Ann: AVZ Delivers Highly Positive DFS for Manono Project, page-243

Morning all,

A few thoughts after reading the DFS.

1. The report is an absolute cracker IMHO, all 163 pages of it. Not wanting to ramp but honestly it is one of the most comprehensive that I've ever read. Lots of juicy stuff in there, all investors and potential investors should IMO take the time to read properly if they haven't done so already. Answers so many questions and provides a tremendous amount of confidence IMO. Hats off to management on delivering when they said they would (more or less), a job well done. The quality of the report is worth the extra 3-week wait and should serve them well at the negotiating table.

2. There is a huge amount of scope to materially improve on the already impressive NPV, Net Profit and cashflow estimates. Need to remember that many of the costings/assumptions are pre-negotiation.

Example 1: Expect transport costs to be reduced significantly once NF and co. pit the railway co.s against one another. Who needs a lucrative long term contract the most? My guess is that they all do, particularly in the current climate. Am fully expecting transport costs to be reduced by a further 20% or $50 p/t, bringing it back to @$200 p/t.

Example 2: Optimisation of the pit floor and converting 'the wedge' from  resources to reserves (refer to Pages 91 and 92 for more information). A no brainer. Improves Revenue by $4 billion, cashflow by $2 billion and LOM by a further 9 years (not that we need it ).

Example 3: US$658m VAT waiver or refund (at least) not included. $$ Caaa ching. So beautiful to have in the back pocket to instantly improve the already robust economics.

Example 4: CDL high grade feed not included in the DFS no.s. $$$ Caa ching.

The above four examples alone (but there are more) are a financier's delight IMHO.

4. In the extremely, extremely unlikely event (IMO) that the $545m CAPEX is unable to be financed in it's entirety  (Stop press: 1.5 year payback - come on down you absolute winner!) well guess what folks, it can be remodeled down to previous Stage 1 (close to $300m) if need be. i.e. This could easily be achieved by delaying the Sulfate Plant and Hydro refurb by a year or two. Still economically robust without the sulfate plant, but either way the DFS proves that the project is a 'goer'.

5. Maiden Proven and probable reserves (93.1mt) already on par with Earl Grey deposit (Mt. Holland at 94.2mt) BUT with the advantage of a higher grade and fewer impurities. However, and as alluded to in Point 3 Example 2 above (personally one of my favourite takeouts from the DFS) pit optimization would likely increase Roche Dure reserves to approx. 135mt, ~44% more than at Mt. Holland.

Now let's think about this for a minute. 50% of Mt. Holland was sold to Wesfarmers last year for A$776 million, valuing the Mt. Holland project at A$1.55 billion. In hindsight I would agree with the majority of analysts that Wesfarmers paid too much (subsequent DFS numbers unsurprisingly not revealed. Clue: IPFS recoveries with flotation were 75% from memory, CAPEX was ~US$750m from memory and required Hydroxide plant, 47- year mine life to make total NPV look more appealing etc. etc.).

However, it is clear to me that Manono is worth at least this amount (A$1.55 billion) but I would suggest more to any potential suitor. Currently AVZ is valued at ~A$130m, less than 1/10th of the 2019 Mt. Holland valuation set by Wesfarmers. Yet Roche Dure alone has more than double the JORC resources, equal reserves (but in reality considerably more as described above) and don't even get me started on the value of CDL on it's own. And with better economics and further $ improvements still to come from the DFS, what's not to like about the No.1 Lithium deposit in the world?

Ladies and gentlemen, one way or another we are going mining (IMHO).
Suggest referring to draft project schedule on page 70 in conjunction (and in context) with the other 162 pages (if still in doubt).

Besides, somebody's got fulfill the demand from 132 megafactories already in the pipeline (up from 4 a few years ago), so it may as well be AVZ given that many of it's competitors either aren't in a position to do so, or simply don't have enough of the right product (grade, scale and low impurities) to fulfill the expected exponential demand for Tier 1 Hydroxide this decade.









And continue to standby what I said back in December.



GLTA

Cheers
Elpha