Banter and general comments, page-1830

25 potential off-take partners. EOI's in October. Potential pre-payment
PEA based on 26Mt resource. Numbers will grow into DFS
Conservative spod price

I had a look at the LRS PEA and CEO interview and noticed something of interest that would impact AZS development of a lithium mine. (BTW the LRS PEA passed the pub test - no red flags and no heroic assumptions unlike CHN’s SS). LRS seems to be quite under valued.

LRS has 25 potential off-take partners which is a lot and shows strong interest. In particular LRS via off-take partners are looking at pre-payments plus debt to fund the capital requirements of constructing the mine with very little additional equity to be raised.

I expect similar interest from potential off-take partners for AZS which would be great as any pre-payment would have a material beneficial impact on reducing dilution of AZS equity to develop the mine. However, I doubt that pre-payments plus debt would be sufficient to totally finance the capital cost of an AZS mine as the capital required for AZS would be much larger than for LRS (but it would be great if I was wrong).

The capital required for AZS to develop a lithium mine would also depend on whether they do a two-stage approach like LRS or just a big one-stage approach (which is what I think LTR are doing but I may be wrong). A two-stage or even a three-stage approach would reduce the initial capital required as the subsequent stages capital would be funded from cash flow from stage one.

Pre-payments and a staged approach to developing a mine may have an impact on what Creasy does with his 40% - ie if little equity was required to develop the mine Creasy may be more inclined not to sell his 40% to AZS or other players vs if a large equity component is required he would need to come up with significant cash and be more inclined to sell his 40%. (I am not suggesting AZS will not be taken over).

One reason for the low capital requirement (there are other reasons) is LRS are only doing DMS to recover the lithium. Using only DMS (Dense Media Separation) their recoveries are 67% for a SC5.5 and another 11% for SC3. It would be great if AZS could manage similar recovery rates as it would have a material beneficial impact on the financials for AZS shareholders (ie result in a higher SP over time). High recoveries will also have a material impact on operational costs ie improve the financials. I am hopeful the DMS recoveries will be reasonable given the visible occurrence of coarse spodumene.

The above two matters are worth keeping a watch on - we should expect news on recovery rates very soon (Tony was expecting initial met results in September) and no real idea when AZS will release details about potential off-take partners. But I bet he has already been inundated with enquires from potential off-take partners from USA, Japan, Europe and China.