General:
Agree a rerate will occur if LTR meets metrics. Now the below is a revision of something I posted a while back.
Lets talk exclusions first:
1. Below excludes moving to 4mtpa at some point.
2. Below excludes moving to sulphate and at some point carbonate/hydroxide exports - which is where the significant profits will be made in due course if they meet specs and costs there, noting LTR has done studies on each scenario.
If LTR meets its project specs it will be able to fund those expansions IMO through free cash flow but meeting metrics is a key.
The calcs for 3mtpa facility producing 600,000 tpa 6% grade spodumene:
In terms of the below, I assumed average costs are around A$850 per tonne, just decided to make it higher than LTR are assuming, but also putting in the LTR assumption as well. The analysis below assumes just a 3 mtpa facility producing 600,000 tpa of 6% grade spodumene concentrate, and the numbers are just one year only profit (so nominal $ life profit is the annual figure * mine life). At 80% recovery and ore grade of 1.5% (which I suspect is what the underground sections are if not more) means you need 5 tonnes ore to get to 6% grade spodumene.
PE 10 (price to earnings ratio) to get to a SP in production, although this could be higher as well as there are a number of companies on the ASX operating above PE10.
For the doomsayers, I am using an opex cost higher than what LTR is assuming. They were previously using A$651 per SC6% tonne - refer
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At a high level, just indicative as expect over project life production expansions, and probably using retained earnings to move to downstream processing. Obviously spodumene price a key, as is the opex cost, and recovery rate that achieves 600,000 tpa of concentrate - hence these are the key risks in any analysis. (Red font cells are the input cells).
The royalty rate in WA for spodumene is 5%, add a 2% royalty for Native Title/private royalty etc making royalty 7%
AT $850 opex cost
At $651 opex cost
Note: In the first year or so, I doubt LTR will pay tax given carry forward of losses they have (i.e. when they were exploring etc etc).
Also if EV demand does meet projections I suspect LTR will be looking at its expansion scenarios, and because of that I suspect the share market will value LTR above PE 10 btw. So the above are just hypothetical estimates IMO IMO for Stage 1.
Key risks - positive or negative on PE 10:
1. If Opex costs are higher than A$850 per tonne - will be a negative. However, if the underground sections the ore is a higher grade than 1.5%, meaning you need to treat less tonnes and more importantly has low deleterious elements, which too many forget about when making comparisons then this reduces this risk IMO. If recovery rates are not met then yes costs will increase - refer
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2. Spodumene price a key - positive or negative. Way too much nonsense posted in recent times here about lepidolite and EV demand not taking off - lepidolite is not going to take over spodumene's roll in EVs and is not cost effective as well, and EV demand is only rising. If spodumene prices are US$750 per tonne or lower obviously IMO that means spodumene demand has fallen by the wayside and a number of mines will become uneconomic -
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3. Not meeting recovery rate - negative risk, but this is a WOF process and not a DMS process which too many here get hung about when comparing LTR to CXO or PLS (as PLS is DMS/floatation). Poople need to understand the difference but will be a risk if recovery rates are not met, but people also forget LTR's ore has low deleterious elements which is important when understanding WOF processes as well - refer
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4. Exchange rate - can be positive or negative depending on what it does.
5. LTR produces above 6% grade spodumene - well obviously a positive benefit.
Again, this does not include expansion scenarios.
Finally, n
ot all spodumene deposits will maximise their profit potential by producing 6% grade concentrate (and the same goes for any other ore type that has lithium in it). Ultimately it is about cost and process (i.e. WOF or DMS or DMS/WOF), deleterious elements in the ore and how easily they are removed and obviously grade of the resource. For example, i
f you are producing 5.5% Li20 concentrate it implies that is your sweet spot whilst meeting the deleterious elements in the concentrate specs, because producing say 6% Li20 means your recovery rate falls further (whilst still meeting deleterious elements specifications) and results in you making less profit than if you sold 5.5% concentrate. LTR is confident it can meet the recovery rate and 6% spod concentrate target - why, the underground sections are high grade and have low deleterious elements (when compared to some other deposits).
Ultimately though there are risks, and once those risks are shown not to have eventuated SP will shoot upwards, because I suspect spodumene prices will be increasing, although not to their highs of past years. However, ramp up can involve risks and hence shareholders do need to ensure they keep an open mind - for me if the risks do eventuate I will be re-evaluating my investment here at that time. Right now a lot of noise, but gloss and glamour will come to LTR when in production it shows it can meet its recovery metric - because recovery is also the key metric that will drive costs btw. Provided further details on this in a post on this thread - refer
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All IMO - will Gina have a crack before first production???? - who knows and personally I don't care, but if you are going to have a crack it would be before production starts because the risk to Gina and others is if LTR meets metrics they will be paying a lot more because meeting metrics means getting cash flow and getting cash flow means paying off all your debts plus having change left over to self fund expansions (or partly self fund those). Again all IMO -
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(20min delay)