Have had another look at the GLN PEA.
It is pleasing to see that they generally took a more conservative approach than some other Lithium Companies.
I have a personal preference for real over nominal pricing for determining NPV.
I see that GLN was assuming US$11687t for BG Li2CO3 as the long term Contract Asia price (real) supplied by Roskill. My own expectations are for a long term BG Carb price above US$12500t, so am given confidence in that PEA figure. (Note that there is no one size fits all price for Li Chems as even BG products have differing specifications).
Of interest as a comparison the AVZ DFS used nominal figures from Roskill of US$14862 (average Contract Asia / Spot China) for lesser Technical Grade Li2CO3 in determining a Primary Lithium Sulphate price assumption. The Contract Asia Roskill numbers in the AVZ DFS were US$11388 (real) & US$14476 (nominal) out to 2040.
The projected EBITDA for GLN caught my attention. There has been some suggestion that Li companies should receive premium resource /commodity multiples of around 10x EBITDA, while in reality most integrated producers are now trading at around 25-50x NTM and 10x 2025 estimated EBITDA according to Goldman Sachs.
NPV is not the only way to value a project or operation but is preferable for many reasons.
GLN average annual EBITDA was forecast at US$174m pa. A multiple range of 6 to 10x results in a valuation of US$1.044b to US$1.740b. I am comfortable in suggesting that if GLN can achieve the claimed US$174m pa it will be deserving of a valuation in that range.
Finally I felt there was an appropriate contingency for a PEA or 30%. I expect this to reduce to 10-15% for a DFS level study.
I am keenly interested in the possibilty of incorporating the land at Del condor and Rana de Sal into future studies. There are multiple benefits. Ideally a nameplate capacity of 30ktpa would be proposed.
Those additional tenements should have adequate land, and even if capacity isn't increased beyond 20ktpa, there will be savings to be made through a reduction in terra forming.
To me it looks as though the Del Condor and Rana de sal land would be ideally positioned for the "Sector 1" ponds (possibly even several of the Sector 2 preconcentration ponds depending on position of the reagent plant), with further flow to be pumped to the currently proposed Pata Pila area for remaining ponds.
There really does seem a lot of room for improvement and an increase in scale of the project would add considerably to NPV calculations.
I would also like to see a solar option to meet or supplement power requirements where possible. This should lower costs. While gas is an attractive alternative to diesel, access to the pipeline in that region can be difficult.
Given current peer valuations along with the price POSCO previously paid for their SDV tenements, I don't think it unreasonable to suggest a valuation of up to AU$400m is warranted at this point in time. That is without ascribing any value to the Australian exploration tenements.
Final point on the current CR. $10m placed at 50cps without any options as an inducement shows considerable confidence in the project. The discount was quite minimal and IMO well timed.
Never know how the market will react to a raise, but I am quietly confident in a positive response given the very minor discount and removing uncertainty around access to funds through to the DFS. Ongoing concerns of dilution for juniors tends to keep a lid on the SP.
(20min delay)