map and a process that is defendable in terms of what you're doing. Where you're spending your money and where your approach is. That's absolutely critical because it defines what core and complementary is. If tomorrow, the cement industry says, "You know what, I think as a churn thing is the greatest thing that ever happened, right? And all of a sudden, things change, and the churn is core. Can that happen? Certainly, it can. If someone tells you, look, your ceramic product is really gives us properties in large styles including whitening that only zircon can or certain other opacifiers, is that a game changer? Does that mean you won't sell the glazes and you only sell the tiles and you won't do HRM? That balance and how -- what your mine-to-market response is, defines our company. But people need to understand how we're doing this. We need to understand that we're following the process. You need to understand we're adding value. And sometimes it's hard to say no, but we will have to say no, because it doesn't make sense. We talked about -- I'm not going to go through the details of this. The market opportunities the accretive value. That optimizer in the center. Cash is important, decision-making, the type of product, energy, production, feedstock plants. What is the #1 thing I'm worried about on the Peninsula? Number one, First Nation -- relationship with First Nations. I think we're in a good, excellent shape there, where our landowners, Streaky Bay [indiscernible] all that, right, is sitting in a very good place, but I'm worried about water. Do you know that every person I talked to on the Peninsula, say, "Hi, my name is Bob", say, "Hi, Bob, what are you doing about water?" But [indiscernible] doing? Or where are you from? I talk to the schools teach say, "Hey, what are you doing about water? Talk to the land owners. They don't even want to hear your names, "What are you doing about water? So water for us on the Peninsula, water, roads, investment in our Peninsula is absolutely critical. And we're putting a plan together on addressing that, but think about it, right? Initially, we're going to start up our mine, and we will be trucking water. $11 to $12 a tonne until we can put that whole picture together, and we have to address that. That's all part of my commercial strategy. Why? As I don't have water -- I mean, what kind of products I'm going to take, how am I going to recycle how am I going to optimize water usage, energy usage, carbon footprint. I'm going to be selling HRM to the cement guys potentially to lower their carbon content. Someone is going to come visit my mine and say, "Hey, you're selling me a low-carbon product, and you're trucking water on a diesel truck." I mean does that make any sense, right? We have to live these values of what we're selling to the markets we're selling in the way we produce our products. So that's a key area of focus for me, and that comes out of this process. So what does it look like? We talked if you look at the bottom, what's core, the ceramics piece. We're going to talk about tile bodies and the validation of that work as part of this presentation, I'll come a little bit later. Our cement and concrete piece, that work is ongoing. More on that probably by the end of June, we'll talk about that piece. But if you look at the macro and the micro environment, right, we have monitoring fiscal policy, Australian-U.S. dollar exchange rate. We have shipping and ports. I don't have a proper port on that side of the Peninsula to ship our product, right? I have to get over to Port Augusta, Whyalla ports issues, right, something I need to think about and address the geopolitical risk, right? The situation in Ukraine and other parts of the world, Taiwan, China and see that how will that impact our business? Would you would have ever guessed that this $3 million to $5 million, you'll see the results of the Ukrainian kaolin? The stuff is absolutely amazing. It's off the market. Will it come back to the market? When will it come back to market? What about the infrastructure needed for that product to come back to the market: rail, ports, trucks? Who will take the risk on buying that product in the future? Don't know. I don't have the answers to that. But I need to be across that detail in order to position our products either short term, long term or medium term. The microenvironment, we talked about water. We talked about value in use, the regional supply demand. China is probably close to 1 million tonnes short on kaolin, all types of kaolin, bulk clay is not a -- different qualities of kaolin. Our sister company, WA Kaolin, which makes a bulk clay for that type of market, you're seeing unprecedented demand in the Chinese market. These are markets we don't -- these are commodity markets we don't participate in, but it's great to see them turning the corner on a demand cycle as well in their markets. That's only good news for us. So I think that's really, really important. Strategic lens. We talked about that before, validating and the mine-to-market response. So for right now, where does that position us? Ceramics, right? Cement and porcelain. Porcelain tableware, you guys saw the deal we did with [indiscernible]. We're really excited about that. Top company directly into Tier 1 Japanese porcelain, Noritake and other fantastic Japanese brands that love our product for its whitening capability. What does that mean? What's the defining issue for that product? Titanium dioxide. We have to