PLS Value Proposition, page-2

I hope you bought a lot in 2014!

Stage 2 production is estimated at 880000t of 6% concentrate, delivering a net operating profit around $500mUS, assuming a sale price of $850US/t and operating costs at $250US/t net of tantalum credits. If they can achieve throughput greater than 5mtpa, which is the rumoured goal, then those numbers get better. So the variables are obviously throughput, price and exchange rate. But let’s assume the above, you then factor in a multiple. This is also highly variable as it depends on outlook and further opportunity to grow (such as the 30% interest in the Posco hydroxide plant).

15 times forward ebit may not be crazy in late 2019. Who knows. At some point the market will grow in the belief of this evolving juggernaut.

So, in my view, a value of $7.5b US is possible in the next couple of years, all things being equal ( which they rarely are). That would put us at $5+ per share. Shares on issue is the other variable, which may be impacted a bit by any raising required for capex, although it sounds like this may be funded via debt- again, we don’t know that yet.

Hope that helps, and of course there are many ways to come up with a value spectrum.