Ann: Goulamina Lithium Project Update to DFS, page-150

looking at yesterdays action, you’d think the DFS was a dud, very interesting market reaction, though probably half of it was just due to Li stocks being hammered.

I’ve been trying to figure out what bit(s) the market didn’t like

Was it the capex? a 30% increase

Technically that means we are no longer fully financed. On the other hand Ganfeng is a multi billion dollar company, to my mind they got a great deal (albeit Li prices were much lower then), so they want this to go ahead ASAP. No way would they let any delays occur because we have problems securing our share ($30m). If you look at the capital costs on P17 of the announcement, most of those costs come in 2023 - so no hurry & Ganfeng have already said they are speaking to their banks re debt financing it. Anyone who didn’t expect a capex increase has had their head in the sand for the last 12 months. In the scheme of things, I think a non issue.

Was it the NPV?

LTR had a NPV of A$4.2b based on a Lithium price of $US1392, we had a similar NPV but based on an overall much lower lithium price.

If we used the same pricing, we’d be well above their NPV. They have a market cap of $2.7b - ours (for Li) is less than 20% of that!

So no, I doubt it was the NPV

Was it the lack of a formal JV?

Even without the formal FID, both partners are going ahead with the drilling, trying to secure the ball mill and other engineering works, not to mention the test work Ganfeng have done on the flow sheets, conversion etc. Yes maybe some institutions like to see the formal JV before investing, however there is no doubt in my mind at all, the red tape will be sorted fairly soon, the JV formalised & FID made. I emailed Doc Mike at 6pm (WST) yesterday about this red tape. I had a reply within 15 minutes (which other company does that?). It is to do with the re organisation of the Mali subsidiaries before they can transfer the exploitation license. Nothing at all to do with the demerger.

There were actually a lot of very good items in the DFS, if these improvements had a separate announcement for each, I’m quite sure we’d get a bounce for each announcement.

The biggie was recovery going from 77% to 80% based on changes to the process flowsheet thanks to Ganfeng’s input. This means stage 1 production has gone from 436kt pa to 506. That’s a 70k improvement - at present prices ~ $2000/t that’s US$140m more revenue per year!! Makes the capex increase look insignificant doesn’t it?

Then there’s stage 2, which will be commissioned 18 months after the initial commissioning. For an extra $70m capex (thanks to the provisioning in stage 1) we get an extra 325kt pa. Again at the present US$2000/t that’s a revenue increase of US$650m per annum.

Conservatism is built into this DFS from all areas. Whether it be the Li pricing used, the construction time, etc Many other company’s DFS are done to help get finance etc & are a bit rosier than reality. Our DFS was really done so that management have a sound plan for the almost immediate implementation of the project, not to sit on a shelf for 6 months while finance etc is sorted.