Port access approved for CAY. Final Investment Decision Next to Build Bauxite Mine.

Disclosure: S3 Consortium Pty Ltd (the Company) and Associated Entities own 2,307,692 CAY shares at the time of publishing this article. The Company has been engaged by CAY to share our commentary on the progress of our Investment in CAY over time.

The Final Investment Decision to build a mine is coming next quarter...

First bauxite shipment is planned for the first half of 2026...

Bauxite is the rock that is essential for the production of aluminum.

A material that is growing in importance to countries around the world...

... not least for its critical role in defence supply chains.

Our 2025 Wise Owl Pick of The Year, Canyon Resources (ASX:CAY) is planning first bauxite production in the first half of 2026 - which isn't too far away now.

CAY owns one of the world’s biggest undeveloped bauxite deposits, not (yet) owned by one of the multi-billion dollar majors.

CAY’s project has a 1 billion tonne JORC resource with an ore reserve of 109Mt in Cameroon, Africa.

That is a resource big enough to be mined for decades.

Today, CAY received port access approvals, which was the last milestone before its project is ready for a Final Investment Decision (FID).

And there are plenty of other updates pointing to the mine construction progressing quickly:

(Read today’s CAY announcement here)

Today’s port access approval was also the final condition for a big cash injection into the company.

Getting this access approval is a final condition precedent for CAY’s biggest shareholder Eagle Eye Asset Management (currently owns ~48%) to exercise the 500m 7c options that it received back in 2023 as part of its strategic investment into the company.

Once exercised, the options will bring in an additional A$35M in cash to CAY and increase Eagle Eye to 58% ownership of CAY.

CAY expects those options to be exercised next month.

We expect Eagle Eye to be a very sticky holder given they already own roughly half of CAY.

Eagle Eye has also been buying CAY on-market recently (see this March ASX announcement)...

So with such a large holding, they are very incentivised to see CAY get its project developed.

CAY had $8.6M in the bank at 31 March 2025, which will mean CAY should have over $40M cash in the bank ~12 months out from first production.

A nice cash runway to negotiate offtake agreements and settle the remaining big financing rounds required to start construction.

Major holder Eagle Eye is also behind a US$124M debt underwriting for CAY, which will be used to purchase the 22 locomotives and 550 wagons CAY needs to transport its bauxite to port.

(the first locomotive delivery is scheduled for Q1 of 2026).

AND there is media speculation that Eagle Eye is in talks to buy a stake in Cameroon’s state aluminium company which owns the country's only aluminium smelter...

(Source)

In fact, in parallel, CAY is working on a Definitive Feasibility Study involving an alumina refinery at the mine head - so it appears CAY wants to capture more of the downstream value chain too.

It appears that Eagle Eye has a much bigger vision here, and getting CAY’s bauxite project into production is central to it all.

(As CAY Investors we are happy to be along for the ride.)

CAY, with Eagle Eye’s backing, has also acquired a 9.1% stake in Cameroon’s national rail operator.

This is a long term investment that would only have made sense if CAY is genuinely serious about getting its project into production.

Camrail owns and operates the 800km railway linking CAY’s giant bauxite deposit to the port.

The deal to acquire 9.1% of Camrail and the port approvals received today means CAY now has access to RAILWAY and to a PORT for export into global markets.

CAY is now progressively moving through the different pre-production catalysts to get its project into production.

However, the market doesn't typically react in a big way to permitting progress.

With an advanced project like CAY’s, we think the main catalysts that will move CAY’s share price will be:

1. The JORC resource upgrade that is coming in H2-2025,
2. Any progress made on financing / offtake deals, AND
3. The updated Definitive Feasibility Study that is coming in Q3-2025.

CAY’s current feasibility study was completed back in 2022 using a US$45.20/tonne bauxite price...

AND that study returned a pre-tax Net Present Value (NPV) for the project of ~US$452M.

Bauxite prices are now above ~US$80/tonne...

A slide from CAY’s recent presentation says that using today’s bauxite spot prices should more than quadruple the project's NPV to US$1.6BN relative to the 2022 study (more on this in a second).

Eagle Eye have been buying on market at up to ~28c per share

As mentioned earlier, once the 7c options are exercised, Eagle Eye will hold ~58% of CAY...

That will also mean Eagle Eye has invested over $60M into CAY since first getting involved back in 2022.

In addition to the strategic capital injections, one other thing we really like is that Eagle Eye and its associates have been buying on the market over recent months.

The latest round of purchases was for ~$4.5M at an average share price of ~28c (near the all-time highs)...

(Source)

We like that Eagle Eye is backing CAY both on and off market.

Eagle Eye’s cornerstone backing of CAY was a big part of why we made CAY our 2025 Pick Of The Year for our long-term development stage portfolio, Wise-Owl.

