Andromeda Metals Limited (ADN) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the Great White Project 2023 DFS Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Rob Katsiouleris, CEO and Managing Director of Andromeda Metals. Please go ahead.

Thank you. Hello, everyone. This is Bob Katsiouleris, welcoming you to our call. This is really a very, very important day in the company -- in the history of our company as we've moved forward to completing the DFS that really resets the enterprise value of our company, of our strategy and our future positioning. So look, it was just a couple of comments before we begin. It was really a herculean effort. We pulled a very comprehensive, rigorous disciplined document together in 7 weeks. And first and foremost, I wanted to thank just the outstanding team that did it, we did all of this in-house with our people with a lot of hard work based on the work that we've done both in terms of the commercial strategy and our technical validation and work with our partners. So really a big thank you to the team who really put together a first-rate outstanding document. So on the first slide, I'd just like to go through and just mention that all of the assumptions for today's presentation and to some extent, on the executive summary are listed here, including a second slide with disclaimers. The key thing on the assumptions here is that we have had an independent financial consultant to validate the model and the methodology that we went through. So I think that's very, very important because it does provide a very, very intense rigorous check on both the methodology, our inputs and our outputs and really the outcomes of the DFS model. So moving ahead, just an acknowledgment of the country before we begin. We're in a very, very special part of South Australia and acknowledging our First Nations partners and people that have been there for generations and will continue to be there is very, very important. The traditional owners and custodians of both the Eyre Peninsula and the land that we're on, the Wirangu and the Kaurna people, we pay our respect to their elders past and present and recognize their cultural heritage and which are really part of their beliefs and our beliefs the land and water was in the sky. So a very important acknowledgment as we begin the presentation. So look, let's start with a high-level review of the results, really delivering a significant increase in NPV to just over $1 billion, a 59% increase in EBITDA. If we look across just some of the key elements, and we certainly will talk about this in detail as we go across. First and foremost, really the strategy work that landed us on very well-defined core and complementary group of products and the associated establishment of the value and use and pricing of those products as established by ourselves and our partners in Spain and Italy and across Southeast Asia. It's a very, very key part of the work that we're doing. It also establishes our deposit as a world-class in both porcelainware and high-end ceramic porcelain tiles. We look at the macro and the micro environment, a very, very key component. Global prices have strengthened. We've talked a lot about Ukraine, the situation, of course, across the [ Bowmans ] area, if anything, has gotten to some extent, worse tightness in local supply has been exacerbated. But in addition to that, I wanted to point out which is a key part of the DFS is that the halloysite mine depletion for porcelainware is also a key contributor, right? So the supply of high-end halloysite typically has come from the Oceania region, China region, high-end porcelainware has significantly dropped off as a forecast for those products in the near future. And that feeds in very, very nicely to porcelainware being one of our core products and certainly watches into the binding offtake we have with Yamada and the high Japanese porcelain producers. Enhanced value, we'll talk about in detail the accelerated sales profile and reduce costs. The weighted average product margin has increased by 34% to $450 a tonne. Our product basket is more profitable. A key part of that is the selection of products and the mine responds to the market positioning, right? We've been able to bring sales forward. We've been able to almost ideally match the mine-to-market response in terms of what the market needs and when the mine will have those products available, the stripping will be done, the overburden will be done. The piles and the blending will be done, which I think will be very, very important. We'll talk about that in detail a little bit later. Lastly, safe and sustainable development. We spent quite a bit of work done and did quite a bit in terms of understanding our Scope 1 and Scope 2 emissions. We have a very clear idea of what they are and how we're planning on improving them. And we're really happy to do at this point, say at least they meet and exceed the global industry benchmarks and certainly more work as planned going forward as we expand the mine to make sure that, ultimately, it can and will be a source of future competitive advantage. I look at the key metrics, really solid across the board along the lines of what I talked about in terms of product pricing behind our offtake agreements. Please note here is not -- that we can't provide detailed pricing as we are bound by European competition regulations as it stands for pricing and reporting pricing. Having said that, our current basket of prices both in ceramic tiles, porcelain really provides the baseline for the value of the DFS, the product portfolio we discussed before. The payback period, of course, improves, which is important. And in addition, we chose to show the DFS on a pretax basis for a couple of reasons. One, first and foremost, we wanted a like-for-like comparison to the previous DFS, so everyone could actually see exactly how the company valuation has changed and why. But we do know that future profits can be offset by carry forward tax losses that are estimated to be $191 million, and those will be available to us when we start producing and recognizing revenue and will provide a very, very key financial list for us, especially when we are starting our project. It's a very, very