Assuming the Morgan analyst was using a US$2500/t average LCE price over LOM, his $24/t rule of thumb to value early stage Lithium explorers would be essentially 1% of that price. That was two years back when LCE price was US$6000/t.
Now, with spot at US$20,000/t.....if you use US$10000/t as average LCE price over the LOM, it probably wouldn't be unreasonable. 1% of that is US$100/t. Let's use that as the rule of thumb now.
Manono-Kitolo 1bn+ ton resource equates to 31mt of LCE (=1000 * 1.25 * 2.47). At US$ 100/t, you'd value Manono-Kitolo at US$3.1 bn at its early explorer stage vs. Market cap at 22.5c of US$644m (for 100%).
Even if you derisk this fair value calculation by 50% to US$1.5 Bn in order to be conservative, you still get ~2.5 bags from here (or 50-60c/share for AVZ). Mind you here we are being conservative TWICE - 1) in assuming half the current spot price as LOM average and 2) then halving our fair value est again.
This is an asset that cannot be easily replaced. The size is probably larger than its peers put together while grades are comparable/better --- you don't find these more than once or twice in a hundred years.
AVZ Price at posting:
22.5¢ Sentiment: Buy Disclosure: Held