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 move 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. You know, we pulled a very comprehensive, rigorous, disciplined document together in seven weeks. And first and foremost, I wanted to thank just the outstanding team that did it, led 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 pulled 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 from 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 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 outputs, and really the outcomes of the DFS model. So moving ahead, just an acknowledgement of 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 in the lands and waterways and the sky. So a very important acknowledgement 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 AUD 1 billion, AUD 1 billion, a 59% increase in EBITDA.
If we look across just some of the key elements, and we certainly will talk about these in detail as we go across, first and foremost, really the strategy work that landed us on a 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. So very, very key part of the work that we're doing. It also establishes our deposit as world-class in both porcelain ware 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 Donbas and Black Sea area, if anything, has gotten to some extent worse. Tightness in local supply has been exacerbated. But in addition to that, you know, I wanted to point out, which is, you know, a key part of of the DFS, is that the halloysite, you know, halloysite mine depletion for porcelain ware is also a key contributor, right? So the supply of high-end halloysite, typically, that's come from the Oceania region and the China region, the high-end porcelain ware has significantly dropped off, as have forecasts for those products in the near future.
That feeds in very, very nicely to porcelain ware being one of our core products and certainly latches into the binding offtake we have with Yamada and the high-end Japanese porcelain producers. Enhanced value, you know, we'll talk about in detail the accelerated sales profile and reduced costs. The weighted average product margin has increased by 34% to $450 a ton. Our product basket is more profitable. A key part of that is the selection of products and the mine response 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've spent quite a bit of work, and we 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, at this point, say at least they meet and exceed the global industry benchmarks, and certainly more work is planned going forward as we expand the mine to make sure that ultimately it can and will be a source of future competitive advantage. A look at the key metrics, really solid across the board, along the lines of what I talked about, in terms of product pricing and our offtake agreements. Please note here, does not... You know, that we can't provide detailed pricing, as we are bound by European competition regulations as it stands to pricing and reporting pricing. Having said that, our current basket of prices, both in-...
Ceramic tiles, porcelain, really provide the baseline for the value of the DFS. The product portfolio we discussed before. The payback period, of course, improves, which is important. And, you know, in addition, you know, we chose to show the DFS on a pre-tax basis for a couple of reasons. You know, 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, you know, that future profits can be offset by carrying forward tax losses that are estimated to be AUD 191 million, and those will be available to us, when we start producing and recognizing revenue, and will provide a very, very key, financial lift 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, you know, 12, 24, 36 months. So all in all, the detail is there. Really good results across the board. Comparing to the previous DFS, we can see that in a little bit more detail on the following waterfall chart. You can see here, our sales uplift, our reduced operating costs in line with our simplified mine plan 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 of 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 Ceduna and Port Lincoln, and we're currently working on that as well. You look at the revenue stream, we can see the enhanced product mix and the uplift given by that product mix.
It's important that as we discontinued PRM, which is the paint 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, relatively lower. 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 we deem it a product that is complementary and/or core. Look, I've decided to include a little bit of a cash flow statement or a curve, I should say, over the life of the life of the product, project. We've shown the full 28 years.
That's our life of mine, so I think it's only normal that we, we show that. We have a payback period just inside of six years on a cash basis. We have, of course, planned 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 two, we are self-funded, right? We are, and we will have the ability to fund from 150-300 and future capital requirements based on the cash flows of the business, which, as you can see, are, are very strong. So look at the core of the work we did. As you know, from the first presentation in Sydney to today, you know, we've developed a very rigorous and disciplined methodology.
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 to mine, the macro and the micro work we've done. We've done this work across a lot of different markets. You know, people ask me why we're not on paints, paper, and plastics or fillers. We've looked at those markets. We've looked at them through a strategic lens and how that fits into our footprint. We've settled on a group of core complementary products.