have TiO2 at a minimum level for our porcelain market. That's 1 piece. Our ceramic market, which is core, 3 parts of the ceramic market: the top of the tile, the middle of the tile, the enamel piece and the tile body, right? Where is the best place for our product? Where is the best value? Where is the best price? Where is the biggest and most important sustainable and strategic profit pool. So we did a lot of that work in the last 35, 40 days. I'll share just the highlights with you in his presentation. So in terms of strategy before we get into the technical detail. What's next, right? So we are wrapping up the work with the benchmarking of our product versus other products, which means the next step is we will be formulating our product, which means companies will say, look, how much of this Australian kaolin can I use in my tile body, glaze or engobe for this type of tile, this plant, this location? This formulation work is ongoing, and we expect that to be wrapped up also probably in the next 2 or 3 weeks, and that will present itself as I said of commercial opportunities for us, right, both in the Mediterranean, Southeast Asia and globally. So that work will be wrapped up. The technical evaluation of the cement and concrete work, we expect that to be wrapped up as well. That could be very promising. It could be high-value use, mid-value use? We don't know. What we do know is that Cement Australia, which is a joint venture between Heidelberg Hanson and Holcim. The qualification of that product in the Cement Australia piece is done. So that means our product has been permitted to be used in concrete and cement in Australia. In Europe, that process look at another 3 to 4 years, especially on the back of what happened in Turkey with the earthquakes, right? People are very, very concerned, that people are not following concrete and cement standards. And what happens? You end up, I'm sure you maybe you have seen the video, video footage from CNN and others, what happened in the Turkish earthquakes in the buildings, literally new buildings, up to code just literally collapsing with an incredible loss of life. So the work will then be incorporated into an updated DFS. The DFS that we currently have doesn't really reflect where our company is, right? We're not a paying company. Look, we can talk about that DFS, how we put it together, why we put it together? But let's put it behind us, right? We do update the DFS, get all of this information in there, our core work, our complementary work, our cement work, put all that piece in and then be ready to take that into the market as part of the request for equity post the debt piece. I'll talk about that. And commercial negotiation discussions aligned with Andromeda's commercial strategy, right? That's the formulation piece. That's the next step of discussions with the ceramic and porcelain guys and how does that fit through to our strategy. One other comment -- I'm going to come back to the project later. But what's really important about the DFS is that is going to be the new valuation of our company, and it's going to be based on commercial strategy, contracts, technical valuation, rigor, discipline and everything that is measurable and definable, right? That's exactly what the market wants to see. We opened the data room for the debt investors, had an excellent response, I think, from a very good group of debt guys who want to participate in Stage 1a of the project. Stage 1A is 50,000 tonnes for AUD 55 million. The IM information memorandum for that piece built on this commercial strategy is in the data room. The technical independent technical valuation of our product done by [indiscernible] is in the data room. The independent marketing work done by TZMI is also in the data room, has our bankable feasibility study and model. We pulled all that together in the last 40 days. And that's a really, really good piece of work, a lot of interest. We wanted to limit the data room to 3 -- 2 or 3 players. I think there's 5 excellent potential partners in there at Phase 1. We'll talk about what that means a little bit later. So look, a quick discussion on our markets. I don't want to get into a lot of the details, but this is the type of work we look at in terms of compound that annual growth rate. We did a lot of work with TZMI, China, [ other ] Pacific and Europe. If you look at the regions we want to play in, we clearly are growing 5.1%, 3.9%. The demand is there. Key to look at people who talk about China. China is a very big market. It's a very fragmented market. It's not a market I want to be directly in because it's simply too fragmented and too many channels, too much marketing and too much cost to serve. The other markets that are interesting, of course, are Southeast Asia, Asia Pacific and the European and North American markets are still relevant. We can still compete in those markets, and we should compete in them, that's where the formulation for the tiles are done. That's where you want to be as a supplier of choice, if you want to play in the other markets, especially the multinationals, are serving those. It's a very, very important piece of our strategy. Very, very key point, right? You'll see the deal that we did with FG that we announced -- when was that? This week last week? FG is an excellent partner for our China strategy. They're big. They make equipment. They have access into the China market. They're creditworthy. And that's the type of partner we want to serve