Originally posted by help_me
Once again, your reading comprehension has failed you. You should perhaps stick to relaying information directly from credible sources rather than sharing your own interpretations and opinions. I'm not going to go through all the egregious assumptions you have made as most of them can be passed off as being subjective, and I feel as though hardly anyone on this board will pay any credence to what I write anyway and instead do whatever they can to discredit my arguments. I will however correct your comments made in regards to the OPEX estimate, as my observation will be entirely objective and indisputable.
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The OPEX estimate provided in the PEA has only taken in to account the costs associated with the processing facility and nothing else. Costs such as salt harvesting from ponds & transport, catering & camp services, brine transportation to plant, pond maintenance, water treatment, manpower not related to the processing plant, lithium carbonate transport to shipping port, G&A etc. have all been excluded from the OPEX estimate. Perhaps some of these costs I've listed won't be relevant to AGY, as we have no real idea what their process consists of, but it's clear that not all costs have been included in the OPEX estimate they have provided.
Not all costs have been included.
However, not all revenues have been included either.
You can be confident that >85% of both have been included and the overall financial picture WILL NOT change materially (i.e. affect an investment decision) if they had gone to the trouble of quantifying the rats and mice incomes/expenses.
If you plug everything into a spreadsheet (and I have) you quickly see that the main items that materially affect profitability are...
Revenues
- Lithium sell price assumption
Expenses
- OPEX (and this is mostly reagent costs)
- Royalities/taxes
The rest of the items are mostly chicken feed (for example, if you tripled salaries of all directors, managers and office workers - nothing much changes)
This is a Preliminary Economic Assessment (PEA), it's purpose (traditionally) is to provide a Go/No-Go decision on developing a mine; if the profitability can only be achieved by tweaking the little stuff, then the economics lack inherent robustness and you would probably dump the project. So, in a PEA you don't worry the little stuff.
The rules of the ASX also
prohibit any mention of upside potential. We all know that the resource is way bigger than the JORC/PEA shows (because they only drilled to 100 metres). We also know that expansion of the resource is probable (and readily available), upside potential to the lithium price is highly likely, and OPEX costs are probably a tad on the high side. But, you can't say that in a PEA, you can only base the analysis on what you have hard evidence for.
There is little point in projecting forward what the share price might be in 3 to 4 years time based on the PEA, because all of these upside potentials will have been realised. It is very doubtful that AGY (or any resource company) would simply build the capacity to the projected PEA (i.e in AGY's case 10,000 tonnes) and then stop. In reality, they will be concurrently putting in place ponds, plant, and land acquisitions to ensure that the 10,000 target is a sign post on the journey not the final destination.
The purpose of the PEA is to determine (with third party independent opinion) if the resource can be made economically viable, based on the Brine, The Process, and Market price at some nominal commercial scale (i.e. 10,000 tonnes), because if t isn't viable at 10,000 tonnes it likely will not be viable at 15k, 20k, 30k etc. (and if high volumes are required to achieve viability, then again the economic model lacks robustness).
That doesn't mean that 10,000 tonnes is the limit, only the chosen volume for which hard data has been collected.
The good news is that fundies and sophos understand this.
IMO
DYOR
