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mondyinvest

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26/03/24

15:21

Post #: 73066060
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Originally posted by HOOPZ: ↑

Aside from not deducting interest before calculating tax, you have still neglected to include the depreciation benefits which are particularly favourable in Argentina. Argentina provides accelerated depreciation rates for mining activity allowing plant (which includes wells and ponds) and equipment to be depreciated within 3 years.
In the model below I have used a 20% depreciation rate. The other thing I have done is use the 79% chloride payability that is now being used in the Phase 2 DFS. Obviously, they have had more discussions (between release of the Phase 1 and Phase 2 DFS) with respect to payability which has increased their confidence of achieving a higher rate. So using your spot price I have a FCF of over US$25m which would see the loan paid off in 3.46 years. Using US$19.5k LCE and a slightly less aggressive interest rate (of 12%) would see the loan paid off in a little over 2 years.

Lastly, a temporary spike in spot price as the pricing pendulum swings back in the other direction could see the loan paid off in less than a year (e.g. US$40k LCE - which is certainly possible, given the rate of EV adoption and how immature the industry is). I certainly look forward to seeing your spot price valuations (which you have taken to like a duck to water) when we are on the other side of the cycle.

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1. The post you are replying to does deduct interest before tax.

2. My table also includes a variety of LCE price assumptions, not just spot - in fact, I include everything from the absolute bears (Goldman Sachs at US$10k/t) to the absolute bulls (Galan at US$28k/t) to show a fair range. The only price assumption I could find above Galan was LKE at US$33k/t and I'm not sure anyone is taking that seriously...

3. I see you have arrived at a P/E of 10... for a small, single-asset producer in Argentina who, assuming they get the finance, will be carrying debt greater than their current market cap. Of all the things one could pick apart in anybody's valuation, a P/E figure is probably the one that should get by far the most scrutiny, but almost never does. Pick a P/E high enough and you're guaranteed to get a lot of positive reactions to your post

4. There's a lot of focus on depreciation, but this does not change the EV/EBITDA multiple which is the main point of the calcuations.

Last edited by mondyinvest: 26/03/24

GLN Price at posting: 38.0¢ Sentiment: None Disclosure: Not Held
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0 Great analysis

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