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China, both PRE and ARU reference China Domestic prices in their NPVs. ARU seem to have excluded VAT, hopefully PRE did also. Lynas include a table on China Domestic ex-VAT price in their public reporting and reference this extensively in their commentary. This is the global benchmark price. If there was another market where you could obtain a 40-70% premium, implied by the prices you quote, then everyone would just sell there, and the difference would be arbitraged away. ESG price supplements are yet to be clarified, but Lynas mention they currently secure only a small premium for their ability to provide an “ethical and environmentally responsible source of production”. As with Lynas, we should expect PRE contracts to be closely linked to China Domestic ex-VAT price.
Aside from that, it is interesting that PRE and ARU are looking to secure contracts now, before any subsidy or tariff regime is confirmed. This is perfectly sensible, since policy could of course take years to resolve, but does this action imply that these companies don’t need government support in order to survive, thereby reducing the likelihood that subsidies will be offered? Requires a longer discussion, of course.
You seem not to accept that ARU are a direct competitor to PRE? They are selling the same products to the same markets, while having the advantage of being in a lower risk jurisdiction. Please do take a look at any of the recent ARU presentations or videos. PRE should have the advantage of being first to market, however on products it’s still not clear how PRE might go about delivering metal, they may initially be limited to oxide only. So much depends on the downstream supply chain structure, which is yet to be clarified.
Charles/CCC/shead/Thomas; How many times are you morons going to continue to quote Chinese Prices for a Company that will be selling its product into the Western World. Chinese RE prices are heavily regulated and the VAT does not come off unless it is exported in the form of a Manufactured product ~ Oxides and Metal do not qualify. On top of that they do not contain any component for ESG compliance/cost; nor are they ESG compliant so they will not be marketable in the ROW.
Pensana will be selling refined Oxide, then metal into the US/UK/EU market, The current NY price is US$120-140/t for NdPrOxide.
I am not at all concerned with "Off-take" agreements, the product is about to enter "Short supply" I think you will find that once the LME opens up their RE contracts next year, there will be a significant Spot market for Magnet makers to source their products thru. In the mean time, Deals are being done for supply in 12-18mo time, but not announced for fear of loosing current supplies out of China.
As to ARU, As far as I am concerned , I am not !
China, do you expect Offtake to be announced in the next few weeks? This is the critical piece, and I wonder if this will take longer to finalise?
China, please take a look at the ARU Ann presentation on HC from 05/10/21, looks like they are selling NdPr oxide or metal depending on customer preference, with metal conversion tolled through Vietnam and Thailand. Europe is one of their target markets.
Current NdPr oxide price on Metal site is 600rmb, less 13% VAT convert to USD at 6.4 gives $83/kg.
China, please take a look at the ARU Ann presentation on HC from 05/10/21, looks like they are selling NdPr oxide or metal depending on customer preference, with metal conversion tolled through Vietnam and Thailand. Europe is one of their target markets.
Current NdPr oxide price on Metal website is 600rmb, less 13% VAT convert to USD at 6.4 gives $83/kg.
Charles, Why are you trying to compare PRE with ARU ? they are nothing alike and won't even be competing in the same space ! I believe ARU will be selling MREC while PRE will be selling Oxide or Metal
And why are you Quoting $87/t when the current NdPrO price is now way over that (even in China) PRE will be selling into the UK/EU market where the current price US$140+
Might I suggest that you don't take any notice of the garbage those sidewalk superintendents 'shead/Thomas/etc spew out, wait just a few more weeks and everything will be revealed by the Experts,
Highly instructive progress at Arafura over the last few months, which may inform some related questions for PRE.
Are auto manufacturers and other end users now acting as aggregators in the NdFeB supply chain, meaning we sell to them and they coordinate downstream aspects? ARU progress seems to suggest that this may be the case, which changes the customer story considerably. However, it’s still not clear who exactly will provide magnet manufacturing capacity. Perhaps some of the larger companies would just do this themselves, if it’s core to their business?
Do we expect to have a metals plant in place at Saltend for 2023? Presumably not, in which case are we able to supply Metal to customers through toll processing? If we are unable to supply Metal at all, to what extent does this limit the potential offtake group?
On financials, ARU presented a base case NPV of $1.0bn at $87/kg. What does PRE's NPV look like at $87/kg? It's one thing to embed forecasts of price growth, but a business case would normally include a baseline position. I suspect PRE may be around $0.5bn at that level. Current price is $83/kg, so this is still relevant.
Arafura seem to have a great deal of interest from offtakers, so critical concern regarding availability of customers is reduced, subject to metals questions above. We may well be in direct competition with ARU for specific customers, although notable that ARU should be in production only one year after PRE. Of course, there could be room for both.
While it’s possible that ARU and PRE touting for customers at the same time may have some impact on pricing, the main concern on price remains the potential for PRE to be adversely impacted by actions of incumbents, assuming that contracts will have a floating price, as is generally the case for Lynas.