important part of how we're going to start the first 12, 24, 36 months. So all in all, the detail is there. Really good results across the board. And comparing to the previous DFS, so we can see that in a little bit more detail on the following waterfall chart. And you can see here our sales uplift, our reduced operating costs in line with our simplified mine plant and mine schedule. We do have a significant increase in logistics costs and this is really driven by product mix, right? This is driven by bagging and the need in the beginning of the project to be freighting across the peninsula to take products out at both Port Augusta, the Port of Adelaide and Whyalla. So there's a significant opportunity for us to improve the valuation of our company as we improve logistics costs and develop more break bulk options closer to our home ports between Sydney and Port Lincoln, and we're currently working on that as well. If you look at the revenue stream, you can see the enhanced product mix and the uplift driven by that product mix. It's important that as we discontinued PRM, which is the paid product, that was outlined in the previous DFS. It's important to note that the benefit is twofold. One is there's a benefit in terms of margin, even though the product had relatively high price, the margin was relatively lower, but there's also a benefit in terms of mine life in terms of the stripping ratio, overburden and the amount of mining needed to produce that product. Having said that, we can always produce PRM if at any point in time, may be a product that is complementary and/or core. Look, I decided to include a little bit of a cash flow statement or curve, I should say, over the life of the project. We've shown the full 28 years, that's our life of mine. So I think it's only normal that we show that we have a payback period just inside of 6 years on a cash basis. We have, of course, plans to fund all of that through that period and generate very, very strong cash flows. Later on in the presentation, you'll see that by post 1B as we move towards Stage 2, we are self-funded, right? We are, and we will have the ability to fund from $150 million to $300 million and future capital requirements based on the cash flows of the business, which, as you can see, are very strong. So look at the core of the work we did, as you note from the first presentation in Sydney for today, we've developed a very rigorous and disciplined methodology, and we've talked about it many times with investors both institutional and our own investors. We've done a lot of work in terms of defining our commercial strategy map and review really the balance between mine to market and market to mine. You can see the upper part and the work on market demand, macro and micro work. We've done this work across a lot of different markets. People are asking why we're not in paper and plastics or fillers. We've looked at those markets. We looked at them through the strategic plans and how that fits into our footprint. We settled on a group of core complementary products. We do have adjacent opportunities that include high pure alumina at this point which can still become part of our product offering in the future. But for right now, we have settled on a core complementary portfolio that's reflected in this DFS. I think the mine response and the associated mine schedule work and the detailed work done as part of the DFS really showed the possibility to line things up in a way that is also working, that is not only accretive to life of mine value but also optimizes working capital. And here, we did something interesting. We actually said that in terms of the response, the mine to market response to the market to mine, there was an opportunity to balance the sales profile and the mining profile. And so within -- as the mining profile action showed the opportunity to actually almost match up directly with the sales profile, we thought that, that would be an opportune time to match both of them. So that was a really, really good opportunity to do that, and that also generated quite a bit of value. So a couple of comments on prices. Of course, China domestic Kaolin supply and demand continues -- that gap continues to grow. On the left, you see the pricing, the U.S. PPI really looking at about 2.4, 2.5x index increase in price in real terms for 1984 prices, these are U.S. producer prices. So this is the majority of these products are produced in the American Southeast and make their way into the Chinese market, very, very continued strong demand across the Chinese market, very strong supply from the Georgian market into there, into the Chinese market. But still, even with all that, you can see the supply-demand imbalance on the graph on the right. Probably a final very, very peak point here on this slide is that if you look at all of the announced tailwind projects, in the next 24 months or even the next 5 years. There are no tailwind projects that have been announced with a 36% greater than 36% alumina content. So we are at 36.5%, 37% life-of-mine deposit with a [ 0.4% to 0.5% of iron ], both additional resources to the north and south, probably totaling 200 million tons of which the Rest of the World cannot find an alumina content in this particular range. So very, very interesting opportunity for our company to commercialize that in the future. Many of you have seen us. We started our journey with a great partner who is still a fantastic partner for us, IberoClays, the leading formulator of minerals in the Mediterranean, Italian, Spanish area. We benchmarked and did a lot of work with them, setting our aluminum iron ratio as a world-class, our color -- fire color has world-class and our mechanical strength. The key components of our product that are almost impossible to find, especially in the absence of Ukrainian kaolin in addition to the chemistry, we are finding out more through the value and use work we're doing with the barrel that there are other attributes to our kaolin that make it very, very attractive across a wide range of building opportunities. Now what's important here is that we have 2 very, very important work that are ongoing, which we'll probably announce the results. My guess is by the September 