in that distribution channel. Does that mean we'll always do that? Does that mean we would do direct business in China? Or does it mean that? When we find the right opportunity with the right customer, the right size, the right growth in China, we'll do a deal with a direct customer, but it has to be someone that fits our strategy, right? It has to be architectural, large porcelain value in use price product in China direct, okay. We talked about Ukraine. Look, I'm not going to spend a lot of time on this, but there's a lot out there in social media, media concerns. Spanish ceramic and tile manufacturers are, I would say, in a tough spot right now. Why? Because if you don't have the kaolin, what do you do? Do you use another clay? No, not really because it doesn't perform in the same way. And in fact, for the high-end tiles is the worst thing you can do. You have to use more zircon and you have to use more opacifiers. What's the difference in price between zircon and a good quality kaolin? Probably a factor of 3, right? 2.5x, 3x, right? If you look at Tier 1 zircon ceramic grade versus an excellent kaolin, probably 3.5x price differential. So can you imagine what these tile guys are paying to put zircon in the tile body as a result of the nonavailability of high-quality kaolin. It's a great opportunity for us, right? It would have been great to have the product available as we speak. But clearly, it's something we need to watch very carefully. If you look at end-use, why are we not playing in paper, rubber, plastic, fiberglass and all that? Because they're not growing and they don't have the value in use for our product. I'm not going to sell our product into commodity end use. So ceramics and porcelain, especially the high-end part of the market, that values us, gives us the price and the sustainability and the positioning that we want, is what we want in the growth in ceramics, driven by the larger tiles, the kitchens, bathrooms, we'll see that a little bit later, is really, really significant going forward. Consider this, right? I'm not talking about calcined kaolin where you need 1 million, 2 million tonnes to generate a decent cash flow. We're talking about a company that wants to grow to about 300,000 tonnes of absolutely high-quality value-use kaolin in ceramics, porcelain, and potentially cement. It was it's a very, very different strategy than a traditional light-mineral kaolin play. China, right? This is a graph that just came out of TZMI. The supply gap is significant. It's significant today. So I would say, just to give you a flavor for these numbers. From the time that this was published, which is part of our -- which is in the data room for the debt guys and which will also be part of our DFS, there's probably another 400,000 ton shortage on top of this, right? Because all of those clays are being consumed. They're not being replenished. There's a lot of issues. The high-quality Chinese kaolin or porcelain has run out. The Imerys mine in New Zealand that supplies a fantastic halloysite, kaolin for high-end porcelain, it's probably down to 10,000 to 15,000 tonnes per year. So just the porcelain market, if you can imagine that porcelain and ceramic prices have converged. Traditionally, porcelain prices have been $50, $75 a ton lower right, because ceramic still is the highest value in use. But today, due to demand, you have a convergence of price, right? So porcelain returns, ceramic returns in this market, especially China, Southeast Asia, have come together. Very, very interesting. We've never seen that before. Will it last? Let's see, it depends on supply/demand, right? So it's clear, right, where, this is the way we want to identify our addressable markets, this is what it would be in China. When we look at the addressable market, we see that it's growing. We see that it's 330,000 tonnes as an example in that market in China. And we say, look, then if we want to say at a 15% or 20% market share, that's the size of the price we want in China through a distribution channel. That's the way we do it. That's the way we motivate it. And we check those numbers, we decide where we're going to play and then we execute. So you look at these numbers and they're very, very interesting. So this is the global ceramic tile market and some just key numbers that I want you to look at. Just look at the score, right? So these are ceramic tile producers. You see China, India, Brazil, how dominant they are. But this is mostly commodity grade. And you look at the growth in '17 to '21, right, how fast India and Brazil and Spain is growing, but China isn't, interestingly, because that tile is commodity tile, right? So again, you have to really look carefully at where you're playing and what segment. The top 10 account for 84%, very, very interesting and global tile production uses about it's 400 million tonnes of minerals a year going to ceramics, [indiscernible] quartz, kaolin, zircon and red clay. And a lot of that is running up. If you -- for those of you -- for investors who follow [ UCA, JA ], some of their deposits also here in Australia, right, they are facing a resource challenge, which is kind of interesting. So 60% of the tiles produced are porcelain, which is high-end. The figure, right, is 90% in Italy and 50% in Spain, 30% which is unglazed, right, which is the porcelain piece. So Spain and Italy still small, right? But still very, very much in the high-end part of the market, where you need the high-end kaolin, the