We do have adjacent opportunities, you know, that include high purity alumina at this point, which can still become, you know, 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, the 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, you know, 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, go next slide. As the mining profile actually showed, the opportunity to, to actually almost match up directly with the sales profile, we thought, 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, on prices. Of course, we, you know, 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 a 2.4-2.5 times index increase in price in real terms, from 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 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 key point here on this slide is that if you look at all of the announced kaolin projects in the next 24 months or even in the next five years, there are no kaolin projects that have been announced with a 36 or greater than 36% alumina content.
So, you know, we are a 36.5-37% life of mine deposit with a 0.4-0.5 iron, with 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, you know, opportunity for a company to commercialize that, in the future. Many of you have seen this. You know, we started our journey with a great partner who's 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 world-class, our color, fired color as world-class, and our mechanical strength.
Three key components of our product that are almost impossible to find, especially in the absence of Ukrainian kaolins. In addition to the chemistry, we are finding out more through the value and use work we're doing with IberoClays, 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 two very, very important pieces of work that are ongoing, of which we'll probably announce the results, my guess is by the September twentieth. This is the final value and use work done with IberoClays, where it compares our kaolin, not only to other kaolins, but to the value and use of all other industrial minerals used in ceramic, especially high-end porcelain ceramics.
The work, as we discussed last time in our presentation, both in Sydney and Melbourne, we will have stage three, stage two, stage three, and stage four of the ITC work that will be published at the same time, really looking at the application value of our kaolin in these markets as well. Again, all that work can be globalized. It applies to Southeast Asia, it applies to China, and certainly applies to Japan as well. So we talk about, you know, what does above market high value mean?
What I decided here is just to show you, if I plotted our product versus all else, you know, versus all the other kaolins, and if we look on the left axis and the bottom axis, the left is just simply an impurity index, which is, you know, from top to down, it shows increasing quality, and from left to right is increasing alumina content. You can see where we are. 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 kaolin and that type of product, we have identified a contestable global market for our product that's somewhere between 350,000 and 500,000 tons. This is, you know, with the market share number, that's probably, you know, 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 kaolins or industrial minerals capable of, of achieving that.
We've, you know, I've shown this slide before, but, you know, when we talk about value and use, this is, I always like coming back to this simply to show you, make sure everyone understands that, you know, kaolin is a white clay. It's, it's needed in the production of ceramic tiles simply because it has refractory properties, plastic, non-plastic properties. But our particular product has whitening and mechanical strength that pushes it over into that group of whitening minerals that typically sell for three to four times more than our product does and allows us to compete for value in use in that space.
A lot of the work we've done, I would say, in the last six weeks, that we'll be able to show, hopefully in late September, will really establish that value, the associated pricing, and how we will position our product in the future. So all of that, you know, where, how do we position all of the outcomes of our commercial and business strategy? Pretty straightforward. We look at our chemical purity, we look at our brightness, we look at our 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 kaolins, but other industrial minerals, in significant quantities in the markets that we choose... and the partners that we want to be a partner with in a sustainable way across multiple markets.
Of course, our home market, Southeast Asia, Japan, Oceania, China, and our partner markets that include Spain and Italy. Couple of comments on HRM. Things are moving ahead with our validation. I get a lot of questions about how HRM is, it's further behind CRM in terms of the validation and technical work. That work is moving ahead. We're pleased with how it's progressing. Having said that, it's very challenging to move forward with validation of a completely new product in a completely new end use. So we're working hand-in-hand with partners to establish that.
In addition to that, you know, 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 somewhere in the AUD 2 billion range, will 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 lens. We looked at, you know, what's important here is to just understand that we just didn't land on ceramics and, and porcelain ware. 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 the lens and we prioritize, you know, the numbers on the lens 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 dig deeper on? And is it something that our products, existing and/or future, can address? We did all that work. We settled on what we settled on, simply because, not only because of value and use, but, you know, barriers to entry, our ability to, 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, you know, made the key decision not to participate in paint, plastics, and paper. We simply did not believe we were a commodity kaolin to do so, and chose to differentiate our product accordingly. I mentioned this before. This is, you know, we, we talk about the mine-to-market response, and, and it's important to understand that, you know, 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 we present that are commercial and market-driven are accretive in life of mine value. And, 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 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 one B and further, really an important part of our planning and an important part of our value creation. This is interesting. You know, I showed this. I think I showed this at Noosa, where sort of the heat map of our 28 years and where the products are.
