Ann: Interim Group Management Report, page-23

Feels like this has so far been a buy the rumour, sell the fact stock within the context of a highly promotable critical minerals/mobility/ESG narrative, but as life moves on the market knows that it will require a massive cheque/massive dilution incoming, for not the most spectacular return.

Now that capital has a cost and is not as abundant as it was, i.e., ECB refi ops rate is 4.25% to 4.5% (consistent with US 10 year bond yield of 4.25%) and higher for longer due to sticky inflation >5% (also pushing up costs since the DFS was done) most of these long duration plays have been discounted and investors have switched from developers to producers, for value and safety. Lower liquidity and higher rates effect the capital asset pricing model for both equity valuations and also the NPV discount rate (WACC). The task now is about financing A$2.5bn capex to produce a A$4.15bn NPV project. That is not overly attractive from a risk perspective, neither is the after-tax IRR of 26% for the level of risk stapled to this. Not to forget they are proposing to fund 35% with equity ($875m) and yet the current market cap is $540m and after stripping out June cash, the EV is little more than $300m.

Currently, the company is trading on an EV that represents a 92.7% discount to the after tax NPV, even with those offtakes in place. Hmmm? While an increase in lithium prices might help the NPV all other prices/costs being equal, this needs more than that if new money is to switch out of alternative lithium exposures. And there will be some reticence there because no one will be able to work out when the selling will start if the stock were to go back up. Not everyone bought at the September 21 peak. And it's not as though the stock is tightly held.

For me, it feels like the only catalyst for meaningful share price appreciation (and we're all here to make money, not to be right/wrong or feel warm and fuzzy about the environment) is a massive financing breakthrough. For me, that will be the signa to get interested, but until then it feels like an option over green lithium rather than a bankable project. The question now becomes how cheap an option does the market, or a larger buyer want.

Not yet convinced about this one. Would like to be, but too many risks and parallels with Chalice. Not advice, just some independent thoughts that might be useful if you want to know how a market participant with little prior knowledge of this stock might look at it for the first time.