What price will they raise money, page-17

I recently invested in AGY as fromwhat I can see I believe:-

 

-       Argentina despiteits fiscal problems over the years remains a relatively safe and law abidingcountry to do business. The new government is very keen to assist inwardinvestment. AGY meeting with Argentine President Mr Maurico Macri in Sept 2018+ Argentina hosting G 20

-       The EV /Batteryrevolution is rapidly expanding, we are only in the “foot hills’ of what willbe a very significant demand “ramp up” as the planned mass production from themajor automobile, bus, truck, motor bike etc manufacturers really startsbuilding from 2020 onwards. From 2020 onwards Battery and EV manufacturingplants currently under planning and construction will increasingly come on linestart and start producing in real volume.

-       This comingBattery EV and Storage “revolution” (we are all going electric) will inevitablylead to growing lithium demand probable shortages and consequent future pricerises. (see below a UBS summary on EV battery Metals.)

-       The methodical waythat AGY have approached this development of the company and its deposit instages. prove up the resource, obtain JORC and build scalable demonstrationplant to prove metallurgy processing and provide customers with finished sampleproduct. (A very big confidence boost for potential lithium customers).
Its good that AGY management is doing this in Phases
Phase 1 Ponds and demonstration Stage 1 Plant after producing samples is nowbeing upgraded to be able to produce small scale saleable lithium and a commercialStage 1 off take agreement should be signed this quarter or early nextyear,  ensuring AGY get some revenues from Stage 1 commercial production hopefully from 2^nd Qtr next year.
Stage 2 production ponds are under construction and should be completed soon going 27 Ha already complete increasing to 36 Ha already 85% complete and operational.
Note the rest of Stage 2 has now been folded into Stage 3 (see recent presentation 30 Nov 2018)
‘exceptional PEA results have enabled Argosy to move directly to Stage 3 development phase bypassing Stage 2 Strategy.

Stage 3 is what the PEA (the recently announced Preliminary Economic Assessment is about) and the economics look very good. Capex US$141 million (A$196 million) including 15% US$18.5 contingency with a project payback of 2.1 years looks very attractive and I believe the lithium price could be higher than the US$13,000 (base caseper ton that they have assumed when this stage 3 comes to production
Length of Mine LOM 16.5 years @10,000 (base case) tons per annum tpa and 11 years 15,000 tpa should increase as more reserves are proved up.
I believe LOM and or a higher production stage 4 could come later as AGY has sensibly increased their license areas and much of this can still be explored or drilled perhaps drilled deeper

-       This managementteam – they are very hard and fast working, they are not overcompensated, theytreat shareholder money like they treat their own (i.e they are frugal) and sofar they have done exactly what they set out and said they would do.

This is where the company iscurrently at, AGY are indeed already more than just an explorer as can seenabove, we have 3^rd party JORC proven lithium resources thatcontinues to grow as we drill and acquire more license areas, we have proventhe metallurgical process to produce the high purity lithium required fromcustomers at economic/ profitable costs plus sent these potential customerssamples.

As the last AGY Quarterly Report published 31 October states this current October– December 2018 Key Objectives are

 

Key Objectives for December2018 Quarter

Ø  Continue Stage 1 Industrial scale pilot plant lithiumprocessing works to produce customized ‘ battery quality’ LCE product and scaleup for increased production. – I guess this happening

Ø  Announce JORC Mineral Resource estimate Upgrade – Tickcomplete

Ø  Announce Preliminary Economic Assessment –Tick complete

Ø  Announce Stage 1 LCE Product off- take agreement Iguess this happening

Ø  Complete construction works for Stage 2 evaporationponds – I guess this is happening

Ø  Progress commercial scale processing plant developmentworks – I guess this is happing

 

The recent PEA announcementstated “Rincom Lithium Upcoming Milestones
Upcoming value adding milestone works include:-

 

         >       Stage 1 Off-take agreement

Ø  Complete construction of remaining Stage 2 evaporationponds

Ø  Regulatory permitting works for approval to commence tocommercial stage construction and operating works

Ø   Ongoing discussions with potential customers

Ø  Advanced discussions with project financiers/strategicpartners

Ø  Continue next stage of project development

While AGY Rincom may not beone of the largest Lithium reserves or projects IMHO its has a very goodManagement and also importantly operational team on the ground and is on trackand will give very good returns. With a relatively low Capex and a 2.1 year Paybackand conservative assumptions (US$13,000 per ton) versus projected demand andone of the early movers / most advanced projects (there are now 38 Lithiumprojects planned in the pipeline in Argentina most at very early stage.) Ibelieve ARG will have no problems attracting the development financing letshope so – While no date projections for finance completion, build commissioningand stage 3 production have been announced I would think 18 months afterbraking ground on Stage 3 –so probably end 2020 early 2021 stage 3 production .Good luck to all

 

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Recent extract from a UBSreport:-

 

‘Battery demand forelectric vehicles was calculated by UBS to rise to 973GWh by 2025, comparedwith around 93GWh in 2018. The market for batteries in general is expected tobe 1,145GWh in 2025, up from 166GWh in 2018, the report added.

Significant opportunities may arise for NMC 622 batteries, which have a cathodecomprising 60% nickel, 20% manganese and 20% cobalt. This will be the mainglobal market by 2025, and will be worth almost $40 billion per year, the Swissbank said.

The demand for NMC 811 material, which has 80% nickel, could push this marketto be worth $25 billion per year. It could rank second among the most-in-demandbattery materials, the report added.

The growing use of electric vehicles could drive lithium demand to 1.15 milliontonnes per year by 2025, from 265,000 tpy in 2018, UBS said.

Consumption of nickel for batteries would total 665,000 tonnes in 2025,compared with 60,000 tonnes currently, according to the bank. This would pushtotal nickel use to 3.1 million tpy from 2.2 million tpy.

And the UBS report said that demand for cobalt has room to grow to 260,000 tpyin 2025, from 120,000 tpy in 2018. ‘