General Discussion AGY, page-5922

Personally, I think it’s too risky trying to trade AGY at the moment when the 10,000tpa expansion approval could be announced at any time. It’s already 3 months overdue so it must be very close. AGY has been providing work, income and skills training to the local community for the last 2 years. They have established a proven track record. The Salta Province has approved everything AGY has requested so far so it’s hard to believe they won’t approve the 10,000tpa expansion especially with the economic benefit it will bring.

I think the 10,000tpa expansion approval is the major blockage in AGY being re-rated as a 12,000tpa lithium carbonate producer. Using AKE’s pricing announcement the other day, AGY should be able to get $35,000USD per tonne. Assuming production, administration and royalty costs amount to $10,000USD per tonne and with AGY’s ownership of the project being 90%. AGY could be clearing $25,000USD X 12,000 X 0.9 = $270 million USD per annum which is approximately $360 million AUD per annum. If we take off 30% for tax then their NPAT could be about $250 million AUD. At a PE of 10 their market cap could be $2.5 billion AUD which is about $1.66 per share assuming shares on issues reach 1.5 billion.

I think when the 10,000tpa approval is announced the share price will gap up and over time move into the $1+ range. Construction of the expansion could commence as early as July once they finish constructing the 2,000tpa plant. With the exercise of the 20c options and 55% of the 25c options they have about $24 million in excess cash which could be used in starting the expansion process. From my understanding the 10,000tpa expansion is just another 5 2,000tpa plants. So, if the 2,000tpa plant successfully produces lithium carbonate then there is negligible risk in producing an extra 10,000tpa.