You can see the legend on the right and the coloring on the right, versus what the mine looks like. We moved the starter pit over a little to the right, just to have a little bit more access to all three products in that, you know, in that initial phase. But that sequencing also... All in all, the sequencing across the life of mine and the mining plan really improved overburden removal, really improved mining costs, and reduced the overall cost of mining. So that was very important. And another key comfort. Another key component to the DFS is just realizing our ability to commercialize sand. We've had quite a demand portfolio develop, especially for our fine sand product.
There's, I would say, a 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 desanding. We're desanding our kaolin. We're creating those products, which are a coarse product and a fine product. Why not sell them if there's a demand to sell them ex-mine gate, and the market is there to accept those products? And the validation is 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 2024 to get that license included in our current license, but we are well on our way to securing that. You know, we've staged the project.
We've talked about this many times, you know, 1A, 1B, stage 2, stage 3. A couple of important things here. Post 1B, the project becomes self-funded. The authorizations, 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, you know, there's an execution piece here that's really important in terms of both marketing and sales strategy, and sales and operational planning.
You know, 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, you know, customer demand, quality, logistics, packaging, working capital, making sure we have the right product mix, customer mix, that optimizes our cash balance and our accounts receivable. The marketing and sales strategy is an important piece as well, simply because we wanna 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 it in terms of the next slide. We call it strategic approach to sales and marketing. We're sort of adopting a little bit of a what's called hub and spoke strategy.
I've always maintained that, you know, 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, and we'll be at this, the Italian Ceramic Show, end of September. A lot of demand, a lot of customer potential, a lot of ability to secure future offtakes on the back of the ITC and the barrel 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 work contract with Yamada, FG, and the term sheet we have with IMCD for exclusive sales in Australia of HRM. A couple comments on the plant.
All in all, I would say most of the long lead time 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 environmental 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.
You know, we've had the data room open since June, and, you know, I've seen a lot of comments and questions saying, "Well, look, from June, it's taken a long time to move debt forward." Please, you know, 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 opaque market. So, I would say I'm very pleased at the rigor and discipline of the group that participated. I think our finalists right now are in the advanced stages of discussion. I'm also pleased that the understanding of our business is there to move the debt discussions to finality. So I think that'll be very, very important.
Now, in terms of the next stages, I've, you know, I've always said, and I always maintain, 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 DFS has been properly issued, properly understood by the funding community, and properly understood in terms of, you know, 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 going to be 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 taken from...
On the debt side to understand the markets and make sure that you come to a certain clarity, I think the DFS is much more rigorous and disciplined, and certainly will 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, we're excited to move forward with that. So look, I have decided, and I didn't include this in the executive summary, but, you know, I get a lot of questions from, the stakeholders and shareholders and others on, on this whole logistics challenge.
You can get a flavor for it here in terms of where we are and how far it is to truck across the peninsula to Whyalla and/or Port Augusta options, alternatively, across to Bowmans and into Adelaide for containerized shipments. You can clearly see that the future opportunity, if and when we're able to secure bulk shipments from Thevenard, there is a real intent from our entire team to make Thevenard our home port. It's 130 km away from our deposit. It makes great sense to do that, and we're working very, very hard on that. We were 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, you know, I think that's, that's going to be a really nice, interesting upside. In addition, you know, to the previous DFS, we have developed the ability to fill Bulk liner containers. So, you know, very similar to what the grain guys are doing. You can put, you know, essentially a big bag in a container and fill that bag up as a single bag. So that's sort of a Bulk liner container shipment option. It's cheaper, more effective. You don't have to use 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 in October 2024. Our last piece here, you know, and an important piece, really, on safety and sustainability, right? You know, we've talked about the need to,...
you know, 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, you know, our commitment to ESG is really shown in the way we mine, in the way we produce, and the way we manage to deliver our products to our customers. We have done an incredible amount of work in this DFS to really pull 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 them 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. You know, we have a very good feeling also for what Scope 3 emissions would be, especially in our home markets.
