Fundamentals 2024

It's been a while since we've seen a fundamentals post from back in the 2016/7 days so I thought I'd give it a go.

Firstly, this is not financial or investment advice it's simply my take on the current situation and you should always dyor and trust no one including me.

A lot of things have changed in regards to both the macro environment and the Company.

Macro Environment
We've been through two Lithium cycles so far and looking like turning into the third over the coming years. My understanding and outlook has changed due to that experience and the following is my take, some things well known and some things learnt, on what's important now.

• Lithium goes through cycles like any commodity and its important that an operating Company's cost structure can survive the lows or a startup project has incentive value at the lows.
• The low will generally occur when demand starts to outpace supply at a price that supports incentive for ROI of expansion or new projects. That is - the cost curve is king.
• Brine is cheaper to produce than spodumene in almost all cases. That means brine performs better in the lows of the cycle and brine can survive where many spodumene producers will come offline. That is - spodumene producers coming offline in the low cycles will lead to the return of demand outstripping supply.
• During the highs of the cycle many higher costs projects will come on line or start up however it would be unwise to hold them during the low of the cycle.
• As of the last cycle, China has implemented a higher cost supply chain (DSO and/or Lepidolite) that can be turned on to limit the price. That is - we will probably never see the highs of the last cycle again as China can mitigate it. Albeit at a higher price than brine and/or spodumene.
• There is no shortage of end product demand. Both EV's and energy storage requirements are increasing YOY. That increase may taper as time marches on but its still very healthy. e.g EV's currently at 25-30% YOY which is still fantastice growth.
• The supply chain of EV's has the potential to glut in many places for example batteries. So we need to monitor more than just the end product.
• European and the major Western OEMs are playing catch up and are happy to run the declining demand problem. They don't have a demand problem they have a price problem. Their unskilled labour cost is too high.

My Investment Thesis after two Li Carbonate cycles

• I don't look at DSO or Lepidolite. That's is - they are stop gap measures.
• For the long term I look for the cheapest AISC. That is brine then the lowest ASIC spodumene below new project incentive price.
• For a swing trade I look at higher cost projects being brought online during the highs. That is - I watch the Li carbonate v's AISC of such projects like a hawk and try not to hold through a low cycle. Unless I hate money.

AGY
AGY as it turns out, by goodluck or good management, suites the current macro. It's a brine project in a low cost environment i.e Argentina. So to me, it fits my investment thesis. As a bonus it's already completed a capital raise to make itself self sustaining until the larger commercial project is funded and even has the option of saving cash and self funding! A lot to like.

Valuations
The following are my calculations only and may be incorrect. My assumptions are my own and people are free to use their own for their own decisions. I have tried to cover what I think is the range of values that could apply to AGY now and going forward.

The following is my work using my assumptions. Happy to debate errors but not debating assumptions. Feel free to use your own.




Feel free to add to the discussion with your own input and calculations