Ann: Earl Grey Maiden Resource, page-179

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eshmun

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08/12/16

15:41

Post #: 21203483
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Originally posted by binwood ↑

Happy to have a look when you post them Esh. I think the numbers in the JORC were pretty dodgey in general.

My suggestion would be you try feeding your model costs as follows (mostly from AJM DFS as they have same size mill and a similar strip ratio).

- $97 per tonne of Spodumene for mining costs
-$130 per tonne for processing
- $90 for transport as per the JORC (that one seemed reasonable)
- $50 per tonne for G&A and Royalties etc
- Total: $367 AUD/tonne - which by the sounds of it is somewhere near what you got.

From there long term (if you want to model 30, 40, 60 years) I would suggest using Lithium Carbonate prices of $8,000-$10,000 USD a tonne. Now from a couple of different sources it seems like the average conversion cost of Spodumene to Carbonate is $2,000. So let's use $6,000 as the lower end of margins there. From what I can tell contracts pricing is mostly working that converter takes half the margin and feedstock provider is getting the other half.

Given that it takes 8 tonnes of spodumene roughly per tonne of Carbonate that gives us $3,000/8 = USD$375/tonne or $500 AUD. Which is still above what KDR used in the JORC announcement.

Now even if you move that up just to $10,000 as a long run Carbonate price (remember currently trading hands for $20,000+/tonne) that gives us $500/USD per tonne of spodumene or AUD$667 a tonne. Which conveniently works out to a tidy $300AUD profit per tonne. Easily survivable for someone with KDR's MC.

Going beyond this though it is probably going to take 5-8 years for any really significant oversupply to occur.

So at the moment conservatively you could say that spodumene contracts are $750USD giving $1,000AUD/tonne and $633 profit margins. Times that out across a 250kt production profile and you are getting profits of $158m. Might work out to be NPAT of $100m/pa

Let's say no look that just seems unreasonable and cut that to 2/3rd's and provides an NPAT of $67m.

Once the stock is producing income it won't trade on an NPV valuation it will be trading on a 10x multiple or a 5 year DCF x a multiplier valuation or something along those lines. So we can easily be talking a 600-700m MC (remembering that PLS and GXY are already there) in 1.5yrs time.

I see plenty of upside potential but I understand if the model says it doesn't work you have to go with that.

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When talking about mining costs you are better off sticking to cost per tonne of ore. I don't have it with me now but I had a plot somewhere of tonnes per annum mined verses costs per tonne which was compiled from data from pits all around the world. I think KDR's assumption of $3/t of ore could be justified when talking about the pit shell that their resource is based around. As the pits get larger the costs come down. I'll see if I can hunt down that chart for you. Esh

KDR Price at posting: 49.5¢ Sentiment: None Disclosure: Not Held
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Ann: Earl Grey Maiden Resource, page-179

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