{australien_flagge}It’s poison for the stock market when the opposite of what everyone expected happens. FYI Resources (ASX: FYI; FRA: SDL) shareholders had expected a Final Investment Decision (FID) for an initial HPA mini-production facility. Instead, the company announced today that partner Alcoa is pulling out of the joint project after a year and a half.
{australien_flagge}It’s poison for the stock market when the opposite of what everyone expected happens. FYI Resources (ASX: FYI; FRA: SDL) shareholders had expected a Final Investment Decision (FID) for an initial HPA mini-production facility. Instead, the company announced today that partner Alcoa is pulling out of the joint project after a year and a half.
Alcoa, while stating that work done to date “has demonstrated the merits of (FYI’s) process for producing high-purity alumina,” nevertheless decided not to pursue the HPA development at this time. Accordingly, FYI’s stock lost as much as 60 percent at its peak in Australian trading, albeit on comparatively small volume of about 18 million shares. The closing price was AUD 0.059.
FYI naturally favors a different reading: Now that the brake block Alcoa is gone, they want to drive the development faster than in the past! The keyword is “speed to market”. The company will continue without Alcoa and is taking control of the HPA project again, they say. FYI remains fully committed to the HPA project and will develop an alternative plan and schedule. FYI emphasizes that the HPA project has made significant progress and has benefited from Alcoa’s rigorous project development and investment of more than $5 million. FYI retains shared access to intellectual property (IP), data and information, project assets and customer relationships related to the project.
Roland Hill, Managing Director of FYI Resources, commented, “Although this is not the outcome we envisioned, the HPA project has progressed significantly and has benefited from Alcoa’s rigor and $5 million investment. FYI has recognized the value of the strategy and views regaining control and management of the project as an opportunity. We have a very experienced team that can drive the project forward.”
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FYI retains its original intellectual property, the process know-how that originally attracted Alcoa to the collaboration, as well as all information and data collected during development. In addition, FYI retains access to all assets and customer relationships established during the joint development phase. In this regard, FYI emphasizes that the market response for high-quality, high-purity HPA has been extremely positive. In addition, with A$10.1 million in cash on hand (as of January 31, 2023), FYI says it is sufficiently funded to continue development work on the small-scale production/demonstration facility. The preferred site for a small-scale HPA demonstration plant near Kwinana, Western Australia, has been determined, he said. FYI is already reviewing other options for commercial sites, it said.
Bottom line: the agenda of large corporations is difficult for smaller partners to predict, and sometimes corporate politics in a group can become a heavy mortgage. It can’t have been due to technical feasibility or lack of customer interest that Alcoa abandoned the HPA project. The business case is attractive, but Alcoa seems to have other priorities. Perhaps Alcoa is simply distracted: At least Alcoa Australia is currently struggling with massive problems. A shortage of gas in Western Australia has recently led to production cuts at the Kwinana alumina refinery. Alcoa is also facing criticism over water pollution, which has led to restrictions on permits. Once the shock of Alcoa’s disappointing withdrawal has been digested, there is an opportunity to look ahead. FYI Resources has excellent political support in Australia and can arguably access public funding more easily without Alcoa. FYI is now back in control. Roland Hill now faces the difficult task of convincing the market that FYI Resources can do better on its own than together with Alcoa. He has his work cut out for him. We say: Now more than ever.
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