OK just threw some project numbers in a GLN LKE comparison table and the difference in market cap vs project value/risk is staggering!!
We all knew this here but to see it in a table below is eye opening:
....a few key takeaways from me:
1. GLN's HMW standalone project is essentially comparable in value to Lake's Kachi project (technology risk aside), yet
LKE's MC is +137% of Kachi PFS post tax NPV and GLN's MC is only 25% of HMW PFS post tax NPV!2. LKE are doing their Kachi DFS based on a much higher 50,000 tpa production rate which will boost their NPV, however they are still drilling to even find/prove up the resource to support a rate of 50,000 which I find a little dodgy to be honest.
3. GLN HMW DFS will like be at least 25,000 ktpa as informally mentioned by JP a few times and inferred by news around pond optimisations and resource increases etc. so this will also increase HMW DFS NPV.
4. When you include GLNs Candelas PE, GLN has a
combined post tax NPV of $2b and our MC is only 17% of this combined NPV vs Lakes 137%! Now if HMW and Candelas are developed as a integrated phased project the economics of the combined development will improve a lot (vs standalone projects like the PFSs are currently), so we should expect an optimised integrated phased HMW + Candelas project to be much more valuable that just the two PFS NPVs added together (geeze, its interesting to see that GLNs MC is only 51% of even Candelas PFS NPV alone, ignoring HMW vs Lakes 137%!). Also, GLN's Greenbushes South could be a game changer too and with recent discovery of pegmatite lens similar to main Greenbushes, so you would think we
should be getting at least $30-40M in MC from our Greenbushes position making our Argentina NPV vs MC calcs even lower!
5. Galan has enormous exploration upside still to come across HMW (and Candelas), which
should ultimately support 40-50 years at 40-50 ktpa in my opinion.
Truly world scale.
6. Galan has many optimisations still to include in the DFS (vs conservative PFS) including opex and capex reductions, which should position is
clearly at the very low end of the cost curve for Li projects worldwide. Our extremely high grade and extremely low impurity resource will add immense value to our ultimate project economics and drive our Li cost of supply to an industry leading low.
Truly world class projects.
7. GLN are are also
still carrying a large and conservative 30% contingency in our PFS capital. This will reduce in the DFS (by the very nature of the more detailed engineering done), note
Lake only used 20% contingency in their PFS and I expect they will reduce this to 10-15% in their DFS, so if GLN reduce their DFS contingency to 15% that's a halving of contingence for us vs PFS which should offset any capital inflation pressure for GLN.
8. Finally, how do you even quality risk in a project NPV (well I actually know, you range every input and use probabilism economics, buts that's a whole different topic!) or asses risk in a company market cap? I sure know which project carry's more risk! GLN have low tech proven evaporation which an extremely high grade and low impurity brine, and Lake have new unproven tech DLE that has never been done ever at scale!
All in all,
the fact that GLN is trading at ~15% of Lakes MC is just mind blowing and the biggest value discrepancy I have ever seen in the market for similar projects in the same commodity (and same location!). The power of Lakes marketing and IR and retail support is just staggering (well done fellas) to get them to a $2.2B MC and the fact GLN is at only $340m is nuts....personally think Lake is way over hyped and GLN are way undervalued/unknown. I would say fair value for Lake, given their tech is not yet proven at scale would be around $1B or ~60% of NPV (~80c per share) and fair value for Galan, given low risk, highest quality resource and upside would be around $1.5B or ~75% of combined NPV (~$5 per share vs current $1.1!).
So investors, ask yourself this....
which company has more potential share price upside over the next 12mo? Holy cow,
Galan could 6 bag from here and still be at the same MC and Lake is currently? And Lake is only 6months ahead of Galan from a engineering perspective. Once GLN's DFS drops year end, early 2023, which will likely show even better economics than now, will it still be a $0.3B MC, no way!!! Even if it gets to just HALF of Lakes current market cap, say $1B, that's ~$3.30per share for Galan which is a 3 bagger on today! For Lake to 3 bag, they would need a MC of $6.5B!!
Mike drop....
(20min delay)