20, this is the final value use work done with the IberoClays where the compares are tailwinds not only to other tailwinds, but to the valuing use of all other industrial minerals used in ceramic and especially high porcelain ceramics. And the work, as we discussed last time in our presentation, more in Sydney and Melbourne, we will have a Stage 2, Stage 3 and Stage 4 of the ITC work that will be published at the same time really looking at the application value of our tailwind in these markets as well. Again, all that work to be globalized. It applies to Southeast Asia, the plastic China and certainly applies to Japan as well. So we talk about what this above-market high value mean -- what I decided here is just to show you, if I parted our product versus all else versus all the other tailwinds. And if we look on the left axis and the bottom axis, the left is just simply an impurity index, which is from top to down, shows increasing quality. And from left to right, is increasing alumina content. You can see where we are. And we are clearly in a very, very unique place world class amongst the best of the best in terms of being in that lower right-hand corner, which is where you want to be. Now based on that and based on looking at the markets for that type of tailwind that type of product, we have identified a contestable global market for our product that's somewhere between 350,000 and 500,000 tonnes. This is what the market share number, that's probably under 30%, very reachable, very attainable, some logistics challenges, but that is actually the contestable market for products like ours in that range. And of course, if you just look at the graph, there are not many kaolin or industrial minerals capable of achieving that. I've shown this slide before, but when we talk about value in use, this is always like coming back and it's simpler to show you, make sure everyone understands that kaolin is a white clay. It's needed in the production ceramic tiles simply because it has refractory properties, plastic, nonplastic properties. But our particular product has a widening and mechanical strength that pushes it over into that group of whitening minerals that typically sell for 3 to 4x more than our product does and allows us to compete on value in use in that space. And a lot of the work we've done, I would say, in the last 6 weeks that we'll be able to show hopefully, in late September will really establish that value, the associated with pricing and how we will position our product in the future. So all of that where -- how do we position all the outcomes of our commercial and business strategy pretty straightforward. We look at our chemical purity, we look at whiteness, we look at mechanical strength, clearly, that positions us as the industrial mineral of choice for high-end porcelain tiles, right? We have an opportunity to not only compete against other tailwinds, but other industrial minerals in significant quantities in the markets that we choose and the partners that we want to be partnered with in a sustainable way across multiple markets, of course, our home market, Southeast Asia, Japan, Oceania and our partner markets that will include Spain and Italy. A couple of comments on HRM. Things are moving ahead with our validation. I get a lot of questions, say, Bob, how HRM is further behind CRM in terms of the validation and testwork. Testwork is moving ahead. We're pleased with how it's progressing. Having said that, it's very move forward with validation a completely new product and a completely new end use. So we're working hand-in-hand with partners to establish that. In addition to that, we are working on additional new opportunities, especially here in our home country and home state where infrastructure roads have been called out and the need for low fine cement for approved projects that are probably similar AUD 2 billion range we need an incredible push in terms of infrastructure, industrial metals, cement and concrete. So that's moving ahead, and we're working very, very hard to bring that to a stage where we can clearly call that part of our core product portfolio. Talk a lot about the strategic plans. We look at -- what's important here is to just understand that we just didn't land on ceramics and porcelain. We looked at all the traditional markets which include paint, which include plastics, paper, fillers, cosmetics, medical applications. We looked at all these markets and said, "Hey, where can we play, who can we play with? Why, where, how do they address the mega trends? " When we look at then, we prioritize the numbers on the lines simply look, simply show you just the way we would think in terms of running through an opportunity to think that is it something we need to be deeper on, and it is something that our products, existing and more future can address. We did all that work. We settled on what we settled on simply because not only because of value in use, but barriers entry our ability to compete and our ability to penetrate new markets as a small new player in Southeast Asia, China and Japan. All of that came out of this work, and we settled on made a key decision not to participate in paint, plastics and paper. We simply did not believe we were a commodity tailwind to do so and chose to differentiate our product quarterly. I mentioned this before. This is -- we talked about the mine-to-market response, and it's important to understand that it's not so much sales dictating to the mine -- what the mine needs to produce. It's a very clear idea that our life of mine and the opportunities that would present that are commercial and market-driven are accretive in life of mine value. And we've done that very rigorously in this DFS. We have a very, very fantastic match between our life of mine and our sales plan and the tonnages associated and the markets that those can be sold in. There's further optimization that can be done. The process is an iterative one. It's a model that we've built in-house and really is the ability to balance mine to market and market to mine, not only in the initial phases, but clearly, as we get up to Stage 1B and further really an important part of our planning and an important part of our value creation. This is