Here is a quick summary of the other key reasons we Invested in CAY:

Quick Summary: 7 key reasons why CAY is our Wise-Owl 2025 Pick Of The Year

1. CAY owns one of the biggest undeveloped bauxite projects in the world.
2. CAY’s project is considered a “Tier 1” asset because of the size of its resource and the premium quality product it can produce.
3. There are structural changes happening to the bauxite market that are in CAY’s favour.
4. CAY’s project is fully permitted which makes the pathway to production clear.
5. CAY’s biggest shareholder (Eagle Eye Asset Management) has had success in Africa before.
6. CAY’s project economics can improve with the current strength in bauxite prices.
7. CAY’s project is close to existing infrastructure which is really important for big bulk commodity projects like bauxite.

To see these reasons in detail check out our Pick of the Year note here: Canyon Resources (ASX: CAY) - 2025 Pick of the Year

What we want to see next from CAY

Here is a list of the key milestones between now and first production from CAY’s recent analyst visit presentation:

(Source)

Now that port access approval has been received, in the short term the key catalyst we want to see CAY deliver is an:

• Updated JORC Mineral Resource Estimate - CAY recently finished a ~23,000m drill program, which will be going into updating (and hopefully upgrading) its 1 billion tonne JORC resource.

Beyond that, we are looking out for:

• Offtakes & financing - CAY has said before that samples had been shipped to potential offtake partners, we want to see CAY lock in signed offtake agreements this year.
• Project financing - CAY’s already got ~50% of the project’s CAPEX underwritten by Eagle Eye (biggest shareholder). We want to see the rest of the project financing secured.
• Updated Definitive Feasibility Study (DFS) - Hopefully we see a big upgrade from CAY’s previous study done in 2022.

More on the pending updated DFS - hint: it’s getting bigger and better

We think CAY’s updated Definitive Feasibility Study will be an important catalyst for CAY because it will give the market a fresh perspective on the economics of CAY’s project.

The previous study done in 2022 was done using a US$45.20/tonne bauxite price and returned a pre-tax Net Present Value (NPV) for the project of ~US$452M.

Bauxite prices are now above US$90/tonne...

We are expecting a big improvement in the Net Present Value (NPV) number when the updated DFS comes out in Q3.

A slide from CAY’s recent investor presentation gave us a pretty good idea of what to expect - with today’s spot prices more than quadrupling the project's NPV (to US$1.6BN) relative to the 2022 study:

(Source)

That would be a major upgrade, especially considering CAY’s market cap is currently sitting at ~A$270M (almost 10% of that ~US$1.6BN NPV).

Usually, as a project is getting closer to first production, its market cap will start to close the gap to its project’s NPV.

Before first production it’s not uncommon to see a stock trading at 40% to 80% of its project’s NPV.

With first production now expected within the next 12 months, that means we could see that convergence start to happen in the short-medium term.

We are hoping that as CAY progressively ticks off each of these milestones, and gets its project into production it will achieve our Big Bet which is as follows:

Our CAY Big Bet:

“CAY takes its bauxite project into production is re-rated to a market cap greater than $1BN”

NOTE: our “Big Bet” is what we HOPE the ultimate success scenario looks like for this particular Investment over the long term (3+ years). There is a lot of work to be done, many risks involved - just some of which we list in our CAY Investment Memo. Success will require a significant amount of luck. There is no guarantee that our Big Bet will ever come true.

What are the risks?

Being a late stage project CAY is most exposed to fluctuations in the bauxite price.

Late last year and early into 2025 bauxite prices rallied to above US$100 per tonne, more recently, prices have come off back into the ~US$70 to US$80 per tonne range.

While the prices are still almost double where they were when CAY did its last study in 2022, if the bauxite prices continue to fall then it could hurt CAY’s share price.

Commodity price risk

CAY’s project is at the BFS stage, meaning it is highly sensitive to changes in underlying commodity prices. If the bauxite price were to fall it would hurt overall project economics and make it harder for CAY to lock in project financing for the development of the project.

Source: What could go wrong? - 20 January 2025 CAY Investment Memo

Cameroon has an election expected to occur around October 2025.

As CAY’s project needs the support of the country, changes to its political make-up may alter its progress to production.

Geopolitical risk

While we believe Cameroon’s current political climate is stable, there have been four coups in the last 4 years in the West Africa region. CAY’s project is subject to the volatility of doing business in this part of the world. Geopolitical risks form a significant part of CAY’s overall risk profile.

Source: What could go wrong? - 20 January 2025 CAY Investment Memo

We list more risks to our CAY Investment Thesis in our Investment Memo here.

Our CAY Investment Memo

You can read our CAY Investment Memo in the link below. We use this memo to track the progress of all our Investments over time.

Our CAY Investment Memo covers:

• What does CAY do?
• The macro theme for CAY
• Our CAY Big Bet
• What we want to see CAY achieve
• Why we are Invested in CAY
• The key risks to our Investment Thesis