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Charles, Wakey Wakey, Which Chinese price would that be, Yesterday's or today's ?
Seems the Chinese are playing catch up, that SMM US$100,000/t price will be "Ex-tax" by the end of this month !
Your ability to Predict anything seems to be failing rapidly !
Hi Joe,
Because, Charles/Thomas/ausheads all have their head up Xi's exhaust pipe. They are missing the entire point as to why the ROW is developing its own Rare Earth supply chain. Which is China can no longer be trusted ! not only because they threaten to weaponize RE's but also because they fail dismally to meet ESG, QA/QC and guaranteed supply Standards.
Why are they even bothering to quote the SMM Ex-Vat price for NdPrO is in itself a distraction; because it is not even remotely close to the price that the Chinese Refiners are willing to pay ROW miners for Concentrates. Without Saltend, Pensana would be lucky to get US$20.000/t for the Longonjo concentrate. Once the other mines see how much margin there is in Refining, China is going to find it hard to import raw materials !
As to the Economics of Longonjo, It was shown to be highly profitable in the PFS using 2019 TREC prices , That was well before Saltend was even thought of and before the prices for NdPrO doubled !
"Charles, why are you yet again resurrecting Thomas's FAILED arguments re VAT and the prices quoted on SMM ?"
Clearly the reason is to draw a reaction from genuine investors a detract from the positive sentiment that is currently building here. He has worked the same trick before and based on past performance I expect he'll continue to drone on about hypothetical scenarios to fit his agenda. It's different approach to DP and Theo, more subtle but ultimately they're aims are the same. Probably best not to engage as he really can go the distance and will waste a lot of everyone's energy as we discovered a few months ago.
Tony, it's certainly true that we don't yet have a complete picture of how economics will be impacted by tariffs and subsidies. However, if an industry can only survive with government support, it seems quite unlikely that the same government would allow industry participants to make anything more than economic profit off the back of that support. As an impartial taxpayer, at least, you would hope not!
In other words, we should expect governments to provide a level of support that allows the industry to exist in the long run, and no more. Such a subsidy-dependent scenario implies a limited return for shareholders.
In the alternative, free market scenario, the China Domestic ex-VAT price is the best benchmark for us to use in planning.
Charles H
Forgive me for butting in. What do you think USA, EU, UK and most other developed countries will do with China RRE exports. My guess that a hefty tariff will get applied and similar would happen to a third source country trying to off load Chinese exported material. The reason for doing it is to stop Chinese dumping of product in order to stop the West having independent sources of material. I therefore find the comments immaterial. The alternative is that EU, USA and UK race to the bottom on subsidising their own RRE industry sources. So whatever is chosen now as a benchmark to me at least appears pointless.
ChinaSyndrome, if we can supply to ROW customers exclusively, and they are willing to accept a price that gives them a 13% cost disadvantage versus China PM competitors, then the inc VAT position would be the benchmark to use.
Of course, the final price paid by the customer will depend on negotiation, including, implicitly, how much of the VAT differential would be borne by PRE versus its customer. Likely that the customer will ask for this to be shared by PRE. At planning stage, the more conservative approach would be to assume that PRE will take 100% of the VAT cost.
If only.????
Charles, why are you yet again resurrecting Thomas's FAILED arguments re VAT and the prices quoted on SMM ?
Yes they do include VAT, because the Chinese charge 15% on all RE's exported, and that VAT only comes off when they export finished 'Manufactured' products. Any Magnet Manufacturer in Japan, the US or EU/UK is currently paying the full price, which today is around US$104,000/t for NdPrOxide. In fact the NdPr price in NY is closer to US$150,000/t due to China's current incapacity to produce due to their Power Cuts ! A situation that won't change till March next year unless they start importing and PAYING for Australian coal :)
Analyst, needless to say, the forecast of company value hinges on price assumptions, assuming you have customers to whom you are able to sell. In spite of all the new technology involved in this space, PRE is largely a commodity play, like other miners.
Applying the baseline $87/kg that Arafura used, I estimate an NPV of £1.50 per share.
If you believe the narrative that there will be persistent year on year price increases as per market research, the NPV would be higher. Although you may also want to temper that expectation for the likely increased competition deriving from other new mining projects, many of which are due to land around the 2024 mark (ARU, HAS, ASM, RBW, to name a few). Many would argue that these will still not fill the supply gap, of course. However you also have high risk of competition from alternative production technologies, such as that described by Hogsnipe, or recycling, for example. Risk of substitution of RE PMs in end user products also exists. So, there are many risks to price; it may be appropriate to limit expectations of price increases, settling on a base case with any upside landing as a bonus.
Good morning Charles, for clarification, you estimate the hit to be approximately $200 million over 8 years that the NPV is calculated over?
So are you valuing us at ~£5 per share Charles?
"Rare earth prices continue to rise and have pushed through US$100,000 per tonne "
Checking versus the data on Metal website, which I believe has historically been used for price reference by PRE, prices appear to be at US$100k only when VAT is included. To be certain, we would need PRE to clarify their source. General disclaimer: I could be wrong, please DYOR.
Assuming I'm correct, I just hope our business planning uses the ex-VAT price. I estimate the difference is worth around £1 on the NPV per share.