https://seekingalpha.com/article/41...d59bmb:ea7b03e97a4464a44e66fdfaa151dcf9#/alt1
.22% cobalt says the author.
*NB author has our resource grade 10% - it’s actually .13%. good article nonetheless. Bodes well for the DFS and revised NPV.
“JH: Just compare the valuation of Tesla to Clean TeQ Holdings (
OTCQX:CTEQF), an Australian junior miner, with a promising cobalt, nickel, and scandium deposit in New South Wales. Tesla is unprofitable, whereas Clean TeQ's Syerston Project will generate free cash flow (FCF) margins exceeding 40% at current metals prices. Clean TeQ trades for only 2 times the FCF it is likely to generate in its first year of production (2020).
My point is that high quality miners can generate profit margins that compete with tech companies, whereas auto manufacturing is a highly competitive, low margin business.
SA: As a follow on to that, what names in the space look attractive to you in light of your observations?
JH: Clean TeQ is one. The company's Syerston Project is going to be one of the lowest cost nickel operations in the world (after by-product credits). The deposit is not only suitable for cobalt and nickel sulphates, but the company is developing an integrated operation where the mine will be the first one in the world dedicated exclusively to producing cobalt and nickel sulphates for the battery industry.
I think the market may have missed the
fact that Clean TeQ is going to "high-grade" the cobalt at Syerston for the first 10 years of production. Despite the fact that Syerston contains an advertised 101 million tonne Measured & Indicated Resource grading only .10% cobalt, the company is going to selectively mine the higher grade portion of this for the first 10 years. Based on its preliminary production guidance, I estimate that the material it mines for these first 10 years will grade roughly
.22% cobalt. This will be well-timed to coincide with soaring cobalt prices. When the company releases its definitive feasibility study in Q1 2018, the economics are likely to surprise to the upside. The company has already received commitments to fund most of the project's initial CAPEX. Importantly, it is debt financing, which is ideal in this low interest rate environment and avoids shareholder dilution.
The same Syerston deposit also contains the only primary scandium deposit in the world. Scandium is used by the transportation industry to make aluminum alloys stronger and lighter weight. The Syerston resource is so large that the company has the scope to essentially create a market for scandium where one is almost non-existent due to the fact that it can provide a stable, lower cost supply for decades upon decades. The scandium in the ground at Syerston is worth about $29 billion at $1,000 per kilogram, which is even less than what this specialty metal has historically traded for. However, it is worth little if there is no market. If the company can assemble enough committed offtake partners from the transportation industry (e.g., aerospace), then this will truly be a prized asset that can reward shareholders for decades.”
(20min delay)