interesting. I showed this -- I think so we're sort of a heat map of our 28 years and where the products are, you can see the legend on the right and the coloring on the rate versus what the mine looks like. We move to start to pick over a little to the right, just to have a little bit more access to all 3 products in that initial phase but that's sequencing also all in all, the sequencing across the life of mine and the mining plan really improved overburden removal, really improve mining costs and reduce the overall cost of mining. So that was very important. And another key component to the DFS is just realizing our ability to commercialize sand and we've had quite a demand portfolio developed, especially for our fine sand product. This, I would say, sand shortage across most of industrial Australia, led by the Sydney area. So there's an opportunity for us to really participate in that by simply desending or deselling our tiles. We're creating those products, which are of course product and a fine product, why not sell them if there's a demand to sell them x mine gate and the market is there to accept those products and the validation. It's very easy, very straightforward and is in process to be wrapped up relatively shortly. We do need a final sign-off from them pre-October '24 to get that license included in our current lessons but we are well on our way to securing that. We've staged the project. We talked about this many times, a 1A, 1B, Stage 2, Stage 3, a couple of important things here, post- the 1B, project becomes self-funded, globalization in the mining lease and the environmental permit and rehab. We've talked about that, we've secured that. We have a very, very good production summary across the life of mine. We know where our products are. We know their quality. We know how to mine them. We know when to mine them in the most optimum way possible to get them to market. And I think our plan is still to have first shipment in October 2024 and move across from left to right as we grow our business. Lastly, there's execution piece here that's really important in terms of both marketing and sales strategy and sales and operational planning sales and operational planning I can't stress how important that will be, especially in terms of managing our working capital and our cash flow. Looking at customer demand, quality, logistics, packaging, working capital, making sure we have the right product mix, customer mix that optimizes our cash balance and accounts receivable. The marketing and sales strategy is an important piece as well, simply because we want to make sure that we are actually executing our commercial strategy in the marketplace with our customers, with our customer segmentation and how we go to market. You see a little bit of that. I've shown in terms of the next slide, we call it strategic approach to sales and marketing. We're sort of adopting a little bit of what's called hub and spoke strategy. We want to absolutely be at the heart of where the high-end tiles are formulated and developed. This continues to be Spain and Italy, will be at the Italian ceramic show end of September amount of demand, a lot of customer potential, a lot of ability to secure future offtakes on the back of the ITC and the Ibero work that will be announced just before the show. So we're very excited to move that forward. Our existing agreements are listed with porcelain, our porcelain contract with Yamada, FG and Term Sheet we have with IMCD for exclusive sales in Australia of HRM. A couple of comments on the plant. All in all, I'd say most of the long lead times items are ordered or terms agreed and on order. So I think all of this is moving in the right direction. So clearly, what needs to be done now is we do need to pay the bond, the developmental bond and the payment of native vegetation fund prior to start, that's a very, very important piece. I think at this point, just a couple of comments on funding. I would say that our debt discussions are at an advanced stage. We've had the data opens in store. And I've seen a lot of comments and questions well from June, it's taken a long time to move debt forward, please accept how challenging it is for debt providers to understand not only the technical challenges of our business, but the marketing challenges of an open market. So I would say I'm very pleased that the rigor discipline of the group that participated. I think our finalists right now and the advanced stages of discussion I'm also pleased that the understanding of our business is there to move the discussion to finality. So I think that will be very, very important. Now in terms of the next stages, I've always said and always maintained that the DFS is really critical because it resets the enterprise value of our company. There's no point in discussing any further funding opportunities or funding strategies until the best has been properly issued, properly understood by the funding community and properly understood in terms of where we are, where we're going and how we're going to get there. So those discussions now that we have issued as of late last week, will kick off. And I think that's a very, very important part of making sure that the DFS is understood, commercial strategy, the technical part, the marketing strategy. If you just look at the amount of time and effort taking from -- on the debt side to understand the markets and make sure that we come to a certain clarity, I think the DFS is much more rigorous and disciplined and certainly, we'll provide that clarity to potential funding partners in the near future, there remains quite a bit of interest, I think, in the project. And so we're excited to move forward with that. So look, I have decided as an executive summary, but I did a lot of questions from stakeholders and shareholders and others on the school logistics challenge. And you can get a flavor for you in terms of where we are and how far it is to truck across the Peninsula to Whyalla and Port of Augusta options alternatively across to Bowmans and into Adelaide, for containerized shipments. And you can clearly see, right, that the future opportunity if and when we were able to secure the bulk shipments from Thevenard there is a real intent from