And what a day it was for AVZ holders to celebrate, with the price of Tin surging to its highest level since 2014.
Refer to the current 10-year (weekly) Tin chart below.
'The premium on the London Metal Exchange (LME) for tin that can be quickly delivered has ballooned as stockpiles in the exchange's warehouse system near record lows. Benchmark LME tin was up 2.1% at $22,430 a tonne at 1715 GMT after reaching $22,600. Prices are up 10% this year after rising 18% in 2020.
"There's a mismatch of supply and demand, a shortfall that will continue,"said independent analyst Robin Bhar. A price of around $25,000 a tonne is needed to incentivise supply to meet demand that will expand to feed industries such as internet infrastructure, consumer electronics, renewable power and electric vehicles, he said.
"I suspect it goes up very quickly, overshoots then consolidates," he said.'
So what has the above got to do with AVZ being the future world No.1 lowest cost SC6 producer?
To put the current price of Tin (at ~$22,645) into perspective, a US$12,690 per tonne increase on the April 2020 DFS assumption (US$9955 over LOM) generates an additionalUS$956 million in Gross Profit.
[sidenote: To the non-holding naysayers with their already hugely inaccurate and misleading 'SC6 only' peer comparison tables, let me repeat this for you:
Tin credits at the current price of US$22,645 /t provides close to US$1 billion in additional Gross Profit to AVZ's April 2020 DFS assumptions.
Let that number sink in for a moment and PLEASE STOP with the misleading comparison tables that you have been circulating on other stock threads. Also, please don't be jealous or afraid of AVZ's Lithium & Tin project, as the way things are trending unprecedented Lithium DEMAND will go a long way to ensure that MOST current Lithium projects under development will likely enter production by the end of this decade IMO, provided the understanding of each deposit / salar is proven beyond doubt, and also the chosen method of processing is realistic, proven, scalable and cost effective i.e. doesn't end up derailing the economic viability of the project as soon as it gets off the ground.]
To put it another way, I updated my previous calculation based on forecasted SC6 production for LOM and below we can see that Tin (as a $22,645/t credit) reduces Manono's MAIDEN DFS cost of SC6 from US$371/t to US$260/t, confirming AVZ's potential to be THE WORLD's N0.1 LOWEST COST SC6 producer, and an impressive ~$30 p/t below Greenbushes' US $291/t.
'There are no peers in the Australian market with the same quality and scale?' says IGO (25% owner of Greenbushes)
In terms of geographical location i.e. within Australia, then I would certainly agree.
However, in the terms of the ASX (Australian market)?
Here are the US$260/t calculations (figures as per AVZ's DFS or where not available, my cost assumptions as indicated):
Tin production and revenue
Roche Dure Tin production over 20-year LOM: 62,699 t
Artisanal Tin production over 20-year LOM: 12,659 t
Total Tin production: 75,358 t x US$22,645 /t = US$1.706 billion in revenue (Tin credits)
Artisanal Tin processing costs = US$76 million over 20-year LOM (refer to table 3, Page 6 of 20 of DFS Summary). $76 million / 12,659 t = US$6000 /t
Roche Dure Tin processing cost est. (assuming same cost/t as Artisanal Tin cost/t here as Tin processing costs at RD are integrated into overall OPEX & therefore not available as a standalone OPEX estimate)
= US$6000 /t x 62,699 t = US$ 376.19 million over 20-year LOM.
Total Tin processing cost est. over LOM: US$452.19 million
SC6 only costs over LOM:US$4.208 billion (refer below table)
US$4.208 billion / 11,354,174 t (SC6 production over 20-year LOM) = US$371/t (also below)
SC6 costs per tonne after Tin credits:
US$4.208 billion (total SC6 only costs over LOM as per the above DFS table) +
US$452.19 million (total Tin processing cost est. over LOM based on US6000/t): -
US$1.706 billion (total Tin credits over LOM based on US$22,645/t Tin price)
= US$2.954 billion
US$2.954 billion / 11,354,174 t (total SC6 production over 20-year LOM) = US$260/t = World's lowest cost SC6 producer.
What more could a serious Lithium investor (i.e. looking for the ultimate leverage play) desire?
Well as it turns out, Lithium's jewel in the crown (aka Manono) has potentially much more to give. Importantly, the US$260/t cost (of SC6 production less tin credits) DOES NOT INCLUDE FOUR other likely key improvements (IMO) to AVZ's final cost per tonne estimate prior to construction, commissioning and production. These potentially very significant cost savings are IMO likely to come from;
1.Pit optimisation (following completion of current drill campaign and assay results due Q1),
2. Transport (significant discount / savings to the standard transport rate cards - currently US$252/t avg.)
3.Processing efficiencies - AVZ conducting ore sorting study aimed at providing further efficiencies, and looking very encouraging last time I spoke to NF about this a couple of months ago).
4.Throughput - an increase via targeting a higher grade feed into into HPGR provides potential for a 10-15% increase in throughput, further lowering the cost of SC6 production on a per tonne basis.
So, as you can see from the above initiatives and potential outcomes, AVZ is on track to easily become THE NO.1 LOWEST COST SPODUMENE PRODUCER ON THE PLANET (IMO) - producing one of the most consistent, cleanest, purest, & lowest-carbon footprint products on the market.
Therefore, if Greenbushes is currently valued at ~US$7.5 billion (~US$5.6 billion valuation excluding the Hydroxide plant) taking into account both IGO and Albermarles's average SP appreciation of ~25% since IGO's purchase, then what should AVZ (on track to becoming the lowest cost SC6 producer and owning 75% of Manono) be valued at by the time Manono enters production in 2022/2023 with a Sulfate plant in tow?
IMO, certainly a whole lot more than 75% of Manono's current US$650 million valuation - which btw is STILL less than 12% of Greenbushes 'mine only' valuation (i.e. excluding the additional US$1.9b in value that I've generously attributed to the Hydroxide plant) despite AVZ's recent SP appreciation - in line with the rest of the industry.
GLTA
Cheers
Elpha
AVZ Price at posting:
21.5¢ Sentiment: Buy Disclosure: Held
(20min delay)