GeneralValuations are always difficult per se because they...

General
Valuations are always difficult per se because they depend on quality of resource and size of resource plus starting configuration and potential to extract resource to fullfill demand shortages - demand/supply imbalances I dealt with this post in the LTR thread the other day Post #: 40855132. If a mine can come onstream at say 5 mtpa ore feed as against 2 mtpa ore feed capacity the market would value the former mine at a much higher value than the latter mine even if both mines have the same size and quality of resource (an obvious point). It is how IRR/NPV and discounting works.

The later a mine comes into production the more discounted in an NPV sense its SP will be all other things been equal. IMO

Also in a NPV sense if your mine has 100 mt ore in the measured category (an for arguments sake lets say it has Li20 of 1.3% - 1.5%), and say it comes on market at a 4 mtpa ore feed configuration the prodominant SP will reflect actually this assumed entry market profile. Say it did extra exploration and found another 100 mt in the measured category but was not proposing to increase the 4 mtpa ore feed configuration that additional measured resource would not have a significant impact IMO on SP because the NPV benefits of that are from year 26 (and that means heavy heavy heavy discounting in a NPV/IRR sense).

LTR valuation
I gave a valuation in this post, Refer - Post #: 40388984, but that valuation when you compare to what WES paid was based on the assumption that both mines come onstream at the same time as KDR (or not that much later). Now, obviously KDR will be coming onstream before LTR and I suspect SQM involvement in KDR (a renowned lithium producer) is also worth something so whilst I arrived at a $830 million value just be mindful I came to that value in a production profile context as if the mine commenced around the same time as KDR. The value of LTR is based on timing to market, and what Albermale paid for Wodgina might need to be looked at in the context of what Albermale does in WA and offshore (below discussed)

Now I wrote the post while ago in AVZ when people there were posting ridiculous values and they were ridiculous at the time which in a way was proven to be the case with what then transpired, Post #: 26548026, but I will take the relevant paragraphs from there and reword to LTR because they are also relevant here if talking valuations:

"So size of resource, which people are debating here, IMO only matters when demand can accomodate the potential supply and this is something I haven't seen that discussed in this thread. That is if PLS is producing 314,000 tonnes of 6% spodumene concentrate (from 2mtpa ore feed) can the market accomodate a much larger 6% spodumene concentrate output from" LTR "(meaning a higher ore feed). I suggest yes but I doubt it will be beyond 1 million tonnes per annum in the first few years, but other can decide.

IMO there is a lot of ramping going on on this forum, but first we need to establish a JORC and secondly the asset valuation (takeover price) is really dependent on the timeline the market will need to absorb that output (given an oversupply in the market will adversely impact price and a NPV calculation so it boils down to the strength of lithium (and in particular hydroxide) demand which then boils down to demand for batteries etc etc etc

"Another way to say it is if" LTRs "resource is 10 times that of PLS it doesn't matter from a valuation sense if the only viable production profile for" LTR "is only slightly bigger than PLS's planned production profile. All IMO"

You can change PLS is the above to now include production from other hard rock plays, and the one most compare to is KDR and Wodgina. What will unlock value here for KDR differentiating the resource and showing that the JORC is indeed with low deleterious elements and that it can supply the hydroxide market. I certainly think it can, but the time value of money affects valuations as KDR will be in production before LTR. Valuations are based on NPV/IRR, and that means entry to market. I think there is scope for a number of new greenfields entrants to enter the market in the next round (current round is KDR), but the question the market has been debating is the timing of the next round. I suspect before 2025 btw.

(Refer blending comments below is where I think inherit value for LTR also lies)

Hydroxide plants in WA
Firstly there is a perception that the Greenbushes resource in time will deplete. I am in part viewing Albermale's move into Wodgina in this context (i.e insurance policy around future hydroxide expansions at Kemerton). Be mindful the EPA approvals for Albermale at Kemerton are for a number of hydroxide trains, not just 1, so would not be surprised that they produce spodumene concentrate at Wodgina minesite and convert it to hydroxide at Kemerton near the power source (if Greenbushes cannot supply the expansion ore for those facilities noting Tianqi may also face the same issues and therefore it might be a player IMO that might also be considering a WA play if Greenbushes resource is viewed as been depleting in the next 5 to 10 years, meaning it cannot supply all its offshore customers plus the WA based Kwinana/Kemerton hydroxide facilities and expansions thereof).

