It is unusual to get npv and irr numbers at this early stage of a project life in this game. It allows one to calibrate models very nicely and I don't see any major issues from my current assumptions on what has been published. You obviously want to be spoon fed all the costs and other assumptions before you invest, so you may be waiting for some time for an investment in this industry. These are not normally published, so good luck with that.
The company has consistently stated that the Urea option was the preferred route to commercialization and these numbers indicate this point. The likely outcome will be for the project to advance with a major investor providing funds for a large part of the required capex. This can be toggled with gas price to achieve an outcome that will work for both the new investor and LCK shareholders. It would be ludicrous to think that LCK will raise all the funds for this project and hold a 100% equity. You need to think that thru a bit.
At $150m value, the company is trading at 13 cents per GJ of 2P reserves. If you assume $1 per GJ, which is about the market average value, and assume a 50% equity in the project, it equates to a $580 market value, which is nearly 4 times the current price. Hardly expensive on that basis. And that also ignores the 2C resource, which can later be converted to reserve with further work.
It is not and LNG project, and never was. It is likely to be a Urea project with some power generation for local and project needs. That is the scenario I am seeing here and it looks attractive on that conservative basis.
Cheers, AL
LCK Price at posting:
28.5¢ Sentiment: Hold Disclosure: Held
(20min delay)