Hi Everyone
Well I am back at a keyboard and as promised looking over the latest report in detail. As mentioned before the report was really good and we have in fact started to see analysts upgrade their forecasts. I am sure that this will continue.
Firstly, if we look at the reported number compared to my earlier forecasts we can see I was fairly close to the mark. As such I have made adjustments to my Dec-22 quarter forecasts. Please note that this is basic at best, can have errors and does not factor in all assets and ownership distributions etc. Apply this against your own research. The key point of the data is to showcase the growth momentum, pushing our valuation towards $20.
In regards to Dec-22 adjustments include:
- After seeing that Oz has changed the way contracts are being executed moving forward with a more short term, indexed based approach I have upgraded my previous sales price slightly. However, I am a little cautious/conservative for the 2H but beyond the numbers I would hope even better numbers are achieved in practice. One thing to highlight is that I don't expect the number to be anywhere near current spot prices. Spot prices are going ballistic, but from what I am reading many of the very high priced sales are for very low volume (e.g. truck size) and I expect large volume sales to be lower than what we are reading in headlines.
- In my last post I did say my cash costs might be out for Dec-21 and they were, just in different directions. Mt C continued to outperform while Oz continues to disappoint me. As such I have been more cautious with my cash costs. The Oz export duty also took me by surprise.
- If we add another $1500 conversion cost for Nahara then our cash costs for hydroxide out of Japan will be approx $7000. Note Nahara is not in my figures so profit in Dec-22 should be even higher. That cash cost is not all that attractive at what could be, but still at current prices will bring in huge cash flow.
- I have also slightly upgraded my spod price and this is based on reasoning coming from PLS in terms of spod margins improving with the miners taking profit share from the converters. The numbers continue to highlight the benefit of Mt C to the company.
In summary, if we look at the change across 1 year between Dec quarters and what could happen at the end of this year, the growth in profits is substantial. If we look out to 2023, even if prices do not move higher beyond 22 or even go down slightly, the new volume that will come from SDV an Nahara will more than compensate leading to even larger profits.
From the report:
- I was really happy to see further discussion and confirmation that Mt C will be extended. That was a very hot topic on the GXY forums between the trolls and longs. It appears once again the longs got that one right. The longer this asset is around the more it can contribute towards paying for our expansion projects.
- Very surprised we had not heard about the upgrade from optical ore sorters to laser ore sorters before. But shows great smarts to keep squeezing more from the asset.
- Great to see Nahara and Oz 2 are still moving forward.
- Glad to see the upgrades in planned production for SDV. Disappointing that the enviro permits were not advised about before. However, the reason for the delay did seem like a genuine excuse. Looks like things are finally going to happen.
- JB all good, but lets get moving faster here I say. April-May possible steps to FID.
Conference call:
https://seekingalpha.com/article/4480053-allkem-limited-orocf-ceo-martin-perez-de-solay-on-q2-2022-results-earnings-call-transcript- On the conference call there was great diversity and some good questions.
- It's clear though that some analysts are not up to the game and fall behind the average HC poster.
- Much was discussed to clarify Oz pricing and this lead to my upgrades above. I think this is a good move. I really liked how we were told which index was used for which market. Provides some clarity to make assumptions.
- I am glad that Martin was clear on how well we are financially to move our projects forward.
- One has to laugh when an analyst thinking too much stock piling of batteries is happening. That's when you know they have no idea what is happening in the real world! Analysts like that show how little people out there understand about what is happening and why we have so much appreciation still left in us.
That's it from me. Again great result, great future profits to be had. Markets will go up and down. Fear and greed will not lead to a straight line. Do your research and buy/sell as your research deems appropriate.
All the best everyone, $20 for 2022 remains based on the growth profile shown in the report, just keep track of Gcar's chart.
