FYI seals $3M WA Gov Grant for HPA plant

Today, our critical minerals technology and development Investment, FYI Resources (ASX: FYI) announced that it has finalised an agreement with the WA government, that will see the company receive $3M towards its HPA plant.

The grant is a strong sign of government support for FYI’s plan to create a small scale production plant (SSP) that will produce more than 1,000 tonnes a year of high quality, High Purity Alumina.

The added funding momentum for FYI comes at a turbulent time for the market, and we see this as an indicator of what FYI is capable of since it split with its JV partner Alcoa - that JV was targeting a much larger project with production of 10,000tpa.

HPA is a key input into the manufacture of LED lights and lithium ion batteries for EVs, which use HPA as a separator between battery components, allowing for higher performance batteries.

We see this grant as an excellent example of how FYI can potentially secure additional non-dilutive funding to advance its small scale plant, with a project engineering study being finalised and due in the March 2024 quarter (Q2 2024).

Should that study for the SSP come in positive, we expect this to accelerate financing discussions with both public and private entities.

For us the SSP is a stepping stone to the originally envisaged 10,000tpa project:

For context, we’re hoping FYI can follow a similar trajectory to Alpha HPA, another ASX-listed HPA company which has a High Purity Alumina project in QLD.

FYI is at an earlier stage to Alpha HPA, and is capped at ~$31M.

Alpha HPA went from a market cap of ~$56M to now trade at ~$825M and is now producing from its project.

Along the way, Alpha HPA managed to lock in a strategic investment from Orica and ~$40M in government grants.

The past performance is not and should not be taken as an indication of future performance. Caution should be exercised in assessing past performance. This product, like all other financial products, is subject to market forces and unpredictable events that may adversely affect future performance.

It is also worth noting that Alpha HPA’s March 2020 DFS had the following metrics for a 10,000tpa plant:

While it would be difficult to infer specifically what FYI’s potential CAPEX for its small scale production plant producing 10% of what Alpha HPA’s plant was designed to produce, we think FYI’s ability to secure enough funds for the SSP’s CAPEX has been made easier after today’s finalised grant with the WA government.

Today’s grant provides an upfront payment of $600K with additional funding subject to various project milestones:

This adds to FYI’s coffers - the company reported a cash balance of $7.4M at 30 September 2023.

We see that as a healthy buffer, at a time when many small cap companies are struggling to secure funding.

What’s next for FYI?

Below is the timeline which FYI is working with for its HPA plant (highlighted):

In addition to engineering study for the SSP being released to market, which FYI indicated will come in Q2 2024, we want to see further progress on FYI’s Minhub (rare earths) project.

FYI is aiming to deliver a feasibility study by early 2024, which will be jointly funded by Arafura Rare Earths.