Folks below summary of a desk note i picked up recently. It is not financial advise but sharing for information only.
Key points
Rincon Lithium Project is located in the "lithium triangle" in Salta province, northern Argentina. The project is ~150 km from Livent's Fenix lithium operations. AGY currently owns 77.5% of the Rincon Lithium Project. AGY's ownership in the project will increase to 90% once the project is advanced to the commercial stage.
Rincon Project will utilize its own proprietary chemical processing technology (developed by Pablo exclusively for the project) to produce high-purity, battery quality >99.5% Lithium Carbonate from its brine resource, with a lower environmental footprint using clean/green technology.
AGY expects to unlock the value of the project through 3 phases - includes development of the pilot plant ( stage 1), 2,000tpa operation (stage 2) and achieving 10,000tpa operation ( stage 3).The fully operational industrial-scale pilot plant (production capacity ~50tpa) has produced battery-grade quality lithium carbonate at >99.5% Li2CO3 purity, demonstrating the efficacy of AGY's proprietary lithium processing technology.
AGY has already constructed 38Ha of evaporation ponds (CAPEX of ~US$7m) that provides the required concentrated lithium brine for the entire 2,000tpa operations. These ponds were built two years ago and are now fully operational. According to the company, their current evaporating ponds have already built up sufficient concentration feedstock to support the 2000tpa operations from day one.
According to the company, the 2000tpa processing plant will be constructed in a modular process to accommodate planned expansion for an additional 10,000tpa or higher production level in the future. The company expects the timeline for construction and commissioning of the 2000tpa operation to be ~15 months, suggesting the plant will be ready for commercial production by the beginning of 2H2022.
The company has already received a 5-year non-binding offtake agreement from Mitsubishi RtM for the entire 2,000tpa production from stage 2.The company is also exploring various options of long term offtakes with project funding options (pre-payments and/or long term loans) to fund the next stages of the project expansions, with several European and Asian customers
We think the final capacity on stage 3 will be contingent upon the outcome of the offtake discussions, market conditions and government approvals. The total CAPEX requirement for the Stage 3 expansion (additional 10ktpa, which would increase the production to 12ktpa) is expected to be ~US$141m (ex. VAT), and includes the construction of ~300Ha of evaporation ponds, the process plant and associated works.
The current JORC indicated mineral resource of the Rincon Project is 245,120t of Li2CO3 up to 102.5m depth (at Li grade of 325mg/L). The company has also delineated a JORC exploration target of an additional 262,000-479,000t of Li2CO3 (Li grade between 315mg/L-325mg/L) between depth interval of 102.5m to 300m, enabling AGY to increase the production capacity further and/or increase the project mine life (at the current nameplate production)
The company has estimated the unit production cost for the 10,000tpa operation to be ~US$4,645/t. Due to limited scalability in the fixed costs, the company estimates the unit operating costs for the 2,000tpa operations to be ~$6500/t (could be lowered to US$6000/t if they can get better pricing on reagents).
We have derived a valuation of $0.31/share based on a Li2CO3 price of US$13,000/t and a discount rate of 10.5%
Key risks
Project execution risk
Lack of exploration success
Metallurgical issues
Lithium prices
Country risk
Currency risk
Expand
