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78.0¢ avz minerals limited

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16/05/18

14:01

Post #: 33134893
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Originally posted by Warnie ↑

Oh this will go across well here

Please be gentle...

Did some background analysis on SP/MC comparisons with a few lithium plays at differing stages, without discussing all here they all follow a similar pattern using KDR as one for supported guidance;

First Drill then Assay results
SP 25% average increase
Market cap from $105m to $135m (roughly)

Scoping Study
SP 100%+ average increase
Market cap from $140m+ to $300m (roughly)

I did a lot of technical analysis won't bore people with it here:

My Conclusions

Assay results give far less increase in SP/market cap than most appreciate, compared with scoping study.

Buying during scoping study is better trade wise than before assay results.

AVZ against other lithium plays is overpriced (for current stage)

Making assumptions on potential size/ resource with market cap is highly misleading.

Compare grades/potential nameplate output/JV is much better guide.

The only thing that I can declare from more detailed research is as the lithium market is now more forward looking than say 2 years ago (perhaps more mature?), I give some weight to an increase in market caps at earlier stages, research also does shows this to be truer in roughly 76.9% of cases, due to initial grades more so than size of resource (80/20 split).

So what is fair value for AVZ?
Off my own base, I add 50% increase for current lithium climate, add 50% for guesstimate grades/output potential/larger resource (which is a fallacy).

Therefore...
$135m x 100% = $270m
Fair value for today (right now) even with assay results included is $270m market cap IMO

Once scoping study results are in and positive:
150% = $675m market cap is fair value.

So all that being said, if you buy today at $300m market cap without assay results, IMO market cap will be less with assay results than today’s current market cap.

Conclusion:

As the stock itself is overpriced IMO, assay results won't add value to the market cap as the base its coming off is already too high.

So IMO the SP needs to drop to around 12.5c mark and increase to 16c on assay results, or no increase with assay results will occur, and if they do, will be shortlived.

Best time to buy is between assay results and a scoping study, where market cap could be $675m with a 150% increase in market cap between the 2 stages.

**If company flogs off the project between assays and JORC/scoping then that's a different story.

So i'm a buyer at 12.5c and seller at 16c - 17c (into final assay anns)
After final assays I wait 90 days (flat period) then (some anns re: PFS and SP start to gain traction)..... i'm a buyer again at 19c - 20c and seller at 38-40c (after PFS).

****Just my two cents worth as a trader, not long term investor.

Expand

Stopped reading it after the 1st line accident/mistake/ error /omission ...

There was KDR 315m shares on Issue in early Oct 2016 @ 82c = $258m mcap undiluted + 47m Options which was - $296m Fully diluted at its peak

Just before or at time Scoping Study Early Oct 2017 was prices was around $1.20 so sahres around that time were 349 shares including escrow +47m Options which gives a mcap undiluted of $418m undiluted and $475m Mcap fully diluted.

All this on a much small resource (but similar grade) than AVZ is likely to have ...is AVZ 10x the size of KDR ?? We will have to wait to find out.
AVZ Price at posting: 15.8¢ Sentiment: Buy Disclosure: Held
19 Upvote

1 Great analysis

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