Also be mindful the way JVs in the lithium space are currently working - the equity holder in the JV is using their ownership stake in a project (also think Ganfeng in its Mt Marion project) to take their stake of production in the upstream lithium mine (i.e. yes they pay a fair price for it) to then feed it into their own downstream converter production facilities.

In terms of PLS/Plibara plays, well I think a few on here don't realise there is a gas pipeline from Dampier to Port Hedland already in play (i.e. the old BHPB pipeline for its HBI plant). Infact if those plays in the Pilbara get access to cheap gas well they are going to be very competitive on the hydroxide front, given it takes 11 MWHh to 14 MWh of power to produce 1 tonne of lithium chemicals downstrem. One of the biggest costs in producing carbonate/hydroxide is electricity, and you need to be close to a electricity source (and gas plants produce cheaper electricity than coal plants btw assuming the gas price is reasonable given the much higher capex costs of coal fired plant). Whilst I put this post in another thread it shows how the calcs on electricity requirements are derived using the Tianqi/Albermale data for their hydroxide facilities and Nemaska (Canda player) study - Post #: 40107095

And oviously locating along the route of the Dampier to Bunbury Gas Pipeline and Dampier to Port Hedland gas pipeline is the key. For LTR and even GXY the key issue for them is does the Dampier to Kalgoorlie to Esperance Gas Pipeline have enough spare capacity for hydroxide facilities, given the very large power intensive needs of hydroxide (over spodumene production at minesite).

PLS
I thought I would provide this to temper some of the information on here about the Pilbara been unable to produce hydroxide. As a non- holder I posted this in the PLS thread because personally the issues with PLS are capex driven as against ore driven IMO by and large - they need to upgrade capex and to ensure they can strip the deleterious elements from the ore and their actual issue in failing to hit recovery rates was the speed to market they undertook which IMO meant they didn't put in the right capex because of the limited MET studies they did - Post #: 40269083 I suspect when they deal with their floatation circuits you'll find their spodumene will be on specs (or far better than now) and furthermore the actual real fear from a PLS perspective is whether they get taken out now and the likes of a downstream converter then fixes the plant and start producing hydroxide at Port Hedland. That is PLS did the hard work of getting teh project up and then someone else takes the cream because of poor capex scoping in hindsight (i.e. PLS thought it was putting in the right capex but it ilooks like too me the new capex program is about fixing the issues etc)

Future activity and blending
In terms of consolidation in the industry I wouldn't be surprised if AJM and GXY is taken out - why, well for start they have working plant and a vehicle straight to production for a player (noting in effect the approvals are already in place for that working plant, which shortens EPA processes etc).

The other thing people probably haven't thought about is blending - been you can blend ores together to ensure you meet some form of chemical grades downstream and maximise profits (albeit that is more of a short term to medium term strategy until a miner gets its own ore). This is where I see LTR can have a big say as well, given if it is correct the very low deleterious elements in the deposit (which provide blending opportunities for converters by in effect paying lower prices for spodumene with say a 1% Fe203 in the spodumene concentrate but then blending it with LTR ore to maximise profits).

Ultimately though the intention would then be to simply use the LTR ore for anyone who took out LTR and/or LTR getting itself into production. Again I went through the concept of blending in another thread, which was not specific the company I own - Post #: 40926112 and Post #: 40926443 - with this post talking about what converters do.

There might be a few embedded posts above but in general when I post, the material I post can be used in other stocks because I always feel the supply gap will lend itself to a number of new greenfields entrants (and not just one new entrant by 2023 - 2030). It is just a case of timing, and for avoidance of doubt I will be also posting this in the stock I own when I have something else to say there.

And finally, going back to valuations ultimately the market decides the value and implicit in that is the way the market determines the various plays. What is posted on HC is an opinion only and the purpose of this post is to really say that some of the comments I see on threads, including the one I own, should be treated with a very very grain of salt. Ultimately value in a share is derived on taking the mine to production yourself, but if taken out by say Albermale/WES in the interim well so be it. Waiting to be taken over and not having a mining focus (i.e. been that is a we will mine this thing ourselves mentality) will not optimise shareholder value.

I always feel the best course of action in an investment sense is does the company have the resource and management to take this too mining, not well lets just wait for a takeover mentality. I personally feel LTR has the resource and management so it goes back to the mining plan for ensuring that teh project is viable (and one of the key issues to address is the overburden which can be addressed as I posted in teh past by teh way teh pit is designed as the ore grade is very good here given the low deleterious elements here IMO). Refer - Post #: 40269530 and Post #: 40286508

All IMO IMO