Ann: Sayona & Piedmont Formally Approve NAL Restart, page-222

Wow... Sorry to dig up an old thread but I'm just trying to get my head around the magnitude of this this offtake arrangement with PLL.

The PFS numbers seem to assume that the capped $900 US/t offtake is for only 2 years before they jointly construct and operate a lithium conversion plant. At which point the PFS reverts to the benchmarked pricing which averages $1,242 US/t over the remaining 25 years as if the offtake never existed.







It further assumes the offtake is for 60ktpa or 50% which has since changed to 113ktpa or 50%. However this is neither here nor there because whether you use 60 or 113 over the 1st 2 years only, it makes very little difference. The big problem is assuming that the offtake is nulled after 2 years because of a joint agreement to construct and operate a lithium conversion plant.


Has anyone run the numbers on this? Based on my numbers it reduces free cash flow, compared to what is modelled in the PFS, by around 40% (post tax NPV is reduced by around 45%). If this is true it has the potential to reduce the market cap by around $700m based on a PE of 18. That is, given that a 113ktpa offtake that is capped at $900 US/t when average benchmark pricing is expected to be $1,242 US/t it is worth around $55m AUD in pre tax profit which translates to around 700m in market cap (i.e. $55m in pre tax profit is worth about 700m in market cap based on a PE multiple of 18 and a tax rate of 30% - I'm not sure what their tax rate will be). How easily will PLL give up on a benefit that is worth 55m in profit before tax per year? Or to put it another way, why would PLL make a decision which would vaporise shareholder value by 700m? Before agreeing to build and operate a lithium conversion plant one of these two companies need to work out who is going to take the 700m hit. Obviously a lithium conversion plant will significantly change the economics again but I assume the $55m opportunity cost to PLL will need to be taken into consideration.

My problem with this is that it doesn't appear to be reflected accurately in the PFS. That is, the PFS should just assume the $900 US/t capped offtake is in place for the full duration of the study (i.e. the study is not based on a lithium conversion plant and needs to stand on it's own 2 feet).

Maybe I'm missing something but this seems like a huge deal to me (based on SOI $700m it is worth around 8c per share).

More than happy for someone to explain to me why this is not a problem or what I've got wrong here.

ALL IMO DYOR