Good News & Bad News, page-5496

PLS MC: 444m; Debt: 154m; Cash: 108m
Project Value: 490m

AJM MC: 110m; Debt: 248m
Project Value: 358m

GXY MC: 297m; Cash: 200m
Mt Cattlin, James Bay & Sal De Vida Project Value: 97m

AVZ MC: 155m
Manono Project Value (100%): 258m

Note: Debt has been revalued from the 61.75 exchange rate used at 31Mar20 to 65.


Its a hard life for a Spod producer at the moment. The EV and ESS disruption is booming notwithstanding.

Poor old AJM has refinanced and kick on. Although it appears they're tapping their $50m standby equity funding already, with the recent options issue announcement.

PLS has only 62% of AJM's debt, while having twice the ore reserve, production capacity and has finance available to fund expansion. PLS has $108m in Cash hand and an unused debt facility of around $A23m. PLS also has the option to refinance its outstanding debt at 1Jul20, to alleviate cashflow as principal repayments fall due. The cash of $108m is earmarked for their POSCO JV and in turn their Stage 2 expansion due Jun20, however if the JV is not announced, then we may see a marked paydown of the debt.

In AJM's favour is that they're at full production. PLS is improving and with GL and other chemical converters opening their facilities later this year, looks to improve sales guidance.

GXY have Mt Cattlin in production, although moderated. Given the small ore reserve, it only justifies a small P/E multiplier.James Bay and Sal De Vida remain undeveloped and the market values them as almost worthless. Given this, AVZ's undeveloped Manono project is spectacularly overvalued.


Given the difficulties AJM face with their debt, the PLS project appears remarkably undervalued. AJM unfortunately saw their Lithia recovery fall to 60% in the March quarter. They had plant breakdown in December, which they euphemistically described as maintenance work brought forward.

The recent ALB quarterly announced that Tianqi's debt in Greenbushes (GB) to the JV funding it, is now over USD107m (thats $A165m; Zero at 31Dec19)!!! ALB said they may withhold dividends to maintain GB. Given the Chinese will not relinquish ownership and the Oz Government's stance on critical minerals announced last November, will GB's seize up financially and cease operations until resolution?

Unlikely but what would production cessation of GB's and/or AJM do for the Spod price (and Lithium prices generally) ... and demand for PLS production? The entire Spod market presently struggles under low prices and financing problems. Emerging producers are stifled in this environment. All the while PLS sits at the ready.

Business is about having a good product which meets customer demand, at the right time. Investing in the sharemarket is about gauging risk, lateral thinking and patience. PLS ticks all the boxes.