our entire team to make Thevenard our home port to 130 kilometers away from our deposit, it makes great sense to do that. And we're working very, very hard on that. We're not able to pull all that piece together in time for the DFS. So I'm showing that here clearly the future opportunity but I think that's going to be a really nice interesting upside. In addition to the previous DFS, we have developed the ability to bulk line containers. So it's very similar to what the grain guys are doing, you can put essentially a big bag in a container and fill that bag up as a single bag. So that's sort of a bulk line container shipment option is cheaper, more effective, you don't have to semi bulk bags or big bags, we've tested that, and we're ready to go with that option as we get ready to commission 2024. Our last piece here on an important piece really on safe and sustainability, right? We talked about the need to really build a safety culture, a committed culture that focuses on safety in everything we do and the engagement with our stakeholders and shareholders across our environmental footprint, our social obligations and the ability to make sure from a governance standpoint, that our commitment to ESG is really shown in the way we mine, in the way we produce and the way we manage and deliver our products to our customers. We have done an incredible amount of work in DFS to really put together Scope 1 and Scope 2 emissions. We benchmark them both across Australia and across our markets. I would say that they are okay, they're acceptable and in line with where we'd like to be, but there are opportunities to drive it further, including the freight piece I just showed including the ability to get on the grid with SA Power and also to really finalize and put in place a very good solution to our water requirements and to those of our community with SA Water. So all that is in place. We have a very good feeling also from what Scope 3 additions will be, especially in our home markets. And ultimately, the purpose here is, yes, ESG is critical and part of our license to operate. But ultimately, we think that the deposit is location, quality of the deposit, the amount of energy and handling that we use is actually the source of future competitive advantage, right? We'd like to publish those numbers as part of every shipment to make sure people understand what that footprint is and we also see a world where CO2 credits and carbon credits will be traded in the Australian market they are currently traded in Europe and the ability for us to generate even more value notably for the cement and concrete industry. A couple of comments on corporate and project risk. You've seen it in the executive summary. I think mitigation plans are in place for everything here that we've mentioned. These are just the key project -- key corporate project risks. A lot in front of us, a lot of big challenges. We've been able to get across a lot of these and put in place everything that we need to make sure that our project is very sound, very secure at this point. So we feel comfortable in terms of what we've identified and the plans that we put in place to mitigate them. Lastly, we always finished, and I always bring this up on why now, right? might we look at the market. We look at the geopolitical crisis, we look at the opportunity in front of us. First and foremost, our resource is we defined a higher value use for resource than what we had 6 months ago. I think that's a very, very important comment, our ability to commercialize that value and use will create not only the value we're showing in DFS, but something sustainable well past 25 to 30 years, certainly with the deposits that we have to the north, the south that are as good, if not better than what we currently have. It's really, really an opportunity for sustainable value generation and the creation of tailwinds to industrial minerals industry in the Eyre Peninsula. That's really what we're talking about, just not this budget on a stand-alone basis. The global depletion of high-quality deposits, we mentioned that, especially we don't talk about halloysite enough. There's not that much halloysite enough. There's still an incredible demand from the Chinese porcelain maker, the Japanese as well. Those deposits in Japan and across other parts of the world are either decreasing and/or depleted and or suffering serious quality, a fantastic opportunity for us to jump into that market. Important to note that the porcelainware market is trading almost at near returns to this high-end ceramic porcelain power market. So great optionality for our business and a great way to further optimize our cost structure. The project itself, we're construction ready, our permits are progressing, our commercial plan the way we've been able to market ourselves in Spain and Italy and key markets, the way we've been able to position ourselves as a small Australian junior that has done the rigor and the disciplined work to establish its product and strategy with the right partners in the right markets, I think that gives us an incredible credibility going forward. And lastly, the geopolitical forces, look, that's interesting to see that the risk that that's put on the existing market, not only the tailwind market, but I would say the industrial minerals market in general, I think there's -- we hear a lot about rare earth. We hear a lot about green energy transition metals, but there is concern about basic industrial minerals and the ability especially as things get very -- things get very, very tight in certain parts of the world. That positions us uniquely to respond, especially to the opportunities in Southeast Asia and China. So that's what I had. I hope you appreciate the presentation. I hope you've had a chance to go through the exact summary. People ask me on occasions, Bob, why did you announce on Thursday had the presentation on Monday, I wanted to make sure everyone had a chance to go through the exact summary digested there's quite a bit there. There's an enormous amount of work that we pull together and hope -- I hope everyone appreciates the positioning work, the rigor, the discipline that went into it. And with that, happy to take your comments and questions.

