Peer comparison AGY vs ORE. Disclaimer- I don't hold either I genuinely just want healthy discussion
ORE is a fair company to use for a comparison as they are both brine producers, Argentinian, and are producing or nearly producing LiCo3
Assumptions-
-Forward looking market which is already pricing in future production.
-LCE sale price is same for both companies therefore an independent variable (using ORE’s Maq pres we find US13,500/t)
-AGY opex/t is the same as that of ORE (AGY have no indication of the true opex).
-FX at .70 (again, same for both companies so independent).
-Fixed costs (office costs, cost of freight, royalties etc) are correspondingly even for both companies (IE ORE’s ~10x production means ~10x more fixed costs as AGY therefore they balance out and are independent). This is optimistic in AGY’s favour (due to a larger company's economies of scale)
-sovereign risk is independent (both Argentinian)
-discount ORE’s other initiatives eg LiOH plant and 29% stake in AAL to ZERO
Using above assumptions we can perform a price comparison of price to EBITDA ratios
AGY.
Stage 3 of 90% interest in 1500 tpa LCE. Current price US$13500/t (AU$19285 @.7FX). Estimated opex (ORE Maq pres) = US4356/t ($AU6222)=EBITDA Margin of 13063pt.
Max 1500 tpa = AU$19.5m * 90% = AU$17.6mpa
Mcap 266m (hotcopper) = 15.1 P/EBITDA
Is this too high?
ORE.
Current production PA ~12,208tpa @66.5% (Maq presentation- amount SOLD. Note this production figure is incredibly conservative- forward looking market would be considering increased production to total 42,000tpa from expansion, and this year’s production closer to 12,600t) @ Gross margin US9177 (AU$13110)
13110*12208 = AU$160m EBITDA *.665=AU$106.4m
Mcap 1.5bn(hotcopper) = 14.1P/EBITDA (conservative as they have AU$522m cash in the bank- an EV multiple would be more suitable even though ORE has debt)
So the market is saying ORE is not only cheaper or (paradoxically) “less” valuable (15.1 vs 14.1 ratios), but I can also buy its less risky assets (currently in production and fully supplying their product), a potential ~3x increase in production within a few years, an AU$55m interest in AAL and a future LiOH facility all for free. Sold.
Having said this, there is a descending triangle in play which would only need a fundamental catalyst eg offtake partner to pop. I still agree there might be short term speculative money to be made here technically however from an investment standpoint, ORE is the better candidate but not by a long shot.
I will reiterate I just want healthy discussion, if my figures are misleading or I forgot to carry the 1 let me know. Cheers
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