Give Reason to hold or invest in CXO, page-151

Agreed its poor quality analysis with the aim of being misleading and most likely depressing share prices, most likely for the benefit of specific clients.

I'm annoyed every time they trot out this price to net asset value ratio as justification because its just BS as a valuation ratio in the mining industry. If a company makes a successful discovery the share price will go up beyond company net assets. If that higher share price is then used to raise debt/equity and develop the asset then the share price will still remain above net assets. Given the price / NAV ratios for many leading companies in the sector I can't see any way that a market capitalisation weighted ratio would be ~1.05x. If the "peer" ratio they have created is by adding up the results of dozens of pre-JORC explorers its hardly a meaningful peer average for any lithium company that has advanced to the point of construction. I suspect its some much wider than lithium "peer" average or a highly selected set of companies, both would be misleading approaches.

Dawg, we all know one of the projects you are interested in is LRS. Their last accounts had equity of $115m and the MC is about $700m meaning they have a price / NAV ratio around ~6x. If Core is "overvalued" at ~1.1x, 6x the same market average would appear to be bizarrely over valued. LRS is not however because price / NAV ratios like 3x, 4x even 10+x can be sensible for a lithium project if they discover valuable deposits. If you go through most of the larger MC lithium companies the price/NAV ratio is massively different to 1.05x so I've got no idea how they would have calculated the ratio but its likely not to include LRS, WR1, MIN, PLS, PMT or LTR among others. I therefore don't know what sort of "peer" average it is.

If Core were confident that prices were US$1,000/t or above and staying above that level then Core could well be making money on the restart of Grants. The its not clear that Core wouldn't restart at the prices suggested. From backwards calculations around production, ROM piles and Core's stated reserves there would appear to still be about 1.5Mt of ore in the Grants open pit mining plan. The CFO advised to a shareholder query that Core has shifted 10.8M bcm of 12.2M bcm and ~85% of the waste ore had been moved. There may be as little as 1.4M bcm to shift to recover that ore. If the deep waste ore had a density of 3.0x then there might be 4.2Mt of waste ore to move to recover 1.5Mt of ore. The strip ratio could be around 2.8:1 which is a fantastic ratio.

If Core were to need to pay A$6/t for waste and ore movement then the 5.7Mt to mine out Grants would cost $34m. I'll use a conservative down-side estimate of $40m. If there is 1.5Mt of 1.4% grade ore with a 63% recovery rate than that would be 265kt of SC5.0 (or 276kt of SC4.8). Core needs to restaff the DMS the DFS estimated US$103/t of output but I'm not sure that will happen. Assuming A$300/t of processed output then this ore would add A$80m of processing costs. Transportation to port, port costs, shipping to China and G&A are all fairly low for Core. It should be under A$100/t but lets use that anyway and have A$27m of costs. The combined restart cost structure looks to be around A$147m to mine and process this ore (ex royalties). 265kt ore with a pre-royalty cost of A$147m = A$554/t. If I'm even remotely close with these costs then Core's restart is profitable at US$1,000/t for SC6.

Core might be better to wait for an inevitable boost in the Spod price from new projects not starting but all these bizarrely high suggested prices for restarting basically assume Core's strip ratio won't improve as it continues to mine deeper when the slope of the pit walls mean the strip ratio will fall as Core goes deeper. If you look at the maths of the remaining ore, this looks more and more like an ex Reo man doing a corporate exercise of pausing mining between the old high cost Core and the new low cost Core that he would have delivered (except he was also tossed out!!).