Just wanted to thank people for their positive comments towards me and i'm glad that some of my posting and research has been valuable.
What I will say and have said before, is that in the end, the credit needs to go back to individuals. In the end it's your decision to buy and you decision to sell. So regardless of what I may have said or done the success you have had is yours to own.
Additionally, just because my predictions have come to fruition thus far it doesn't mean they will again in the future. There's been quite a few stocks (3/4) in the last 2 years that I've personally made 500-1000% ROI. But each of those has had some subsequent pullback.
Meaning there may have been others that thought because I'd been right for 12 months prior that I would continue to be right. In that case, there's quite a few people that may be in the red if they bought in at higher levels.
That's why I do often suggest and mean others should do their own research and decide if it fits the risk vs reward. My investment start generally super low in the cycle and when you're on big profits you can ride those retraces.
That said, I don't post anything I wouldn't stand by in the future and often why i'm fairly explicit in my wording. I do believe that a fair MC value for PSC at it's current phase is around $400M AUD. Still well below it's prevailing NPV. That's an assessment a little higher than i usually would attribute (60-70% post tax NPV) but it's taking into consideration peer valuation in the sector.
Peer valuations have exceeded their respective NPV's as IMO the market is basically pricing in a situation whereby the LoM pricing used in the studies is expected to be conservative. i.e. although the pricing is at $2500usd/t for SC6 you cannot justify using that for LoM pricing. Most developers (bar CXO using a fairly obscene LoM pricing for 5.8 product IMO) are using 700-750usd/t for SC6. This is generally the average price used over the last 2-3 years. What we have occurring now is an assumption from the market that although SC6 is out of control right now, perhaps a new LoM assumption across next 20-30Y is maybe a little higher than 700-750usd/t.
What I will say, is that despite what the market thinks the analysts predictions which underpin most feasibility studies are still in that 700-750usd/t range. The issue with management or any company going rogue and making a 'management' call, Is that the feasibility can be labelled un-credible. It additionally provides shareholders with a poor sense of the risk exposure. Essentially presenting economics above what industry experts are suggesting. (BTW i reserve a bit of judgement on analysts and commodity pricing long term as it's really a massive dartboard). It's often very difficult to predict demand (which has many inputs across 20Y) and then also understand the potential supply which may or may come online and in what time.
Irrespectively, if you want to pick good stocks in commodities you can do so with 3 pretty simple checks.
-Capex. Lower capex means less dilution, easier to fund and shorter payback.
-AISC/Margin If you can produce an equivalent or better product cheaper than your peers it makes no difference what happens in the commodity pricing because you'll always be profitable.
-MC to NPV or MC to post-tax Ebitda. This tells you the upside in the investment based on the current value of the project. In production it's essentially your EPS (earnings per share) if the market cap doesn't rise you end up with a company full to the brim with cash and paying very nice dividends until the market catches up.
1) PSC is at the lower end for capex for construction
2) It's AISC is very good. If petalite is considered a credit SC6 production is 11usd/t. Massive upside as well with petalite recoveries.
3) It's got one of the lowest MC to NPV ratio's of all developers.
So as mentioned I intend to hold to FID. Would consider free-carrying at that junction but it's dependant on what the company MC is at that time and what's happening in the wider sector (has SC6 tanked / is the market shot).
One thing I will say is PSC's post-tax ebitda on 736usd/t means they can almost make their MC in profit in years 1-5 with the SEZ. I think roughly 125-150M AUD per annum. Assume PSC only retains 60% of project post finance maybe 80-90M AUD profit attributable.
What the going PE ratio for a lithium producer? 10 = 850M MC, 20 = 1900M MC. That 5-10 times upside from here and when PSC is in production. If the SC6 price is around that level and PSC meet the figures in it's feasibility studies this is IMO where this company could be valued when in production. Which is 18-24 from FID. So late 2023 first thing 2024 IMO.
SF2TH
PSC Price at posting:
48.5¢ Sentiment: None Disclosure: Held
(20min delay)