Ann: Blesberg Lithium-Tantalum Project Acquisition, page-55

Hi all. Unfortunately I do not share the optimism that this is a good acquisition for AVL. Apart from the fact that I think this will become a distraction from the V game, I think the entry into lithium is too late (by a long way). However, my main concern is that the acquisition does not appear to represent good value. Here is my reasoning.

Cost to AVL (at today’s closing SP)

1. Option fee – 7M shares at $0.016 = A$112k
2. Purchase 100% of SA Lithium – 70M shares + 80M performance rights = A$2.4M. I recognise the value of the performance rights could be higher or lower but I used today’s price
3. To fund SA Lithium’s purchase of SALT = US$1M + US$2M = A$4M at 0.75 exchange rate.

Total consideration = circa A$6.5M (in today’s money).

Potential Lithium Supply from Blesberg

1. Resource containing 50,000 tonnes lithium carbonate equivalent. I have assumed that 100% of this is attributable to AVL, but this might not be the case
2. This is equivalent to a resource containing 20,222 tonnes (I think my calculator is working but can someone please check this?)

Therefore, the AVL transaction cost is A$322 per tonne contained Li2O.

As an aside, if we assume a typical resource grade of 1.2% Li2O, the resource tonnage needs to be 1.685M tonnes to hold 50,000 tonnes lithium carbonate equivalent – not very impressive when you think about it this way. Of course this does not discount discovery of the next PLS at Blesberg.

By way of comparison, consider the recent transaction between DKO and PLS. The total transaction cost was A$8M but only A$5M was to purchase the Lynas Find resource which contained 91,250 tonnes Li2O. Therefore, the DKO transaction cost is A$55 per tonne of contained Li2O, 6 times less than the AVL unit cost. This is why I don’t see value in the AVL transaction.

Despite all of the above, clearly the market disagrees entirely. I will therefore stick to my day job. Hopefully this post will not be trashed as a down ramp, it is my opinion based on an assessment of the information to hand. Cheers.

Disclaimer: All the above is my opinion but if the calcs are wrong, it’s Ozgold’s fault.