Can't sleep, thinking about BGS and the upcoming PFS. To preface this rather large piece, I will admit that I have been buying BGS throughout the week, and now have ~500k shares. This is a lot for me, if I could buy more I probably would.
Originally I compiled a scoping study base case from available figures for a 1mt plant. It came out at 166mil, not bad, but I have now amended it to make it more accurate.
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Again, all figures taken from SS. Changes I have made:
- Used an AUDUSD exchange rate of .75. I have noticed that pretty much all PFS/DFS documents use this figure.
- Used a 25 year mine life. Our resource is currently 33mt, so I am using 25mt approx. Very conservative.
- Reduced the output each year from 190000 to 180000. This might still be too high - average production could be lower.
Nevertheless, NPV after tax with 80% ownership comes in at just over $200mil.
This is a calculation that uses a 1mt plant, 25mt of resource and a 10% NPV discount rate. All after tax.
If our NPV from our PFS is below this, I will eat my hat. No way will it be below this figure. Which begs the question: why are we sitting at 65mil MC then?
Well, I decided to do a comparison of my 5 favourite upcoming producers (and AVZ, just for their fanbase). The 5 I like are BGS, TAW, AJM, PLS and KDR. In my opinion, all of these cos will produce, have a defined resource, are hard rock producers and have/soon to have plans underway to build plant. Apologies for the small size.
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This week I have been digging into this data and I learned a couple of things. Below are my takeaways thus far:
BGS has an incredibly low amount of shares on issue. I have included 7500000 options as part of the upcoming resolutions, still super low register. Compare us to AVZ, ridiculous.
BGS and KDR have very high quality deposits. To put this in perspective, AJM has a bigger JORC resource than us by about 7mt, but we still have more lithium inside ours. This is significant when we consider our NPV potential.
AJM & TAW's PFS documents provide a pre tax NPV, but no post tax figures. PLS's did, which shows just how good their mine actually is. Note AJM's DFS NPV was only 280mil after tax. My 200mil calculation is pretty much our minimum.
When you compare POST tax NPV to current MC's, you can see that many of these future producers are already trading at their NPV. AJM and TAW are essentially fully priced in once tax is considered. For PLS, I used their PFS for a 4mt plant to compare. If I used their DFS NPV of 709mil, then they are priced in at 89.5%. Still great long term value there if they build that 4mt whopper though.
This was huge for me, because it shows that these companies are not trading at a discount. Their current value is almost completely priced in.
So that leaves just BGS and KDR. Both have great deposits and are relatively cheap. Interesting that neither has published a NPV figure yet. Once they do, it is only a matter of time before the market corrects itself. KDR has recently been moving slowly upwards because investors are waking up over there.
Just for entertainments sake though, you can see that even at our super low valuation of 200mil, we are about a third of that currently. That is ridiculous. No other company on the ASX can offer this kind of risk/return value. For KDR to offer similar value, it would have to have an after tax NPV of 800mil, which is actually an after tax NPV of 1.6million because they only own 50% of their operation now. Again, this is significant.
We need to think differently about what we have here because our share register is much smaller than our peers. I was reading notlistening's post yesterday about how we will be valued at $1 if we prove up to 100-300mt, drill out more zones etc. He's like the biggest ramper here (sorry notlistening, I actually always laugh when I read your posts because of your profile pic) and he is aiming for a
future outlook of $1? That doesn't make sense to me at all.
I'm going to propose something super crazy. I am suggesting BGS is worth $1
right now. No extra drilling, no increased JORC, no hydroxide plant. Just having a tiny 1mtpa operation would put us at $1. The funding for this is literally peanuts.
But if the PFS comes out and it shows us 2mt with a 3-400mil NPV (after tax and 80% considered), we should be worth $1.50-$2. AJM, TAW and PLS - they are all close to their after tax NPV figures.
And if in the future our resource is increased, NPV will rise.
And if we reduce our OPEX, NPV will rise.
And if we build a carbonate/hydroxide plant, NPV will rise.
The point is, $1 means I have 500k in my pocket. At $2 I have $1million cash. Super high figures (for me to earn on one stock anyway). This is not a dream - 400million NPV is very achievable and in fact likely. It scares me when I think of it. But you have to have vision and belief in your research in order to hold on for the whole ride.
For me, I ain't selling until we get close to our NPV.
Also would love feedback on the above figures - I had to get them from a collection of announcements so could be slightly inaccurate.
