Well between rescuing fish from my overflowing fish pond due the deluge in Sydney
I have now had time to read through the whole PEA document for a 2nd time.
I never expected the PEA announcement to jump the SP alot but I must admit I thought we might get about a 10% bounce today but looks like its ended in the red but for me personally it was just great to get some financial and mine metrics on the project and I can see why JZ is so positive. I have no doubt that this project is commercial and knowing JZ I think these already impressive numbers will later prove to be conservative and will they will improve alot more from this "base case" as he calls it as the project develops.
Personally, (and yes I am a long term holder) I thought the PEA numbers were excellent. Not so happy about all the cautionary statements they had to put in it as well, and I suspect that is what has held up the release of the PEA, but I fully understand why JZ wants to keep the detailed costs, equipment requirements, flow sheets and IP confidential so I guess we just have to put up with those. Like I said in an email this afternoon congratulating him and the team he is stuck between a rock and hard place so to speak in what the ASX requires and what is company propriety confidential info. Personally I would rather have the cautionary statements and keep the IP and info confidential.
From my previous analysis, which I have posted on this forum, I always realistically thought a 10,000-12,000 tpa operation with a mine life of 10 to 15 years so my number estimates were pretty good. I really like the 10,000 tpa,USD$13,000 per tonne sale price, 16.5yr mine life option personally as they can and will likely increase this if demand exists later by deeper drilling and further land acquisitions. At the moment most drills only went to 102m with one to 147m and they know the depth goes a lot deeper with for example some other companies on other salars drilling to 400-600m so by drilling alone I suspect that the resource could be increase quite abit if they need to but it makes sense to get into commercial production 1st and then drill more if and when the demand requires it. A pay back period of just 2.1years, an NPV of USD$399m with an IRR of 53% and GP % of 61% is very good IMO...thats about $2.45b revenue with gross profit of about $1.3b over the project life...not bad for a small producer
. I also have alot more confidence in JZ's capital cost estimates of USD$141m than the approach the consulting company used too as JZ will know the costs of most of the equipment he needs and how much the ponds have cost to build to date etc and we all know how tight JZ is with spending money.
I actually thought the consultants method of extrapolating costs from ORE and LPI was abit lazy but I guess if JZ wont provide them with a detailed list of plant equipment due to confidentially reasons then they have to get some costs from somewhere. Interesting the capital cost of LPI in comparison is USD$527m, but that is for a 20,000 tpa operation. I also thought using a discount rate of 10% in the NPV was very conservative too. LPI used 8% but also provided NPV' s for 6% and 10% too and when they used 10% their NPV drops by USD$279m to $770m and thats for 20,000 tpa and their IRR is 23% so while I also think the AGY PEA numbers are quite conservative (and will likely improve more) they are based on the results of actually running an industrial scale pilot plant for a few months not just some estimates based on a few lab tests and what a consultant thinks. The operating costs are also alot better than they look when compared to peers. For example ORE originally said their costs per tonne would be USD$2,495 but I had a look at the actual costs for the Sept 2018 qtr per ORE's quarterly report and they were actually USD$4,640 per tonne last qtr and that excludes general and admin costs so if AGY take the G & A costs (USD$357) out of their estimate AGY's like for like cost per tonne is actually USD$4,288 and thats based on JZ's estimate based on the current pilot plant costings with a scale up. Other things that were good to get out of the PEA is that the consultants said that 95% of the drainable brine can be abstracted from the salar and the recovery through the ponds is about 70% which is the high end of what I expected. JZ also re-iterated that it is critical that the LCE product is fit for the purpose and tailored to supply the preferred OT parties (plural again) and that its not a one product fits all strategy so this should in itself build stronger relationships with those OT parties as he is showing AGY will customised the product to suit each individual customer's requirements. Like another poster said on here the other by products could also add another potential USD$10m revenue each year as well (based on current sale prices for potash and magnesium oxide).
All this in USD too !!!
Very happy long term holder here.
