Running discussion on SP, page-34491

'Joe will push renewables, America will push for lasting remarkably better climate action. Big Scotty will follow (because leading is not his style). our resource just became one of the keys to the immediate future!!'


Morning all,

Couldn't agree more. Following Biden's victory speech over the weekend, it was interesting to see mainstream media immediately focusing on the urgent need for action on climate change. And with US, Asian, European & UK governments all now pretty much aligned in terms of seeking to transition their respective economies to a renewables based future, it's absolutely the perfect time for THE BIGGEST EVENT THIS DECADE IMO - that being the clean disruption of energy and transportation - to go mainstream.

After all, the required technology to make this once in a lifetime event a reality is already available (though further breakthroughs are still crucial to accelerating the process). Add to this environmentalists and indeed the will of the majority of the world's growing population who want to breathe in clean air and with many having experienced the effects of climate change first hand, private enterprise convinced and excited by the economic potential of a renewables and ESS based future, and now the mandates of all major governments being in alignment, (excluding Australia of course but they will be forced to fall into line or face unprecedented global scrutiny) particularly in reference to Trump being the last 'Superpower' leader to resist the inevitable transition from a fossil fuel based economy to a renewables based future.

Therefore, it is my honest opinion that AVZ's unique and world class deposit (i.e. one that can easily, economically, and materially contribute to a Lithium powered future for decades) just doubled in value.
After all, there are no other known hard rock Lithium deposits in the world that can boast the same grade, scale, purity & consistency throughout (with the exception of Greenbushes although the main difference being GB, unlike AVZ, is heading towards its end of life).

[Sidenote: Why are these attributes so important?

A higher grade deposit requires less ore to produce an SC6 product, creating economic efficiencies. A converter (i.e. from SC6 to Hydroxide and the processes in between) requires a consistent feed in order to work well, a certain scale to run economically and a certain scale to avoid cathode producers relying on too many sources.

When converting SC6 into battery quality hydroxide, the conversion process demands a consistent ore feed. A change in the feed affects the entire process and in the worst case the performance of the cathode. Unwanted impurities can cause the malfunction of a high performance Lithium-ion battery and in extreme cases can cause a fire and/or an explosion. That might be considered to be an acceptable risk with Tier 2 quality Chinese made products, however for the purposes of powering mobility the Western world demands Tier 1 quality batteries that are safe, high performance and long lasting with 8+ year warranties for customers.]

And although it's unlikely that the market will reflect the above opinion (i.e. that the value of AVZ has just doubled) in a single session today or even say in a week from now (short of a first of multiple OTs which my BTD suggests is 'extremely close'), it's clear that for the last six or so months the market has commenced 'Lithium Boom 3.0' - albeit forecasting future demand & possible price spikes before they have actually occurred - like markets tend to do.

And with the above recent developments I suspect ALL cream will now rise to the top fairly quickly IMO (just as it did with Lithium Boom 2.0) and remembering that AVZ was previously considered the creme' de la creme' in 2017/18, albeit at a point in time when the market's assessment of one of the great opportunities of our lifetime (and certainly for this decade) was clearly premature.

However, step three full years into the future (2020) and this opportunity looks more ripe for the picking than ever before IMO, particularly in the case of AVZ.

Some current valuation analysis (below) to consider.

1. AVZ vs hardrock development peers (as at 30th September).



Note: post updating this graph on the 30th Sept, the hard rock development project mean (average) has risen a further $47 p/t to $314 p/t Li20 Enterprise Value (highlighted in yellow in the snapshot below), an increase of $47 p/t. And yet AVZ (already heavily discounted at $33 p/t the end of Sept) has only risen by a further $7 p/t to $40 p/t. In fact, AVZ in currently trading at an 87% discount vs it's hard rock development peers.

2. AVZ snapshot versus three development peers; Lithium Americas (LAC), Liontown (LTR) and Piedmont Lithium (PLL).



Note the stark difference AVZ's valuation vs the others, with AVZ trading at an 80% discount to attributable project NPV. When comparing projects, IMO it's ridiculous IMO that AVZ's m/cap is only half that of LTR and PLL, and a billion dollars less than LAC. Even at 15c per share (double the current SP), AVZ would still be trading at a 60% discount to NPV (in line with PLL) and still at a whopping 73% discount vs hard rock development peers on EV/t basis. Conclusion: Extremely undervalued vs hard rock peers and also LAC IMHO.

3. Giant Cup and handle pattern forming on the monthly chart? IMO yes, especially when one looks at the catalysts that are likely (IMO) to drive this formation.



From a TA perspective, note that the 20 & 50 month MAs, MACD, Stochs and TSI have all turned positive after months and months of the SP forming a flat and extremely solid base between 4 and 7c.

4. AVZ performance vs Global X ETF and 48 x Global Lithium stocks over the past 6 months (post Covid-19 crash and post AVZ's initial yet outstanding and conservative DFS)



6. AVZ vs Global X LIT ETF 2018 - present. The performance gap differential has widened further since July 2020. Immediate target to bring AVZ back to the bottom of previous gap length: 15c-16c per share (double the current SP)

Conclusion to all of the above: Short term SP target: between 12-18c but probably subject to an OT or two being delivered possibly this week or at least prior to the AGM IMHO.

GLTA

Cheers
Elpha