And ultimately, you know, the purpose here is, yes, ESG is critical and, and part of our license to operate, but ultimately, we think that the deposit, its location, the 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, make sure people understand what that footprint is. And, you know, we, we, we also see a world where CO2 credits and carbon credits will be traded in the Australian market, as they are currently traded in Europe, and free spend, and the ability for us to, to generate even more value, notably for the cement and concrete industry. A couple of comments on corporate and project risks. You've seen this 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 and project risks. You know, 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, you know, very sound, very secure at this point. So we feel comfortable in terms of what we've identified and the plans that we've put in place to mitigate them. Lastly, you know, we always finish, and I always bring this up, you know, why now, right? Why now? Well, you know, we look at the markets, we look at the, you know, the geopolitical crisis, we look at the opportunity in front of us.
First and foremost, you know, our resource, we've defined a higher value use for a resource than what we had six months ago. I think that's a very, very important comment. You know, our ability to commercialize that value and use will create, will create not only the value we're showing in this DFS, but something that's sustainable well past 25-30 years, certainly with the deposits that we have to the north and 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 a kaolin and industrial minerals industry in the Eyre Peninsula. That's really what we're talking about, just not this project on a standalone basis. The global depletion of high-quality deposits, we mentioned that, especially we don't talk about halloysite enough.
There's not that much of halloysite left. There's still an incredible demand from the Thai and Chinese porcelain makers, the Japanese as well. Those deposits, both in Japan and across other parts of the world, are either decreasing and/or depleted and/or suffering serious quality issues. 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 tile market. So great optionality for our business and a great way to further optimize our cost structure.
You know, the project itself, you know, 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 discipline work to establish its products and strategy with the right partners in the right markets, I think that gives us an incredible credibility going forward. And lastly, you know, the geopolitical forces, look, that's interesting to see that the risk that's put on the existing market, not only the kaolin market, but I would say the industrial minerals market in general.
I think there's, you know, we hear a lot about rare earths, we hear a lot about green energy transition metals, but, you know, there is concern about basic industrial minerals and their availability, especially as things get very, you know, 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 exec summary. People ask me, on occasion, say: "Bob, why did you announce on Thursday and have the presentation on Monday?" I wanted to make sure everyone had a chance to go through the exec summary, digest it. There's quite a bit there.
There's an enormous amount of work that we pulled together, and I hope everyone appreciates the positioning, the work, the rigor, the discipline that went into it. And with that, happy to take your comments and questions.
... Thank you. We will now conduct the question and answer session. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by as we compile the Q&A roster. I see no further questions at this time. I will now turn back the conference to management. Please continue.
Okay, have you paid? So the first question is, the first question is: Have you paid the environmental bond yet? If not, when is it due?
So, yeah, answering that question, which 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 are... There's not much more I can say. We're, you know, we're obviously our plans hinge around getting the bond paid first and then moving forward with earth movement, clearance, so forth, so on. We should also find to be part of the equation.
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, we have quite a bit of interest, here in Australia, but also quite a bit of interest in our company, over in Europe. And, and so as part of, of the, visit over to Italy, we will certainly be, entertaining interest from, people in the European space who, who consider, you know, who consider, you know, and understand not only the industrial mineral space, but also the supply-demand dynamics of, of, of kaolin.
Next question is: Slide eight, we show positive cash flows will only start in year four of the life of mine. How will the first three years be financed?
Yeah. So we're, you know, showing that clearly, we understand the 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 sheets to be signed to underpin the debt discussions?
The term 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, when I should say, not if, clearly there is a need that the LOIs have been manifested into term sheets that are binding. I think for us, you know, the timing of getting that done is in the current season. You know, 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 three 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 1 A?
