A little more discussion on how the market might rate us when we come out of suspension - all IMO.
I’ve assumed the issues are resolved with the Government & it’s confirmed we operate under our establishment agreement which reflected the mining code companies like RSG etc operate under.
Under that agreement we would own 40% of 90% (Gov’t owns 10%) or possibly 40% of 80% if the Government buys the extra 10%. So 36% or32%.
Atlantic (A11) also operates in Africa, will own 40.5% (govt can buy more) of the project and has a MC of $227m. By just about every metric Goulamina is superior. Our Resource 211mt @ 1.37% compared to 35.3mt @ 1.25%, planned production 506kt compared to 365kt. Most importantly they are still unfunded and need an environmental permit before they can start construction (expected mid 2024). They also have a 10% Royalty and 35% corporate tax (ours 6% and 30%).
Considering the above, IMO Leo is at least worth double their MC, note our MC based on our last traded price is $604m (hotcopper show quoted shares not including FFXs holding).
Compared to Aust producers, Core has a MC of $400m - they are a fraction of our size, have commissioning issues, have stopped mining, had a cash cost of A$1953 for the Dec Q well above current prices especially as they produced SC4.8. Probably no worthwhile comparison there because of their issues, however the market still values them at $400m despite these issues under current Li pricing.
LTR has a MC of $2.2b, they are now unfunded (market took $800m+ off their MC for that ), smaller resource, plan to produce about the same as Goulamina, 100% ownership, but will be a high cost producer and will struggle under present pricing. Comparatively our 36% (of 2.2b) = $792m, our 32% = $704m but remember the market just took $800m (possibly more as it appeared word leaked out before the announcement) off their MC when the loans fell thru.
PLS has a MC of $10.6b ($2b in bank), produces 580kt of SC6 equivalent, will be going to 1,000kt SC6 equiv by Q3 FY25. Same as our stage 2. They are medium cost and are cashflow positive under current pricing.
Compared to PLS/LTR obviously there is an African discount and the ownership %. PLS is an established producer so it’s not a good comparison.
On the other hand, PLS has stood up to this pricing environment fairly well because it is profitable at these prices and can weather the storm. We’ll need some commissioning & rampup funds (which the latest sale should give us) however being low cost it will not take very long to become cashflow positive and we’ll be well & truly set for the inevitable rebound.
Our closest comparison is Atlantic. Considering the market took about 33% off LTRs MC when the loans fell thru, I’d say if A11 was fully financedit could have a 33% increase in MC and if it was fully approved and under construction, you’d have to think another 33% ? So it could be valued at about $380m in those circumstances.
To me that $380m would be an absolute worst case for Leo considering Goulamina is significantly bigger and both would have a similar % ownership 40.5% and 36% (both can lose more).
As I posted a few days ago, we’ve always traded about 25-55% lower than LTR (allowing for ownership %). using LTRs price before word got out & the loan rejections, at our last price we were around 41% of LTR which would value us at our last traded price 50.5c (MC $600m). Note that does allow for our JV partnership ownership going from 50/50 to 40/60. I’d also add, in this low price environment being low cost is of utmost importance - 6 months ago it didn’t really matter. So in that 25-55% range we’ve traded, I think it would be closer to 25% discount. Based on LTRs pre loan MC of $3b that would give us a MC of $720m or 60c ($3b x 32% less 25%).
Personally (if I wanted to sell - and I don’t) I wouldn’t sell for anything less than 60c and if the SP approached 32c ($380m from above) IMO it would be an absolute bargain.
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