Some thoughts around the deal now that the dust has settled.....

Some thoughts around the deal now that the dust has settled..

FFX are receiving $65m USD (approx. 20% of NPV) + guarantee of funding all CAPEX + a hell of a binding offtake agreement + the several other intangible benefits

Consider that KDR received $75m for a larger resource, in Australia, when Li prices were higher.. which only covered approx. half of their CAPEX, and you can only conclude that we have got a fantastic deal here.

The initial payment shouldn’t be the focus, the real value is that we now have a tier 1 partner, are fully funded and offtaked, enabling us to unlock 50% of our stage 1 NPV of $1.3B AUD.

Unfortunately I think a lot of the selling is due to retail over expectation. People were expecting >$300M USD etc. That would have been fantastic but wouldn’t change the fact that we only need $100M (perhaps less after the FEED is complete) to build Goulamina, and we have that now.

Also, consider how much dilution we would have been up for if we went it alone…

At least 2 more capital raises would have been required, then to get debt, likely would have needed at least 40% equity due to being in Africa. Looking at some optimistic numbers, we would best case only end up around 20c ahead, which is peanuts in the scheme of things, and would have opened us up to all kinds of funding, offtake, and operational risks. We have practically eliminated all of those risks with this deal, giving us a free ride to production.

Consider our peers trading between $400m - >$1.2B with less impressive project metrics, not offtaked, not funded (consider how much dilution they will soon be up for), and think to yourself if Goulamina is currently fairly valued at present…

FFX keeping 20% and operating the mine will provide considerable boost to FFX as well – how much will that net FFX each year? Note our mining services contract for Morila worth $360M signed the other day…

As Ozblue has said several times, the beauty of Morila, AND now Goulamina is that no extraordinary luck is required here, our valuation is currently so low that as long as the simple development boxes get ticked off as they have been laid out, both projects will be slam dunks. The biggest risks have been effectively removed from each project:

The Morila gold mine is operational, has a large 10 year reserve, and has immense exploration upside to improve economics and extend mine life for 20+ years.

We don’t need to pray for the drill bit to prove up the goods, hope that the mineralogy is economical to extract, suffer through CR after CR to continue funding the operation, wait for construction to occur etc, the Morila cash machine is currently spitting out cash and by all indications will continue to do so at large scale for at least the next 20 years

Goulamina is fully funded & offtaked, has a 20+ year high grade & low cost reserve, with the resource likely to multiply in size with ease.

As above, all of those early exploration co risks have now been eliminated, yet you can still buy now at the valuation of an early stage explorer. All we now have to do is build the thing and start operating cash machine #2.

Now that Goulamina is effectively guaranteed to production and has a partner of the calibre of Ganfeng on board, I expect that major institutions in the lithium space will take notice and start accumulating positions now at the current bargain basement level valuation. There is currently an oversupply of shares hence why we’re not running up to $2, but as these large players get their fill, there will be a squeeze, pushing us up to a valuation congruent with our peers as per KDR’s delayed run to $2.30.

It's up to Mike and Alistair now to get in front of said institutions and make them aware of this incredible turn around story with multi billion dollar blue sky potential.

The other thing that could be holding us back is a perception of completion risk to the deal, even though the conditions precedent should be a walk in the park:

Will the Mali government say no to the addition of an entire new industry in the country?

Will the Chinese government say no to a Chinese company gaining more raw material supply?

Will Ganfeng shareholders say no to taking a stake and securing considerable supply in a tier 1 spodumene mine?

These are scheduled to be completed within 3 months, after which the initial $39M investment will be made from Ganfeng – at this point, any fear will evaporate but by this stage we should already be valued in line with our peers as the opportunity here is too compelling.

Ganfeng will want this mine built ASAP just as we do, so I expect the timeline given to be yet another case of FFX under promising and over delivering as they have every step of the way with Morila.

We need to step back and look at the bigger picture – we have a tier 1 resource, tier 1 partner, are fully funded & offtaked, and are the next spodumene project in the world to come online, which has a larger production rate than PLS’s ($4B MC) current rate and at lower cost per ton.

We’ve made it.

Euroz Hartleys have set an initial price target (in their opinion) of $1.03. Sprott says $0.80 (in their opinion). In my opinion, we’ll knock those targets out the park.

Now we just need the good doctors to buy Barrick’s last remaining non “Tier 1” gold mine in West Africa (the Tongon Mine in Cote d'Ivoire) next year at a steal, just like we did for Morila. The in-country experience FFX gains there will help them to facilitate the establishment of a lithium hydroxide processing facility for the SpinCo/Ganfeng JV in Abidjan... we can dream...