[Operator Instructions] I see no viewers are further questions at this time. I will now turn back the conference to management. Please continue.

Okay. I have to pay the first question. The first question is, have you paid the environmental bond yet? If not, when is it?

So yes, answering that question, I think we're just getting the questions up here on the screen. On the environmental bond, our plan is to pay the bond in October -- in the October, November window. So we are preparing to do that. And we're -- there's not much more I can say. We're obviously our plans hinge around getting the bond paid first and then moving forward with earth movement and clearance and so forth and so on. We have a question here that says, as a time frame on debt funding and other institutional investor support, will you expect offshore funds to be part of the equation? Look, we have quite a bit of interest actually in Australia, but also quite a bit of interest in our company over in Europe. And so as part of the visit over to Italy, we will certainly be entertaining interest from people in the European space who we consider and understand not only industrial mineral space but also the supply-demand dynamics of kaolin.

Next question is on Slide 8, we show positive cash flows will only start in year 4 lots of mine, how the first 3 years be financed?

Yes. So we're showing that. Clearly, we understand EBITDA and cash through that first period. We do have a debt and equity portfolio organized to make sure that we're funded through that period until we're generating cash. So I think that's all part of the modeling we've done and the advanced discussions that we currently have with our debt providers.

Do they need current LOIs and term sheet to be signed to underpin the debt discussions?

So the current sheet -- the LOIs that we currently have in place. I think what's important is that by the time we eventually tap debt when and if -- when, I should say, not if. Clearly, there is a need that the LOIs have been manifested into term sheets that are binding. And I think for us, the timing of getting that done is in the current season in September, October. We have a lot of interest, a lot of opportunities to lock down the LOIs that we currently have in place and/or to create other ones and/or to settle on binding offtake agreements. I would say all 3 groups of opportunities are in front of us now.

Next question is, can you please give some details on unit costs and revenue of Stage 1A?