So look, on unit costs and revenue, I can, I can only refer to just the margin uplift. I'd, you know, don't really want to get into the price structure, and that for the reasons I mentioned during the presentation. Having said that, I think, you know, it's important to understand that in one area, you know, 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, you know, we're planning on, you know, selling some of that sand product right from the get-go.
And I think what's important, especially when you start up, is, you know, cash is king, and getting our products to the market and getting paid for them, especially in the first 12-24 months, will be absolutely critical. Any questions online?
Yeah, more all the questions are online. Bob, are you able to go through the total CapEx and a brief outline on how the total CapEx has come down?
So look, our, our CapEx, you know, our CapEx has, has come down really because our product mix and product portfolio has changed, right? So if you look at, the absence of PRM in, in the, in the product portfolio at this particular point and stage, we don't have high-end, expensive magnetic separation in there. We don't have the advanced, some of the other capital, capital items, which I think are, which were originally part of the original DFS. We also have an, you know, optimized OpEx, in line with the CapEx spend, which I think is, which I think is favorable. So, all in all, a very, very rigorous capital profile. What's also important to note is, you know, we're not going out for capital now, right?
We've been probably looking at securing and getting the term sheets 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 in the Australian market. We've taken a lot of that off the table, simply because we've made the necessary commitments and down payments to some of the larger items. And now I think what is probably critical in terms of construction and capital is, you know, is the MCC, the electrical packages, the steel packages, 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.
We're, you know, 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 a CFO? And an update on the carbon capture plant.
So we are, I'd say, in the final stages of securing a CFO. Excellent candidates, excellent people, I think will make a great addition 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've promised, to come back to the carbon capture decision and next steps shortly, and I know I promised I'd do that at the end of the quarter.
Look, it's 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, and certainly with a, you know, 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've sort of laid out this afternoon.
Next questions. How is the LOI with IberoClays progressing towards a binding agreement? And are they keen to get the product into place?
Yeah, 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. We will be visiting many of them, having discussions with many of them at the end of September. But IberoClays is very keen to finalize our agreement. I think we have planned to wrap something up by the end of October.
I think what's important is, you know, 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 12-24 months. I think that's gonna be a big part of our startup plan.
A question from Don, asking: On page 12 and 13, there are two separate samples of CRM products. So what do they represent, the CRM-B and the CRM?
Yeah. We had, we had originally tested in Spain, a sample, samples, with and without bentonite. You know, so a lot of the work we did originally in porcelain, where we thought that adding 1%-2% bentonite would give much better firing properties, much better, and much better strength. So we decided when we benchmarked and validated the work that we did, we decided to do that for both CRM with bentonite and CRM without bentonite. Having said that, you know, the results, we're, we're very pleased that the results without bentonite are excellent and, and acceptable both for tiles and for porcelain ware. So our plant, our plan, I should say, is that the plant actually comes out without bentonite addition. That saves OpEx and CapEx in terms of, you know, what our initial plans are.
Next question is, given market conditions in, given the target market incorporates Europe, what is your planned response to dealing with Ukraine supply coming back online in the future?
Look, I think, 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, and the customers needed to formulate in their global, 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 with the Ukrainian tailings, but we're not going to see anyone taking 70, 80, 100% positions with Ukrainian clay. That's simply too risky. And the need for multiple tailing, multiple zircon, multiple feldspar suppliers is going to be absolutely critical, not only to de-risk the European business, but also to de-risk the Southeast Asian and Chinese business.
I think, you know, geopolitical tensions today are not only in that part of the world, but certainly exist in other parts of the world as well. You know, we have to be ready to pivot and respond to those. It's important to note that Southeast Asia, China, Japan, Oceania, remain our home markets, and we are dedicated to serving those, as we grow.
One listener is also just wanting clarification on that. Now that the updated DFS has been released, is it only now that funding discussions can begin? I was under the impression that the data room was open to potential funders.