high-end zircon and the high-end products. Look at the exporters as well, which you can see again, China, look at the Spanish exports, the Indian export and the Italian exports, incredible how much of the products made in those countries are exported. People are still buying and paying for the high-end stuff. People in Melbourne are paying. People in Sydney are certainly paying, and people in Adelaide are paying. And it's incredible to see those products in showrooms, incredible price point and incredible demand. And the tile consumers, clearly, China is still the biggest consumer, India, followed by Brazil, Indonesia, Vietnam, and Turkey, all markets that we'll be looking at as part of our direct strategy. So tile production, 3.2% growth until '26. Porcelain tiles are projected to grow at 7.3%. That's an incredible growth rate, and that's a fantastic driver for our business because a porcelain tile means glazed or not glazed, but it needs a tile body and it needs fantastic mechanical strength in those large formats. We saw tiles yesterday in the 1 by 2 size, right? We saw some of the biggest tiles I have been receiving off late, ready for sale in a showroom. Just a couple of comments on just the process and where we fit. You can see here the main components and the additives for ceramic tiles. You can see the firing temperature is down below. You can see the different additives, right? The nonplastic, the basic parts and the red clay of the body. You can see the piece -- the additive to give the refractory piece, which is what happens when you fire the tile. You've seen the center column what we call the whitening agents, right [indiscernible] alumina and zircon are used there. And then the coloring, which is the pigments, chromite and iron oxide. Those colors -- let's start from the far right. Those colors to go through a digital printer and be put on a high-end tile, need 20% kaolin on the flex side, on the glaze side. But if you look at the body where the white clays are and the kaolin, right, especially on the refractory piece, our Great White CRM fits there exactly with the other clays. But also, if you see the dotted line, provide whitening equivalent to zircon in a tile, which means for someone making a large tile, they're thinking, "Hey, this stuff is great because it gives me the mechanical and plastic properties I need." But in addition to that, I can displace some of the zircon, which costs 3x more, and that's value that no other kaolin in this segment has, this whitening capability. I'll show you the details of that work in just a bit. Yes, here it is. So I'm not going to get into the details of this. Some of the high-level results of the work that IberoClay did to benchmark us. You can see from left to right, there are 2 samples in red are, the ratio of iron to aluminum, lower is better. You can see how good the Ukrainian material is. And in terms of where we sit versus everybody else, we are with the Brazilians and lower than everybody else in terms of iron-to-aluminum ratio. And I can tell you with certainty, the sample we sent for testing was certainly not the best sample we had and certainly not representative of the iron-aluminum ratio we'll be delivering in the future. So we are world-class in terms of ratio, in terms of what people are looking for. And in terms of control and you look at the color measurements, if you look at the L value, where we are, and the B value for color on a fire basis, we are incredibly white. When we fire CRM from Great White mineral deposit, you get an additional whitening benefit that's kind of unique to our deposit. We suspected this for a while because we also see it in porcelain. And the results down below are also very interesting because they point to very, very excellent mechanical strength. Just look at the number, 524, 2.79 compared to everyone else. Why is that important? Can you imagine not having mechanical strength in one of these big tiles? How's this big tile at 3 millimeters or 6 millimeters going to stay together? You need that mechanical strength. And that is given really by the mix of kaolin particles and halloysite that's unique to our deposit, right? Excellent mechanical strength, excellent aluminum-iron ratio. So we pulled all that information, validate it, tested it. Now we need to see how you can actually use it in formulating these tiles. That's the next step. Top 3 iron/aluminum. High brightness and very high dry mechanical strength. If I look at those 3 key points, where should I focus? porcelain ceramic play large-format tiles. That's what we want. I need all of you to change your kitchens, bathrooms and put in porcelain tiles in the large format as soon as possible. You can send the check and the request for paying it to Patrick. If you do that, I'm sure he can help you out. But let's get the project up and going for it. So we saw a lot of that last night, and we were thrilled to see that. Once you guys have a clear view of that. If you have a chance and you're here in Sydney or Melbourne, to visit the Porcelanosa showroom. Does it cost anything? Just go and take a look, tell them you're a Kaolin shareholder. They might get really excited, offer you a glass of wine, never know if it can happen. Take a look, I invite you to take a look, you will see something that is -- represents the best potential of our company and represents art in its own way, really fantastic, both as a showroom in Sydney and as a showroom in Melbourne as well. Another