STTCOMP PSC, FA Long
Lithium in Zimbabwe
JORC 72.7mt @ 1.11% = 2mt LCE
I was on the hunt for an undervalued lithium based on FA and TA and I think I found one.
Everything seems to be lining up and ticking the boxes for me.
Lowest EV/JORC lithium (Spodumene or Brine) resource I could find on the ASX.
So while the grade, tonnage and LCE is pretty close to the average the EV/JORC is more than 5 times less than average.
Recently signed conditional offtake, placement and development funding agreement with Sinomine.
7 Year offtake for 100% of phase one spodumene and petalite concentrate production
Full non-dilutive funding and building of the mine and plant to be done by Sinomine
Repayment only after the plant has been fully operational at nameplate for 3 months. (This eliminates the huge risk associated with delays and rework etc)
Repayment via the $$ they receive from the sale of concentrate from offtakes.
Sinomine has operated in Zimbabwe for many years.
Confirmed 99.8% Ultra High Purity (Battery Grade++) LiCO3 produced from their petalite and they are in the process of commissioning their LiCO3 pilot plant wich will initially produce 100kg a month of battery grade LiCO3.
PSC reserves the right to build the full scale LiCO3 plant and divert 50% of the petalite to the plant and then supply the lithium carbonate to Sinomine under the offtake (huge increase in profit margins)
PFS Due this Q (Q1 2018)
Production to begin within 12 months of construction beginning (possibly Q1 2019)
Positive Political Developments in Zimbabwe are producing a huge tailwind for PSC and the Lith Project.
Today they announced that the Zimbabwe gov has included the project in the Rapid Results Initiative Program.
Chart is absolutely gagging for a break of the AT and it looks like the overhead supply from the 10/11/17 has been absorbed for the most part.
So while the majority of the lithium stocks have run a 3 bags or more and have reached fair (or overvalued) EV/JORC values already and are prone to profit taking I feel PSC is just about to get going.
Given the disparity between the EV/JORC (the average is $1072/t Li2O and PSC sits around $200) I calculate fair value at 20-25c especially given the non-dilutive nature of the funding and the development agreement and terms.
I expect the reason PSC is yet to reach fair value is due to both perceived sovereign risk of Zimbabwe (until recently the political situation wasn’t appealing) and also that the funding and offtake isn’t binding yet until both parties receive the necessary regulatory approvals which given Zimbabwe's new Rapid Results Initiative and China's ban on fossil fuel powered cars and need for lithium to supply their exploding EV market I don't think will be a problem.
Therefore I think that the offtake/development/construction deal going binding will be the catalyst for the breakout.
Cheers.