The data room was open, the bankable feasibility data room was open to the debt investment investors and parties that were interested. We have had, you know, discussions with others that were not on the debt side. My view has always been, look, you know, there was 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, you know, in a lot of detail and saying: Look, you're, you know, 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, you know, three, four months.
There are others that have been waiting and anxiously asking and waiting for the updated 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 consider debt financing costs? And with the cash flow model, why are there no revenues per commodity?
Yeah, well, we, we didn't wanna really show cash flow by commodity, coming back to my, my comments on, on pricing. I think that's an important piece. Look, the debt financing costs and discount rates and, and all that, look, what we wanted 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, you know, the cost of debt will, will have to be figured in, as will 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 feldspar, zircon, et cetera, or is it already well understood and accepted?
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 that the kaolin, especially this kaolin, is not only world-class in its use as kaolin, but it is also 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 in ceramic tiles. And that's the work that we'll be wrapping up by, like I mentioned before, by September 20th.
A question on the WA Kaolin agreement that was announced recently, that they were able to get a cornerstone backer 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, I think that's a possibility. I think, I think WA Kaolin did a great job pulling that piece together. Having said that, you know, I think the cornerstone backer was an existing offtaker over a period of time, decided to come back in, secure more offtake on the back of equity. That's certainly a potential for us. I see that type of deal, something more that fits one B than 1 A. Certainly, you know, if there is a customer that participated in 1A on the way to 2B, if they wanna secure more offtake and we're willing to take an equity position, that's clearly something that we could do that. We could do that in at that particular time and place, but we'll consider that in due course, certainly.
Do you consider Poland, Poland as a trading partner? Poland is within the top 10 tile exporters.
Yeah, absolutely. Done a lot of work in Poland in the past, and I think what's important to understand is that the type of technology there, you know, I think digital printing, you know, we have a focus on areas that digitally print simply because the value is higher. But, you know, Spain, Italy, India, are tops in that region. But they're... You know, the Middle East, Poland, and other countries are right there in our ability to really take digital printing to the next level, and certainly will produce the high-quality porcelain tiles that we're looking for in the near future.
Next question is: Are there any long lead time items that may defer the project start date?
No, we don't. At this point, we don't, we don't see any long lead time items that are critical. Like I mentioned before, I think the focus now is just on, on the ancillaries, you know, steel, motor control centers, all of that. All that's there, you know, 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 optimizes our capital, capital spend.
So, you know, we have, you know, we're in the process of building our project team on site, and we have our construction manager who's just joined us a month and a half ago, I believe, two 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 commissioned.
Will you be planning on shipping the product in bulk bags and exporting containers or in bulk, break bulk by the vessel load?
So we'll be doing both, right? Break bulk, from by the vessel load probably will be our preference for some larger customers. We will be exporting in containers, and as mentioned during the presentation, bulk liner containers, right? So there's an interesting option there to get bulk liner containers, that are relatively easy, relatively straightforward, to fill, and be able to serve the markets. If there are customers that can accept them, we know who can and we know who can't, that's certainly going to be, our preference.
... Just, following on from there, they're also asking just about possible contamination in the containerized scenario.
No, I think we're most of the partners that we're working with or planning on working with are working in food grade. So they are experts in really cleaning, maintaining containers for food grade shipments, and our plan is to start up with food grade as the baseline setup for container shipments. Interesting to note, the Europeans do not, and they move quite a bit of their industrial minerals, including kaolin, in containers and/or rail hopper cars. They don't use food grade, all right? So they don't use food grade rail containers and/or rail cars. Our plan is to start up with food grade to make sure that our initial products, at least for the first year, are well received in the market.
The exchange rate, previously, was uncertain to the US dollar. So obviously, moving to 0.7567 in the new DFS makes the figures look good. Is this exchange rate more realistic, or, will it just defer producing, and, and why not use a more conservative exchange rate?
