$15m - $1 billion market cap

Sorry to keep sears waiting. This is a valuation I put together a few months ago by piecing all the needed numbers together from various sources. I'll keep this post to just raw profit potential and follow it up with some scenarios for getting from here to there.

Firstly I'll list all my source numbers and where they came from so others can check them and perhaps refine some of them. Note that all prices are in USD.

One rather critical factor that I missed in my first go at this is the conversion of lithium oxide (Li2O which is present in the ore) to lithium carbonate (Li2C03 which is the end product).
Li20 molecular weight: 29.9 grams/mol
Li2CO3: 79.9 grams/mol
Conversion ratio: 2.67

Resource: 25 - 29mt @ 1.4-1.6% - current JORC + 8-12mt exploration target
Since this is based on an in production mine I think it's reasonable to assume the exploration target will have been explored by then.

Mine Capacity: 0.5mtpa
Numerous announcements have indicated target capacity of 0.5-1mtpa. I've based these calcs on 0.5 but at the end will use 1mtpa to indicate the potential range.

From the Investor Presentation on 9/11/2011 I've got a few numbers
http://asx.com.au/asx/statistics/displayAnnouncement.do?display=pdf&idsId=01239176

Payable Material: 74% - pg 23 (i.e. lithium bearing ore from total ore mined. There may be scope for improvement of numbers here at minimal extra mining cost if only the lithium bearing ore is fed into the process plant given that it's capacity is the limiting factor, but I'm not sure if which rock is which is a known factor at the preprocessing stage or if it is feasible to seperate it)
Extraction Rate: 93% - pg 23
Lithium Carbonate Price/tonne: $6500usd - pg 11

By products from ore based on the test mining operation in the 80's of 150,000tpa.
pg 7: http://asx.com.au/asx/statistics/displayAnnouncement.do?display=pdf&idsId=01183150

Extrapolating these figures to 0.5mtpa source material we get
164835 tpa Feldspar - $63/tonne
81585 tpa Silica Sand - $34.51/tonne
11239 tpa Mica - $154/tonne

Prices for these materials are hard to find so I've resorted to USGS average prices
http://minerals.usgs.gov/minerals/pubs/commodity/feldspar/mcs-2012-felds.pdf
http://minerals.er.usgs.gov/minerals/pubs/commodity/silica/mcs-2012-sandi.pdf
http://minerals.usgs.gov/minerals/pubs/commodity/mica/mcs-2012-mica.pdf

I've got two key figures from a Canada Lithium (CLQ:TSX) presentation. They have a similar pegmatite hosted resource which is well past DFS stage so the plant and processing costs would be comparable. Their resource is lower grade (1.19%) but higher tonnage (47MT measured, indicated and inferred).

pg 21 - http://www.canadalithium.com/i/pdf/CLQ-Presentation.pdf

Opex: $45.10 / tonne of milled ore (used this figure rather than final product as grades are different).
Capex $200m for 1mtpa plant using figure for CLQ's capex for 1.3mtpa plant - CLQ pg 21

I have assumed a capex of $150m for a 0.5mtpa plant. I had conversations with a director earlier this year that indicated $120m, I'm padding it to be safe but I'll add the numbers for their $120m figure as well. I'll assume $200m for a 1mtpa plant which is conservative given CLQ's plant is 30% larger for the same price.

So now the numbers:

Li2O tonnes = 500,000 tonnes ore * 74% payable material * 93% extraction rate * 1.5% concentration
= 5151 tpa Li2O * 2.67 conversion factor
= 13780 tpa Li2CO3

Revenues:
$89.6m Li2CO3
+ $10.4m Feldspar
+ $ 2.8m Silica Sand
+ $ 1.7m Mica
= $104.5m

Opex:
500,000 tonnes * $45.10
= $22.6m

= $81.9m/yr pre-tax profit
less 30% tax = $57.33m/year excluding amortised capex costs

@ 1mtpa capacity:
= $163.8m/yr pre-tax profit
less 30% tax = $114.66m/yr excluding amortised capex costs