20% MC/NPV is what it should be right now at current BFS stage.
30%-35% is after off-take agreements and financing deals.
Higher MC/NPV is at construction to production stage.
HIO is such a high quality project if people are familiar with all the supporting infrastructures that HIO is endowed with (nearby water, ports, rails, roads, power, rich mining history Broken Hill workforce, "Major Project Status" awarded by the federal government, "State Significant Development" awarded by NSW government, full support from regional Broken Hill community/council). Its product is of highest grade and lowest impurities in the world, and sits right in the centre of green steel, net zero emission movement with new steel furnaces (DRI/EAF new steel mills) and thus should command an even higher MC/NPV.
Of all the scenarios of NPVs that I have listed before, the most likely scenario IMO is 350mil tons resource utilization at long term average price of Fe62% = USD $120/ton which gives us a NPV8% of around AUD $14.75bil. A project with NPV8% of USD $2bil (AUD $2.7bil) is already considered as a great project within the junior mining start-up projects, let alone $8bil or $10 or $14bil.
People should get this ingrained in their heads: when we talk about LONG TERM AVERAGE price of Fe62%, we talk about the AVERAGE price over 20 years-40years life-of-mine (LOM). Not Fe62% price today, or next year, or any single year. The effect of inflation alone will take it way above USD $150/ton-$180/ton by 2030 IMO.
SP at 20% MC/NPV ratio = 20% × $14.75bil ÷ 750mil share (NOW) = $3.73. That is the sp it should be at today.
SP at 30% MC/NPV ratio = 30% × $14bil ÷ 820 mil shares (inclusive of 71.5.671options issued to LDA Capitals, at excercise price of 70c) = $5.40. That is the sp it should get to after off-take agreements and financing deals (year 2023).
For reference, my GLN stock already reached 29% MC/NPV at very strikingly similar progress stage of pilot plant/resource drilling and upgrade/BFS,...
GLN lithium stock has the main project (HMW) in Argentina (not as good as Australia in terms of sovereign risk) which has After-Tax NPV8% = USD $1.338bil = AUD $1.785bil (versus HIO's After-tax NPV8% = USD $11.06bil = AUD $14.75bil at mid-case scenario) and GLN's MC went to $580mil (versus HIO's MC = $145mil today). 90% of GLN's MC is attributed to its main project HMW with the balance of 10% attributed to its 2nd project Candelas.
90% × $580mil ÷ AUD $1.785bil = 29% MC/NPV.
GLN and HIO have very similar milestones ahead of them in almost the same time frames:
GLN: - Highest lithium brine grade in the world: 946mg/L - Resource drilling: currently ongoing - Next resource upgrade: March-April 2022 - Pilot plant completion: expected April 2022 - BFS/DFS completion: Dec 2022 - Off-take deals expected: unknown - NPV8% = USD $1.338bil for HMW project - MC = $580mil (1 week ago)
HIO:
- Highest iron ore concentrate grade in the world: Fe69.9% - Resource drilling: currently ongoing - Next resource upgrade: March-April 2022 - Pilot plant completion: around April 2022 - BFS/DFS completion: Dec 2022 - Off-take deals expected: March/April 2022 onwards as in latest AGM presentation ASX announcement few weeks ago. - NPV8% = projected USD $6bil (low case) to USD $11.06bil (Mid-case).
GLN sp went from 11c (1 year ago) to $2 and my maths says it will go to at least $5 by end of 2022. Just 2 off-take anns will easily take it to above $5). That is close to 5000% gain.
Some may say but GLN is in hot commodity Lithium while HIO is in iron ore business. Yes I agree Lithium is hot commodity but remember its after-tax NPV8% has been upgraded to current USD $1.338bil after the company has raised its projected long term selling price of Lithium carbonate 60% higher from USD $11687 to $18594/ton. Also, remember HIO is also at the beginning of a major trend of steelmaking moving to DRI/EAF/Green steel revolution which will require high grade iron ore and therefore we will see HIO's Supergrade70%Fe in hot demand. Iron ore has no alternatives while EV battery manufacturers are constantly searching for alternative materials to make it cheaper.
There is only one way for HIO's sp and MC to go that is up. Simple as that.
GLN:
NPV8% = USD $1.34bil Current MC = around $580mil Expected MC when sp reaches $5 = around $1.5bil (after off-take anns and resource upgrade)
HIO:
NPV8% = USD $6bil (low case) NPV8% = USD $11bil (Mid-case) Current MC = $145mil Expected MC = ?
HIO Price at posting:
20.0¢ Sentiment: Hold Disclosure: Held
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