Yeah, look, excellent question. Look, our view on exchange rate is based on a forward five-year view of rates. You know, we have rates out there. The forward curve for Aussie dollar is pointing to numbers that are much lower than 67. You could go in today and lock in an Aussie/US dollar exchange rate of 62, right? There are brokers and financial instruments available that you could lock in that kind of exchange rate for your business. I think when we're up and producing and when we're generating some cash, the ability to look and hedge exchange rate that is super favorable for our business is something we'll look at. For right now, we thought 67, especially with the current five-year view, is acceptable to use in the DFS.
Two questions on the same topic. You haven't mentioned anywhere nanotechnology. Is it still on the agenda? And there's a specific question on, have you considered the AUKUS submarines and potentially using carbon scrubbers as part of that?
Look, I think both are opportunities that, you know, probably. I think, in my view, I think still HPA is one step ahead of, in terms of, you know, looking at our commercial strategy map and what we wanna make core and complementary. But nanotech is still there. What's important is we still own the IP, and how we commercialize it or how others can potentially commercialize it is certainly something we want to take a look at, in post getting our project up and going.
Well, with the updated DFS out of the way, what are the key coming milestones that investors should be looking forward in the next 6-12 months?
So I think, well, I think, you know, our focus right now is, is debt. And then I think post that, you know, finalizing funding of our, of our project. And I think for myself, really the key is looking at the market, the market response, especially, after September, October, and gauging the interest both in our home markets and abroad. I think really the question is: How quickly can we get to 1 B?
I think 1 B is the sweet spot of where we need to be in terms of volume, in terms of optionality, in terms of the ability to be both in Southeast Asia and other markets, in terms of our ability to deliver HRM to our home markets and start really establishing that in line and in, you know, in time for the European validation of the product, which, you know, as I mentioned before, can take two or three years. So the sooner we get onto that and sooner we get to 1 B stage, the sooner we'll have a business that is not only profitable, but also self-sustaining going forward.
Has there been any assistance provided by local or state government agencies to help move the project forward, funding or otherwise?
Look, we've had discussions at numerous levels. But I think we've had a lot of support. We've had a lot of interest. I think there is probably more interest from the state side at this point, looking at the project, but post one A, right? I think there's a lot of interest in, "Hey, get it up, prove that you can get up and going," and then as you get towards one B, I think there's an incredible amount of interest in the project, in not only funding one B, but also what one B will mean in terms of socioeconomic impact, notably on the Eyre Peninsula.
Just on that, there's a question around cash flow, positive cash flow and payback. Should the CapEx need to be taken out during for 1B and so forth to just see what the payback is for stage 1A? Or, you know, why have we used, looking at all the the capital requirements to calculate payback?
Well, you know, we wanted to show the project in its entirety, right? I think it's pretty fair to say that when we're looking at just stage one A in terms of certainly the debt requirements there, we have looked at it on a standalone basis over the life of the mine. But I think for the purpose of how we presented DFS, I think it just made sense to do it that way.
A shareholder asks, "I understand that the plant will take 12 months to complete the construction and expecting to only pay the environmental bond in October, November. Therefore, that will have you sell it, finishing up in around November and probably for sales.
Look, I think, I think we can certainly, even with the timing that we have, I think just getting, you know, getting the proper, you know, announcing that we are fit to sell in October and having shipments in October, albeit maybe not at the full nominal rate of stage one A, I think, that unto itself will be extremely well received, by the market, both, in Australia and abroad.
I think the final question is, can commissioning of the plant will take 12 months. Will you have the funding sorted before October 2023 to allow the product to be delivered by October?
I think right now, number one priority is to, you know, as we are advanced on the debt side, you know, finalize what we started in June. And I think with the BFS, I think, you know, the confidence that we have, that the balance of funding required, based on the response that we're getting, I think we're keen to move forward on that. But I think number one piece of priority right now on the funding side is to really wrap up the debt.
Just a question here on water and how we're managing that.
Yeah, we have a good solution, you know, post-startup with SA Water. You know, we've been able to finalize that probably about a month ago, in terms of being able to secure the water requirements for the project and how we're going to do that. So they've been, you know, again, good partners and been able to work with us. And certainly, we're trying to, at the same time, make sure we have the potential to get on the SA Power grid, because, of course, it is renewable energy and would have a very significant impact on our carbon emissions.
