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Ianwil

13,197 Posts.

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28/02/18

18:10

Post #: 31425847
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Originally posted by binwood ↑

I thought I would do up a bit of a summary of where we are at since we have had quite a lot of news recently.

Offtakes

Stage 1:

General Lithium: 140kt for 6+4 years
Ganfeng: 160kt for 10 + 5 + 5 years

Stage 2:

Ganfeng: 75kt + 75kt (conditional on finance support)
Great Wall: 75kt + 75kt (conditional on finance support)
POSCO: 240kt

Total: 840kt

Funding

Ganfeng's terms were to provide up to 50% of stage 2 funding via debt or prepayments. This means a maximum of A$103m to gain their extra 75kt

Great Wall's terms were US$50m or A$64m of funding to gain their extra 65kt

POSCO is funding us A$80m of equity now and has a convertible bond facility for another A$80m.

So in theory I see up to a possible A$320m available to us. I think we may be touch and go on cash for the completion of stage 1 and ramp up so would probably allow $20-30m of the POSCO cash to be used at some point before being replenished by cashflow. So let's call it $290m

Stage 2 plant is going to cost $207m. I would expect cashflows can cover any working capital requirements beyond that for stage 2.

So I think all in all we have probably $80m to play with - or the POSCO convertible bonds.

Downstream

It will likely depend on where it is built (and SK obviously looks likely) but I think a 30kt plant could probably be built for A$300-400m easily enough there. That makes our 30% a cost of $90-120m. We should be able to fund this easily enough in my opinion.

Cashflow

Let's look at around 2021 as that is when this probably all settles down.

We will say costs are $250/t and sale price $900/t.

That gives us cashflow of 840kt * US$650 = US$546m = A$728m (at 75c)

Now the POSCO deal lines up pretty cleanly at 240kt of spod into 30kt of carbonate/hydroxide (8:1 conversion as rule of thumb).

So let's say feedstock costs $7,200/t and conversion costs are $2,000/t. A sale price of $14,200 (feasible) would be netting $5k/t. Our share of that product would be 30% of 30kt or 9kt. That adds another US$45 = A$60

Total expected cashflow = A$788m. NPAT of c.$550m

Valuation

Depending on conversion price of the convertible notes to POSCO we might end up with around 1,850-1,900m SOI.

Downstream processors are given higher valuations in terms of P/E, so we could be looking at a big number but I will use 20.

Gives us a valuation of A$11bn. Across 1,900m SOI that is $5.79/share.

Obviously I have made a few assumptions along the way here and this is all IMO etc etc.

Expand

Sounds like we are there with PLS shares now go in the bottom drawer wrapped in cotton wool, bring out when the first shipload of spod goes out. Time to move onto AJM see if we can them over the line.

PLS Price at posting: 92.0¢ Sentiment: Buy Disclosure: Held
5 Upvote

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