So look, on unit cost and revenue, I can only refer to just the margin uplift, don't really want to get into the price structure and not for the reasons I mentioned during the presentation. Having said that, I think it's important to understand that in 1A, we are starting. We are developing, I think unit costs as we ramp up will be, of course, a little bit on the higher side until we get to steady state. I think one thing that's additive and sort of nice to have is we're planning on selling some of that sand product right from the get-go. And I think what's important, especially when you start up is cash is king and getting our products to the market, getting paid for them, especially in the first 12 to 24 months, will be absolutely critical. Any questions online?

Yes. All the questions are online. Bob, are you able to go through the total CapEx and a brief outline on how this total CapEx has come down?

So look, our CapEx has come down really because our product mix and product portfolio has changed, right? So if you look at the absence of PRM in the product portfolio at this particular point in stage, we don't have high-end expensive magnetic separation in there. We don't have the advanced -- some of the other capital items, which I think are -- which are origin part of the original DFS, we also have an optimized OpEx in line with the CapEx spend which I think is favorable. So all in all, a very, very rigorous capital profile. What's also important to note is we're not going out for capital now, right? We've been probably looking at securing and getting the term sheet done, the testing done for the better part of the last 12 months. So in doing that, we've taken a lot of the capital inflation, other junior companies are suffering with in the Australian market. We've taken a lot of that off the table simply because we've made the necessary commitments in down payments to some of the larger items. And now I think what is probably critical in terms of construction and capital is the MCCs, the electrical packages, the steel packages to the rest of that. And it's not so much the cost that might be the concern. It's just the availability of labor to get that in place and done and we're working very hard to make sure that, that's available to us in line with when the large capital items show up.

Are we any closer to securing CFO and an update on the carbon capture plant?

So we -- yes, so we are, I'd say, in the final stages of securing a CFO, excellent candidates, excellent people. I think we've made great additions to our team, and we're wrapping that up and hoping to make an announcement shortly. Look, I haven't gotten around to and I know I promised to come back to the carbon capture decision and next steps shortly. And I know I promise to do that at the end of the quarter. Look has just been all hands on deck in terms of getting the DFS. But certainly, we'll come back to carbon capture certainly before the end of the year and certainly with a very, very clear pathway in terms of what we do with what we currently have on hand and how does that fit going forward into the strategy we sort of laid out this afternoon.

Next question. How is the LOI with IberoClays progressing towards a binding agreement and other key to get the product on the...

They're very keen. They have a lot of customers asking for products, very high-end customers as well. Also interesting to note that a lot of customers that have plants in Southeast Asia are also opening dialogues with us, and we'll be visiting many of them having discussions with many of them at the end of September. But Ibero is very keen to finalize our agreement. I think we had planned to wrap something up by the end of October. I think what's important is how we start up the plant, who we ship to, especially those early days, making sure that we ship to customers that can turn things around in terms of payment and making sure we manage cash properly in the first 12 to 24 months, I think it's going to be a big part of our start-up plan.

A question from Don asking on Page 12 and 13, there are 2 separate samples of CRM products. So what do they represent?

We had originally tested in Spain, samples with and without bentonite. So a lot of the work we did originally in porcelain where we thought that adding 1% to 2% bentonite would give much better firing properties, much better strength. So we decided when we benchmark consolidated the work that we did. We decided to do that for both CRM with bentonite and CRM without bentonite. Having said that, in all the results, we're very pleased with the results without bentonite our excellent and acceptable both for tiles and for porcelain oil. So our plant, our plan, I should say, is that the plant actually comes out without bentonite position. That saves OpEx and CapEx in terms of what our financial plans are.

Next question, is what -- given the market conditions, given the target market in corporates in Europe, what is your planned response to dealing with Ukraine supply coming back online in the future?

Look, I think it's clear for us, right, that the European market is for us a formulation market, right? It's a market where we want to sell the volumes needed to the partners and customers needed to formulate in their global plan. So when the Ukrainian deposits do come back, I think there is an element of risk that all of the European players will certainly reformulate a portion of their business again within Ukranian tailwinds, but we're not going to see anyone taking 70%, 80%, 100% physicians with the Ukranian clay, that's simply too risky. And the need for multiple tailwinds, multiple zircon, multiple fills for suppliers is going to be absolutely critical, not only to derisk the European business, but also to derisk the Southeast Asian and Chinese business. I think geopolitical tensions today are not only in that part of the world, but certainly exists in other parts of the world as well. And we have to be ready to pivot and respond to those. It's important to note that Southeast Asia, China and Japan, Oceania remain our home markets, and we are dedicated to serving those as we grow.

