In some respects there's parallel's with Delta. Both Delta and...

In some respects there's parallel's with Delta. Both Delta and GT1 have a near development asset (Mt Ida and Seymour) but the bulk of the news flow during 2023 has related to their exploration efforts around their secondary asset (Yinnetharra / Root Bay). These secondary assets are now looking likely to be larger than the primary assets. The secondary assets are however several years further behind in the development path.

If you go through tick boxes like resource size, management, location, off-take partners, general business partnerships etc, you could argue that GT1 should be at least half if not towards two-thirds of Delta's market cap. Delta's MC is $368m. With GT1's 276m shares on issue then a two-thirds value would put GT1 at 89c (in the currently depressed pricing for lithium stocks).

In a world where you can buy the likes of Core for under 40c, GL1 for $1.28, Piedmont for 55c or if it takes your fancy SYA at 9.2c then GT1 would struggle to be worth over $1. That noted, I don't expect these other cheap lithium prices to remain and you could get the double whammy valuation uplift of GT1 improving its relativity with other stocks and the whole market also lifting.

A wildcard is how much value you can attribute now to GT1's hydroxide plans. The case for an integrated hydroxide operation delivering at least US$10k/t margins is pretty strong and higher margins than that are IMO believable. The planned phase 1 capacity is being stated at 24ktpa. If GT1 were to deliver this project that's back-of-hand EBITDA of US$240m/yr. This starts to open up the multi-billion future market capitalisations but what's the funding picture look like and how many shares will need to be issued to achieve this comparatively near-term vision?

Some people don't get it around deep root bay drilling. This is about knowing there's a controlled supply of ore to feed the Hydroxide plant, even if that ore is US$1,000/t to extract. Piedmont has indicated you need 6.53t of SC6 for a ton of Hydroxide (30kt plant from 196kt of SC6). Both LTR and PLL have put the operating costs of Hydroxide at under US$4k/t. If GT1 could deliver IRA compliant green powered Hydroxide with a short transportation path at perhaps US$11k/t (2023 dollars) or less they are going to be a money printing machine. If GT1 can secure robust Ontario government incentives for Hydroxide you could see a situation where their pre-funding Hydroxide plans have a $0.5b+ valuation then you add on the rest of the business value. That gets you MC valuations well over $1 and that's a huge margin of safety when buying around 50c.