A question on corporate risks. There's an acknowledgment of the inability to secure additional offtakes at assumed pricing. Can you please discuss what scale position of this, as discussions are currently underway for the offtakes and required over the next 12-13 months?
I would say that the offtake discussions are, I would say are in good shape. There's, there's a lot of interest, you know, both on the porcelain, on the porcelain side and on the ceramic tile side. I think that's, that's very, very important. I think how we position, our, our tile strategy and our porcelain strategy regionally, to take advantage of, of price opportunities, but also to make sure that we originally start up with credit-worthy customers, that can be excellent partners, especially in the first 12-24 months. That's the balancing that we're trying to do right now. Make sure that the offtakers we're talking to, and that want our product, are also reliable, creditworthy, and, and can certainly be part of our, customer portfolio going forward.
I think the last question is, what is stopping us shipping out of Ceduna?
Look, there's a variety of issues there in terms of containers, in terms of bulk. So there is an opportunity, I think, longer term, to do something out of Ceduna, as is Port Lincoln, as is Cape Hardy, on the other side, as is Thevenard. I think right now is, you know, the right time is to really work with the local authorities, the local councils, and the people involved in the logistics solution providers, in terms of who wants to really set forward a plan that includes us, grain, and other bulks. And that's what we're working towards.
And one final one on a local perspective. As far as employees and contractors are going, would the Streaky Bay is located in a remote part of South Australia. What would you need early in the process in terms of housing, et cetera? Because might it be limited.
Look, housing, you know, be it Poochera or Streaky Bay or that area, is an absolute... is a concern, right? We want to be able to attract young families and families who wanna come and work, and work for us. So we're working with both communities, to make sure that affordable housing is available, water and other community requirements are in place. I think it's something that, you know, we wanna make sure is well understood, in terms of supporting our employees and future employees. And also to make sure that, you know, some of the infrastructure requirements upfront, some of the roads and some of the other issues to and from the mine site, not only for us but also for the local stakeholders, are also part of the community's plan.
I would say that the communities have been responsive, both for what's required during the building stage and certainly are across what's required for the startup phase of our project.
One final question that's come through on share consolidation, whether we're considering that.
Look, I think it's not really... It's something that's critical or paramount for us. We'll consider it in due course if and when it makes sense for our business. But I think right now, I think we, you know, we certainly have other priorities that are much more important here in the next four to six months.
That finalizes all the questions and all the time we have for the moment. We'll pass back the communications back to your moderator.
Thank you. This concludes today's conference. Thank you for participating. Now I will hand back to management for closing remarks.
Great, thank you. Look, first and foremost, thank you to all who participated, all who listened. We appreciate... You know, we certainly would not be at this point without the support of our shareholders, stakeholders, employees, and all that have been on the journey that we've been on for the last couple of years. We've gotten to this point. I think, you know, I think the quality of the project is outstanding. The upside is significant in terms of the value creation in the near term, medium, and long term.
I think, you know, in terms of the opportunities for us on the peninsula, I think, you know, one of the key takeaways is just simply to remember that, you know, ultimately it's, it's much bigger than just a Great White Project, you know, in terms of the tenements and the volumes and the, and the available qualities of what we have across, across the peninsula and the ability to, to get to that contestable market of, you know, 500,000 tons. You know, the market's there, the market's gonna continue to grow beyond that number. I think our challenge is going to be how do we respond, when, and with, you know, with what partners, customers, and people who will be part of that journey.
Wanted to take the opportunity to thank all of you who participated, and look forward to catching up with you in person as we plan a set of meetings in Sydney, Melbourne, and Perth, and as part of our investor day and investor outreach. I think that'll be a good opportunity to catch up as we did last time. Many thanks.
Thank you. This concludes today's conference. Thank you all for participating. You may now disconnect.