The FYI Resources Ltd (ASX: FYI) share price is plummeting following news of a joint venture for the company's high-quality alumina (HPA) project.
FYI Resources has signed a binding terms sheet with Alcoa of Australia for the joint development of the project.
If all goes to plan, the terms sheet will progress into a joint venture between the two companies.
The market hasn't responded well to the news. At the time of writing, the FYI Resources share price has tanked 33.94% to 55 cents.
Let's take a closer look at today's news from the mineral exploration company.
Image source: Getty Images
FYI Resources share price dips on JV
FYI Resources' stock has tumbled after the company released news of a planned joint venture.
The company has looped Alcoa into an agreement to create a joint venture of its future HPA project.
Under the agreement, Alcoa will hold 65% of the joint venture with FYI Resources taking the other 35%. The level of control that FYI Resources has in the project might be the reason for the poor reception.
Additionally, investors might not like the fact that either party can pull out at various intervals.
Both companies will have the opportunity to walk away after the design of a demonstration facility and the completion of production trials. The option to leave will be on the table again after the demonstration facility is completed and detailed engineering is undertaken.
The companies plan to make a final investment decision for the project in 2023.
FYI Resources believes the joint venture is the best chance it has to de-risk the project and ensure its future success.
Commentary from management
FYI Resources managing director Roland Hill commented on the news driving the FYI share price lower, saying:
Today's agreement brings the possibility of production closer to reality without further material dilution to our shareholders. FYI considers that a future JV forms a robust structure capable of delivering the high quality HPA strategy, as outlined in the DFS, at a time when the international HPA market is forecast to grow in line with the world's e-mobility uptake and emerging HPA applications.
