- FYI Resources Limited (ASX:FYI) has released an updated DFS of its HPA project.
- The updated DFS has resulted in a significant increase in the base NPV of the HPA project to USD 1.014 billion.
- FYI sees tremendous potential opportunities in the HPA market, given the current demand and pricing scenario.
FYI Resources Limited (ASX:FYI) has scored a major milestone with the updated definitive feasibility study (DFS) of its HPA (high purity alumina) project leading to a significant surge in net present value (NPV).
FYI has updated the base NPV of the HPA project by 87 per cent to USD 1.014 billion. To update the base NPV, the Company has considered the commercial and technical improvements, market applied metrics compared to its peer group, discount rate (8 per cent) and updated inputs (exchange rate).
Following the key update on the updated DFS, the stock price of FYI climbed by over 9 per cent to AUD 0.605 during the early-trading session on 31 March 2021.
The resulting NPV increase indicates the substantial Project de-risking, major technical improvements, and other significant commercial developments accomplished since the announcement of the initial DFS in March 2020.
The Company believes the increased NPV result reflects the HPA Project’s achievable potential more appropriately. Besides, the outcome signifies the greater confidence in FYI’s Project, given the progress accomplished by the Company over the last one year.
What Does Updated DFS Indicate?
Completed to an overall accuracy of -10 per cent to +15 per cent, the updated DFS results in exciting project metrics exhibited in revised NPV. The recalculated NPV shows the quality of FYI’s HPA project, and the successive Project improvement and de-risking carried out since the initial DFS.
FYI’s updated DFS underlines a surge in the forecast financial returns and a de-risking for the Company’s HPA Project, as highlighted below:
The latest study is based on the initial DFS of March 2020 that considers the Company’s ground-breaking, low temperature, low-pressure leach & precipitation process flowsheet to produce high-grade HPA.
FYI has made significant enhancements to its project after the release of its initial DFS, including process redesign, detailed flowsheet advances, production optimisation and extensive supporting testwork to de-risk and optimise the integrated HPA strategy.
The initial DFS outlined the clear passage to advancing an integrated HPA refining business in the promising operating jurisdiction of WA. Taking the foundation work, the Company has bolstered the overall project metrics by an additional 12 months of continuous project improvements.
Significant Opportunities in HPA Market
FYI uses several methods to discern demand and pricing models for the HPA market in order to establish a reliable estimated sales price. This process comprises direct contact with market participants and the involvement of many independent commodity market research firms.
One such primary source relied upon by the Company is CRU Group, which is a leading market intelligence and analysis entity specialising in HPA. FYI mandated CRU particularly for the updated DFS, with a research report revealed to the Company in March this year.
The latest market study and round of interviews undertaken with consumers, projects, producers and other market participants in South Korea, Japan, Europe, North America, and China infer that there is evidence that the global HPA market is marking an entry into a phase of mild tightness. Consumers in the sapphire market for LEDs particularly state that supply of reliable 4N HPA is becoming limited.
FYI believes that attaining and maintaining a reputation for delivery of reliable HPA with the consistent specification will develop into a very powerful marketing tool.
Moreover, CRU HPA Report 2021 estimates the modelled HPA demand to grow rapidly between 2021 and 2028 at a CAGR of 18.7 per cent. Assuming unrestrained by the supply of 4N+ HPA, the demand is likely to grow from ~30 kt in 2021 to more than 104 kt in 2028.
Owing to substantial demand, CRU models the global HPA market to fall into deficit this year, as reputable 4N and 5N HPA at existing supply capacity may not meet the huge market demand as production has not moved in line with demand growth. As a consequence, FYI sees tremendous potential opportunities in the HPA market.
In a nutshell, the HPA product marketing research has validated robust growth in HPA industry. Besides, the revised NPV and Updated DFS have validated that the FYI’s HPA project is not only financially and technically strong, but the development work undertaken since the initial DFS demonstrates positive value re-rating and continued project de-risking.