One listener also just wanting clarification on that now that the DFS has been released, is it only now that funding discussions can begin. I was under the impression that the data room is open to potential funders.

The data was opened the bank offerability guide room was open to the debt investment -- investors and parties that were interested. We have had discussions with others that were not on the debt side. My view has always been, look, there's no need to further those discussions until I had a proper enterprise value and update of our company. I didn't want anyone to really be looking at us in a lot of detail and saying, look, this is your value, this is the company so forth and so on. I think those discussions there's a group that's been with us for, I'd say, 3, 4 months. There are others that have been waiting and anxiously asking and waiting for the update in DFS. That's a very, very important point to make, right? That the DFS is not just us putting it out there, that the DFS actually has been requested by the funding community on numerous occasions, both here in Australia and both offshore.

Two questions in one, why did the financials not include considered debt financing costs? And with the cash flow model, why are the revenues -- what the nonrevenues per commodity?

Yes. Well, we don't want to really show cash flow by commodity coming back on my comments on pricing. I think that's an important piece. Look, the debt financing costs and discount rates and all that, look, what we want to do here is give you the opportunity to really do an apples-to-apples comparison on the valuation of our company, right? At this point as we move forward with the DFS and discussions with potential funding partners, certainly, the cost of debt will have to be figured as well others. But I think for the purpose of what we're doing here, trying to understand how we have dramatically improved, changed and set the enterprise value of our company, I wanted to do it more so on a debt on an apples-to-apples basis.

Are you needing to educate the market as to the alternative use of CRM in regards to sales plan, et cetera? Or is it already well understood?

No, excellent question. Very, very difficult to educate the market in this piece, and that is really the point of the spear on the value and use work, right? It is really important that people understand the tail and especially this scale and is not only world-class in its use as kaolin but it is potentially world-class in its ability to create value and use, save money and establish itself as an industrial mineral of choice in other applications and certain tiles and that's the work that we'll be ramping up by the -- like I mentioned before, by September 20.

A question on the WA Kaolin agreement that announced recently that they were able to get a cornerstone back in moving to production. Are you able to do something similar or with one or more of your customers for one of our products?

I think that's a possibility. I think WA Kaolin did a great job going that piece together. Having said that, I think the cornerstone back. It was an existing offtaker over a period of time, decided to come back in secure more uptake on the back of equity. That's certainly a potential for us. I see that type of deal something more that fits 1B than 1A. Certainly, if there is a customer that participated in 1A on the way to 1B, if they want to secure more offtake, we're willing to fit an equity position that clearly is something that we could do that. We could do that in -- at that particular time in place. But we'll consider that in due course, certainly.

Do you consider Poland as a trading partner? Poland is it within the top 10 tile exporters?

Yes, absolutely. No, I worked in Poland in the past. And I think what's important to understand is that the type of technology there, I think digital printing, we have a focus on areas that digitally print simply because the value is higher, but Spain, Italy, India are tops in that region. But there -- the Middle East, Poland and other countries are right there in our ability to really take digital printing to the next level and certainly we'll produce the high quality of porcelain tiles that we're looking for in the near future.

Next question is, is there -- are there any long lead time items that may defer the project start?

No, we don't. At this point, we don't see any long lead time items that are critical. Like I mentioned before, I think the focus now is just on the ancillaries, steel, motor control centers, all of that, all that's there, getting that all in place and just making sure we provide the proper project management between the capital that's going to show up on site, our ability to install it, our ability to test it and then our ability to link it to the rest of the process flow sheet in a way that makes sense and optimize capital spend. So we have -- we're in the process of building our project team on site and we have our construction manager, who's just joined us 1.5 months ago, 2 months ago, and so we're preparing to lay out the foundation of what that plan looks like and making sure that not only does it optimize timing of the long lead time items, but also installation of everything needed to get them up and commission.