IMO both are great long term holds, and at present AGY is very undervalued in relation to future earnings. A comparison between the two:
|
| CXO | AGY |
|---|
| 1 | Current MC | $1.84B | $466M |
|---|
| 2 | Project ownership | 100% | 77.5% (increasing to 90% upon 10ktpa production milestone) |
|---|
| 3 | latest pretax NPV ($AUD) | $384mil (NPV8) based on USD$850/t | $546mil (NPV10) based on USD $13,000/t |
|---|
| 4 | Increase in contract market price of product since NPV calculations
| 2.23x ($2750/t) | 3x ($52,000/t) |
|---|
| 5 | Increase in spot price of product since NPV calculations | 4.88x ($5,000/t)* | 4.98x ($78,000/t)** |
|---|
| 6 | Production commencement | Q4 2022 | Q2 2022 |
|---|
| 7 | Production capacity | 190,000tpa spod | 2,000tpa carbonate (increase to 12,000tpa by 2024) |
|---|
| 8 | Production revenues year 1 (my calcs/guesstimations) | Ganfeng: $206mil
Tesla: $75.6mil Yahua: $75mil (assuming price ceiling of $1,000/t) Spot price: $67.5mil Lithium Fines: $10mil.TOTAL REVENUE PER YEAR: $434mil | Currently no offtakes. With 2,000tpa being quite a small amount, could probably sell at spot price. Therefore, TOTAL REVENUE PER YEAR $155mil (x 77.5% ownership = $120.5mil) |
|---|
| 9 | Current MC valuation compared to year 1 revenue | + 323% | + 288% |
|---|
| 10 | Annual revenues by 2024 | $434mil | By then AGY’s 10,000tpa expansion plant should be operating. So: 2,000tpa spot for $140mil (AGY would now have 90% ownership at this point) plus 10,000tpa at current market contract price for $468mil (90%) = total annual revenue of $608mil |
|---|
| 11 | Current MC valuation based on annual revenue by year 2024 | +323% | -23.3% |
|---|
| 12 | Mine life | 10 years at 190,000tpa | 16.5 years at 10,000tpa |
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| 13 | Current in ground value of resource at average contract price (in AUD) | $4.52bil | $17.4bil |
|---|
| 14 | Production cost as % of current market contract price | 13.2% | 8.8% |
|---|
* on March 4 Platts heard spod price tradable at $7,000/t!
** Platts heard carbonate price tradable at $88,000/t
Conclusion: when valuing both based on year 1 of revenues, the valuation of both companies aren’t too far apart. But when factoring AGY’s 10,000tpa expansion plant come 2024, AGY becomes very undervalued compared to CXO. Perhaps this discount is because CXO will commence generating $434mil per year in 9 months time, where as AGY won’t be generating $608mil per year until another 24 months. Perhaps it’s because Cxo is more advanced with offtakes, FID etc. Either way I anticipate that in the not too distant future, AGY will re-rate the way Cxo has over the last 12 months.
Both companies have exploration and resource increase upside. Then of course you have CXO looking to go into hydroxide maybe as early as 2025 which will turn Cxo into another beast entirely!
So to answer your question who would win?
IMO CXO got the jump on AGY and has motored away, but once AGY’s 10,000tpa plant kicks off I expect AGY to race up right along side CXO, potentially even poking its head in front. Then when both are bounding down the straight I think the Cxo jockey will pull out the hydroxide whip and Cxo will get the win
You can tell it’s Adelaide Cup day today haha.
IMO
GLTAH
Disclosure: I have traded AGY through the teens and twenties and have recently decided to purchase a parcel for a long term hold
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