way of looking at it, see where the body is prepared. This is the flow sheet for producing a tile. We've top 3 there. We've got unique mechanical properties in the pressing piece. We provide rheology in the glazes and we fire, right? So you know what, we provide value in this chain in multiple places, right? And that's the unique opportunity that we have. It's a really cool way to look at it, to look at the potential, right? You could play in all of these red circles, you could play in one of them. You could say, "Hey, I'm only going to sell to polished, fired large tile, maybe I'll get involved in the pressing. Maybe I'll do all of it. But there's different value at every step, right? So we have to think about that as well. Look, a lot of discussion on digital printing, right? You can print anything on the tile. You can put your family photo on a tile. You can do anything. You want the quality, it's incredible. You can make a tile look like marble. You can make it look like leather, wood, textiles. We saw all kinds of incredible stuff last night. But the leaders, right, the key target markets over time, right, in terms of conversion into digital production is still Spain, Italy, India and China. But look at the Spanish and Italians are the leaders in digital printing and formulation. You are not going to get this stuff through a digital printer if you don't have the right rheology and kaolin in the glaze. That's another key part. And another key part of our strategy to participate in what we call the glaze portion that's critical to digital printers. Key target markets, they export to good -- look, about 85% -- 84% of that production digitally printed in those countries is exported and people pay an incredible price for those tiles. Key market part. I'm not going to go through it. It's just some things to think about, right? Commodity products, they grow in China, right? Double firing [ disappearing porcelain slab grows ], right? That's very important. We talked about that. People need higher, better raw materials. We have the right product for that. We have the right product, not only to replace Ukrainian kaolin, but also to participate in the new technology that's evolving on kaolin demand. The growth in Europe is significant. The multi-porcelain slabs, it's happening in Europe. In fact, it's happening in Australia as well. Ukrainian clays, we talked about. And look, don't underestimate the crystalline silica issue. A lot of you like granite, A lot of you like stoneware in your homes, love stoneware. The rest of it, granite. The rest of it, sooner or later though, especially in Australia, crystalline -- respirable crystalline silica will not allow these products to be used. You can't cut them without releasing respirable crystalline silica. The answer there is going to be ceramics large-format tiles. We're seeing that demand already. It's an excellent thing. Provide anyone who's interested in excellent article press about that as well. And we talked about quartz and respirable silica, big, big issue, right? So some of the key trends to look at, clearly driving our market, clearly part of our commercial strategy, clearly part of our thinking. Yes, this is kind of I wanted to show you. You guys can look at the video. We have time, there's a link down here. But just understand how big these things are, right? We look how big these tiles are. So a lot of architects using these. A lot of people using in their homes, wall tiles, the rest of it. And so you need the mechanical strength, you need the fire in properties and you need to be able to digitally print on these in a way as nice as the picture on the right, but you want that marble look, you want that stone look, you want whatever look you want, it's possible, the technology is. Yes. Great stuff. All credits to Porcelanosa. A lot of what is being put in place globally. Everything you see is ceramic, including the wood. We were on a floor last night that we could have sworn it was wood, and we were told this is ceramic tile. All of that is doable. You see the kitchen counters, all of that ceramic tile slab as well. Really, really interesting technology. All of that needs quality kaolin of the type that we have. And bathrooms as well. You can see all of the wood piece is tile, the stone piece is tile and everything on the wall and including some of the stoneware is ceramic tile, very expensive stuff, really nice though. So let's talk about the project, right? Where are we? That room is open, get on investors, the IM, the BFS, the ITC and IMC are all done. They're in there. Investors have been invited. I think they're impressed at the quality of the debt IM, that's Stage 1A. We are looking at Stage IB already. Why? Because the market demand is there and could be there in the next 6 to 8 weeks. Let's see what happens with cement. Let's see what happens with formulations. Another $50 million is required to get to 150,000 tonnes, which is 1B. We have a preliminary model for 1B. We won't proceed with 1B until we update the DFS, which evaluates the company that provides a new valuation based on our commercial strategy, contracts and the market. We need that DFS updated that underpins 1B and the potential mix between depth and equity. We need to get that DFS done as soon as possible, right? First week, second week of July. We need to have that ready to go with all the rigor and discipline and data that I showed here in this presentation so that people understand where we're