my opinion is, that three events clearly have to be fulfilled here in order to fundamentally underpin this increase.
1. the dd from glencore must be completed positively. without a positive conclusion of the dd it will be difficult to obtain offtake financing. the mgmt has communicated that there are several actors who have also expressed interest. but are they still willing to enter as “2nd choice” after a negative signal was sent from glencore?
2. an export permit should be issued before 3.
3. after an export permit has been granted, i consider the partial or complete pre-sale in form of an offtake to another player to diversify to be much more lucrative. it is obvious that a much broader market can be addressed and that several contracts can contain different price levels. a concrete example from a "young producer" in canada shows what problems a partial sale at a price below the company's own opex will cause.
at the moment i think it is difficult to sell at market conditions. the drop height is significantly lower compared to others due to the world-class resource, the (assumed) low opex, and the modular strategy. this only gives galan an advantage if they actually sell a product. they are well on their way there.
please don't forget that there is still a long time until 2025. i sometimes have the thought that some people have not yet prepared themselves for the pain that may still come. in some posts i notice that euphoria is greater than rational concentration on fundamental data that currently available.the market environment is a catastrophe. we are currently at a very low point in the "lassonde curve" that is often mentioned here. sp performance was also catastrophic last year.
on the other hand:
- we received two world-class studies in one year
- the announcement of an offtake with dd currently underway
- construction is in full swing. not only stage one, but also infrastructure for stage two!
- the mgmt has become significantly better when it comes to communication. they have heard the criticism from the shareholders
- they are trying everything not to dilute the value of the shareholders
- they bought shares on the market during an extremely dark phase of the sp in order to underpin their confidence in their own work
all of these points say this can be a world-class project and it is currently under construction.
below i have made some of my own assumptions about a possible future value. the assumptions are as follows:
- stage two
- 90% of 20,851tpa = 18,766tpa*
- selling price per ton 18,000 usd** - 3% royalties = 17,460 usd
- opex 3,511 usd / t + 5% recovery failure, 100 usd / t road & transport*** 50 usd / t additional g&a***
- sustaining capital / t 265 usd = aisc / t 4,102 usd
* i assume that production volumes will be lower, at least in the first few years of the ramp-up. my assumption is based on the production numbers reported in studies and the actual reported production numbers after ramp-up.
** i lowered the sales price further to demonstrate the cost-effectiveness.
*** the additional costs are based on the granting of an export permit. this will, in my opinion, cause additional costs for transport, administration and loss.
don't trust these numbers, even if they are significantly lower than if you used the actual numbers from dfs stage two. for me they serve as a guide to generate a limit buy in price through a margin of safety. as always, this does not constitute financial advice. always do your own dd!
and yes, i also have a market cap of over 1 billion usd in production. even with the significantly reduced numbers, a p/e ration of 8, newly issued shares and a discounting of the future market cap. which is completely crazy.
(20min delay)