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$5.28 galaxy resources limited

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Thesi

8,745 Posts.

2629

20/08/16

18:19

Post #: 18565924
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Originally posted by airconditioner ↑

Yes Bloomberg is a Copy and Paste of Mac bank.
So lazy.
I've only really taken a quick look through Mac's analysis, simply because when I read it I could barely believe it could ever be taken seriously. To start with - their demand curve is fiction. Once you realise that, then the whole thing is a waste of time.

Here is my quick take on it. There are probably a lot more inconsistencies than I found from a quick read.

Why are different US dollar rates and market LCE price applied to ORE as opposed to all other companies?

Galaxy is shown in their model as making $5m profit this year.
Then bringing in 265m dollars next year.
Then 240m. then 213m.
They assume $75m of costs - still equating to $190m of profit.

That apparently gives us an NPV and reasonable market cap of $727m????

They assume taxes of approx 50m each year for Galaxy?
What? Aren’t we building an apparently useless SDV with that money and therefore writing off our tax?
There would be a good deal of historic tax losses to write off for several years to come. I don't think Galaxy will have a tax bill for a few years at least.

Regardless of all that, Galaxy is shown to outperform Orocobre’s profit in every year across the estimates
except for 2020 where they squeak ahead because Mac starts rolling off the spodumene price so aggressively - and see above for inconsistent USD/LCE treatment.

What is the logic behind Galaxy’s SDV being worthless, never supplying a cent and there still being a case for PLS etc who will enter beyond the “over-supply” era?
PLS are shown to not produce reasonable quantity until 2019.

I have to ask one more time - why is there a case for PLS if there is none for SDV?
They are both headed for production at approx the same time. Either there is demand or no demand in which case PLS is worth a line of zeros, same as SDV.

They show Galaxy out-profiting PLS in their estimates which is estimated to hit peak profitability of about $66m, less over time as opex climbs.
Still, PLS is basically valued the exact same as Galaxy’s market cap - taking into account no risk component at all. They may never even build a mine, haven't released a DFS and they are still valued higher.

SDV just has a line of zeros for its contribution to Galaxy.
This is just a massive con.
What do they think we're doing with the hundreds of millions of profits then?
They assume we have it in the bank just earning interest of $11m by 2019. Uh huh.
Why have they added nothing for the tantalum production even though they show that we are producing each year? At least PLS is not credited with any sales of that either, when they produce it too.

Why is not factored in that SDV has a resource with superior chemistry could produce and become very competitive on cost and quality with Orocobre?
The profitability of Mt Cattlin makes it clear we could proceed with the build from revenue alone
and that we'd be stupid not to, with Mac bank deciding that instead we'd prefer to pay out 100s of millions in tax.
At the worst, SDV could compete for the exact same clients and under-cut ORE, supported by the revenue stream at Mt Cattlin.

This is just the sort of ridiculous assertion to pull off the accounting trick they wanted - because if they showed SDV coming online for Galaxy then their own large investments in ORE and PLS would look like a mistake.

Simply saying that SDV won’t happen and will do nothing is a ridiculous statement.
It could equally be applied to NMT, PLS, AJM etc. Even Orocobre. ORE is apparently risk-free from being out-supplied by other, better quality brine players in a time of "over supply".

Mac bank owning 1% stock in Orocobre and PLS makes this no more than a partisan down-ramp.
You'd expect this stuff in a company profile report for spruiking - but not an independent bank report on an entire sector.
Careless errors such as spelling NMT as NEO consistently, tantalum as tnatalum and spodumene as spoumene also don’t look good in a professional report.
How much hurry were they in to rush out this con job?

Expand

If anyone is unsure what we are talking about, Macquarie make it free to read from the following link:

http://www.macquarie.com.au/dafiles...cs/2016-08/AustralianLithiumMiners090816e.pdf

Last edited by Thesi: 20/08/16

GXY Price at posting: 39.5¢ Sentiment: Buy Disclosure: Held
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