playing, why we're playing, the value we're creating, the sustainability of what we're doing and how important our product is in the marketplace. In the June update, the IM, definitive study; mid-August, need to get it probably finalized, sooner than that, but that's sort of the drop debt date, first week of August, latest, right? So the updated financial model and the IM, all need to support Stage 1B, needs to be ready to go I would say much sooner than mid-August based on the discussions we've had this week with institutional investors here in Sydney. There's a lot of institutional interest in our company. They're all clamoring for the DFS, right? Put this slide together, I thought mid-August was achievable. The response I think from institutional investors this week is, "Hey, mid-July, you've got to have the updated DFS where you go." So if that's what it takes to get institutions across the line for our company, we'll do that, right? We'll commit to getting the updated DFS because the valuation in the DFS will include the HRM product in the mine plan, which the current BFS, DFS does not, okay? Construction. We have the Environmental Bond in July to pay. We can -- well, we can certainly pay it or we can push that off because we're not mining yet. We'll see how that goes. And look, I've had a lot of comments about this planned shipment in October, right? The mating season, the negotiation season for Industrial Minerals typically opens on American Labor Day, which is September 8 and end Thanksgiving for the first 2 weeks of December. We have to be ready to ship in October. We have to participate in that negotiation season. We have to have a seat at the table. We have to tell the world that we are selling a kaolin at this price for 2024 and 2025, and we have our existing offtakes and additional contracts that we're participating in. And we are part of setting the global price for kaolin. It's not just Sibelco, not just Imerys and not just the Americans from Georgia setting that price. It's Great White CRM and products from Australia that is sitting at the table as well. Absolutely critical because I don't want to wait until the following October to participate and promote our pricing in the market. We need to do it in October. So that's a little aggressive. We have long lead time items. We have a plan to build. We have road works. We have the rest of it. We have a detailed plan. We're ready to do that. We want to wrap up the data room with the debt guys in the next 6 to 8 weeks. We need to get the DFS updated in that time line. We need to come back and see the work at the end of June. If it warrants a look at IB versus 1A, we need to make those decisions, have that valuation and be ready to go to the market. Look, a lot of people tell me, "Bob, you guys aren't gold, not aluminum. We don't know anything about kaolin", is not -- you know what? I love that. I love how opaque our market is. A love that you can create art by mistake. A love that ceramics has for a long time been a part. There is an element of challenge to create what these people have created in the last 100 years. I loved it. I loved that when I was in Rio Tinto Minerals where we led a big push for the use of boric acid and borates in tiles where we created borosilicate glass. We've created Gorilla Glass with Apple for the front of your iPhone and iPads. We did all that from Industrial Minerals. That was opaque. So the same product that sold for a tile, I sold to Apple for their glass. The price was different. What's wrong with that. That's arbitrage. We own it. The product has it. The optionality sits in our deposit in the Peninsula. We own it, right? So we manage it and we're custodians of the deposit. We're also custodians of the value and where we play and why as shareholders, owners, employees, stakeholders. Very, very, very important. Don't let anyone tell you, "Oh it's kaolin, it's nowhere, right? Rather kaolin and gold, aluminum or copper because it's our product. We decide what the value in use is. It's a very powerful concept, really is. Just some comments and acknowledgments. Ibero is a fantastic company. Ultimately, we'd love to make them a customer as they are the key company in the world, working on Spanish and tiling formulations. Miguel Galindo was my point person in Rio Tinto Minerals, leading the push in ceramics and tiles for the better part of the 10 years. We worked together. He is consultant and has been a big, big part of our success with the work. Porcelanosa, old friends. Great to see them last night. They were gracious hosts when we were in Spain and a really fantastic evening hosted by Richard Earp and his teams. If you guys have a chance to see the Earp brothers showrooms, please do. They're fantastic people, fantastic technology and hopefully, great potential partners. It would be great to get our products into some of this high-end end users because that's really going to drive value is really going to drive our growth, okay? Look, a lot to digest. I wanted to take that time today to share with you, go through the presentation. Happy to take your questions. Understand that we are -- that we're not just validating. We're positioning, we're formulating, and we're creating a fantastic opportunity to commercialize our deposit, call it, a nontraditional way, right? Really good value news, really good potential, certainly in the next 12, 14, 16 months, okay? So happy to take your questions. Patrick has a microphone. Over to you, Patrick.

