General discussion, page-118

Apologies if this has been gone over before, I don’t read all the posts.

With 2 world class assets, it’s impossible to get a feel for the markets valuation on each.

The recent AVZ deal helps put a valuation on Leo.

AVZ sold 24% of the project for US$240m, that values the whole project at an even $1b

AVZ’s 75% would be worth $750m, or you can look at it from the view of 51% worth $510m + $240m cash received (not sure on tax treatment)

That US$750m (A$1.04b) just happens to coincide with their current market cap of A$1.1b

So not only has it been thus valued by the market, but also by a commercial transaction.

AVZ holders would maintain they’re undervalued - I’d agree.

Considering Ganfeng only effecively paid $65m for 40% of Goulamina ($130m into JV of which they own half), AVZ got a very good deal. As has been discussed before, it’s not so much the upfront payment, but the offtake terms etc etc that are more important. However I do believe this relatively low payment has affected the market’s perception as to the valuation of Goulamina.

Lithium prices have also surged since we signed our JV.

I don’t want to get into the them vs us, however both projects are very similar especially considering both are in W Africa.

No doubt they have a bigger resource, however both companies have a LOM of around 20 years, our stated LOM is 23 years, if we wanted to go beyond that our resource is open, it’s just a matter of more drilling. AVZ plan to build a bigger plant with about 50% more production, but at a higher capex & opex - mainly due to their high transport costs. Our cash costs are way below AVZ’s.

Leo’s share of Goulamina is 40%, that same percentage of AVZ’s project would be worth US$400m or A$555m

That is more than our entire market cap including Morila.

AVZ have a good project, it’s main claim to fame is the Resource size however once both projects are in production, the market will be looking at EBITDA not resource. In years to come, Lithium prices will inevitably come back down and then operating costs will be even more important.

Considering Goulamina is fully funded & expecting a FID in the next few months, have higher profit margins, I’d argue we should have a higher market cap than AVZ. Obviously AVZ holders would disagree.

By the time the demerger goes ahead, Goulamina will be well on the way to development. Then we’ll see how the market values Leo.