Anybody have a question?

Bob, I wanted to ask a question. How the debt piece is obviously the piece that you're going to come back in the next 6 to 8 weeks. What proportion does that represent in terms of your capital requirements to get you to a stage where you can sell your products in October '24.

For the 1A case, probably would be about 40%. 40%, 45% in there.

Okay. So are you able to elaborate as to how the balance of money will come through it, whether it be cornerstones or even investors having to put up with the balance.

There is a group of cornerstones interested for the equity piece. They are clamoring for an updated DFS, right? And so I'm not going to engage any cornerstone on any discussion on the asset value of our company or a company value until I have a value, right? So I don't think that's fair to anyone in the room or anyone of our shareholders. I'm excited about that. But as you can imagine, there's not much I can say about that at any particular time, right? So the balance, right, then in terms of a raise, capital piece. Let's see how that piece pans out. Let's see where the institutions who are very interested, cornerstones. There is, as you can imagine, that cement piece that needs to be tied up because the cornerstones are looking at that very carefully as well, right? They know about it. They know across our commercial strategy. That's what makes us appealing, but we need to manage that carefully, right? We don't want to -- I'm going to put it, don't want to fill the baby out with the bathwater, so to speak, right?

So what you're saying is then that there will be an effect, a significant dilution, but that dilution will be matched by the enterprise value of the company, increasing with your [ robotic ] strategy.

Absolutely, yes. Absolutely. Look, what is that -- it's a good point. What is that enterprise role? What -- where can this go? Look, I have an idea in my mind and where I want to drive it in terms of value. How is that going to be reflected in terms of a market response? Don't know. But the macros and the micros and the story itself and how you can validate it? In my mind, it's pretty straightforward, right? It's certainly, it's as straightforward as any metal commodity but in a more powerful way because it's regional to us here in Australia. So I think Australian investors, I think global investors, cornerstones, there have been 1 or 2 very big strategics that wanted an engagement. I have not engaged them. I'll be discussing it at the Board level on 14th simply because that's a very tricky and touchy commitment, right, where we are right now because that valuation. What I have -- what we have in our hands until I have the DFS, right, that value? I need to know what that is first before I really push this thing any further, it be with cornerstones or strategics at the door because I don't want to give any value away, right? That's really, really important. We need to have that patience, let's get the DFS work done. Let's put the rigor and the discipline similar to what we've done here into that piece of work. Let's stand behind it, and then let's engage the right people on our terms. That's what I want to do.

It sounds like you got a little bit of Scottish blood flowing through your veins. Don't want to give anything away. That's excellent. That's music to my ears anyway.

I think ultimately, we're going to I think the -- I look at the debt guys, they're such a -- they're a good group of guys, right? But any time you're talking debt, you really want to make sure you're keeping your firstborn close to you, your mortgage close to you, your car close to you. But all joking aside, look, I'm accountable, right, and I'm responsible. And we've had a chat in the 60 last days, a lot of frustration, a lot of discussions. I thought it was important to show this to you today because I want you to understand where we're going and why. That's really important, and to have the courage to say, "Hey, we're going in the right way. I'm worried about this. I'm worried about that, market, so forth and so on". But I think we're really well positioned. I really do.

Yes, you've got a hell a lot of a lot of work to do with getting feed front-end engineering and design done and all that. Changes and all that. And then Board -- then the Board has got to get to decision to mine DTM, decision the mine stage and so on and...

We have a really detailed plan. Really...

FID. I mean you have to work the FID.

Yes. Yes. So we're running a lot of things in parallel, right? We're running a very detailed project in parallel. We're running a debt process in parallel. We're putting together and getting ready to put an IM and updated DFS in parallel. We're doing all of that, be in Melbourne at the end of June to engage our shareholders and institutional investors. There's this institutional piece, too, that sort of can't be by surprise this weekend, just to be honest. It's not sort of meet and greet, hi, this is not, right? People are across our story. And once you present the story this way, now people are interested, right? And I think I made a comment that Patrick said I need to be and Frank was in the back, I need to be back here in 4 weeks to follow up on this, right, because that's a great opportunity for us. And I'm really pleased with the response of the group here in Sydney. Hopefully, we get the same type of response in Melbourne. I need to get my head around going to Perth and seeing what kind of interest is out there. But look, based on what I've seen here in the last 2 days, certainly, there's an appetite for our company and to invest in our company, so -- which is good news.

I know you're not very keen to talk about pricing actions because that would be -- you're talking about commodity. However, have prices increased since the DFS?

Prices have increased by, I'd say, 30%.

30%?

So just to answer your question, if you look at the tile, the other part of the tile is the best price. The middle part of the title is probably $50 per tonne less, and the tile body traditionally $75 less. Today though, today, that traditional difference across the tile has gone, right? What are people willing to pay for high-quality kaolin in a tile body today that gives you whitening against zircon? Interesting question, right? I have the answer to that, but I can't say it at all.

Does that mean that when we have the updated feasibility study that the financials, the economics of the project will be much improved compared with what it was in the previous one?

I would say, yes. So the key levers for that, very lever, what happens on the cement side, right? Our cement product in terms of value about 2.5x, almost 3x more than the ceramic piece, right? Very, very important to understand that.

And it's lower cost.

And it's lower cost.

Which means the margin is huge. I'm surprised you don't really have -- you had a focus on the concrete product. But you are more about the CRM rather than the HRM.