General Discussion Banter GLN, page-9935

@mondyinvest , a good post to provoke commentary, like others I think its a bit of all of the above.

However couple of points need to be made at the outset in answering your question. Whether the price is fair or correct depends heavily on your time frame. As a long term resource investor I try to take a 5-7 year time frame as I know this is the required horizon to get a project to the end of the development pathway.

Your question presupposes the market is efficient and rational but often the market has a completely different time frame to me. The market is often way shortsighted ( and for that timeframe its valuation is probably correct) but I am far more patient . When viewed from my time frame but its pricing is often not rational or efficient. You try to implicitly argue a 2 year period will go pretty close to getting the valuation correct. I would argue, if it is rational and efficient its on way longer time scales than 2 years when your in junior resource explorer/developer land when again these projects take years to develop. For a normal company making earnings already and getting close to maturity I would agree with this statement on 2 years much much more though with some qualifiers still. But we are a developer that is still expanding our resource with no cashflow and in the case of greenbushes , we havent even stuck a drillbit in the ground yet. We don't even have a DFS out yet on HMW, much less really fleshed candelas out or any offtake agreements, which given we are going the chloride route , takes on much more significance as it will remove a lot of uncertainty.

What we are seeing in essence is just a form of the Lassonde curve playing out. I laugh when i come to this forum and people who are often up way more than 100 % on their initial investment ( i know this as they were posting here well over a year ago and sometimes much longer when Galan was way under a buck) bitching because its gone nowhere this year. I say so what.....? I assume people posting here are not fund manager's that have to MTM each qtr or year and one is hoping for way too much to expect this to go up in a steady linear fashion.

If you do your research and the information flow on the resource size and grade and project development keeps going in the right direction in a timely manner, and the economics continue to look encouraging, then this is what is the really important information not price action over recent months. For mine the recent announcement and resource upgrade gives me confidence the project is continuing to go in the right direction no matter the poor outcomes price wise this year. As a sidebar , this was why I thought incentivising mgt and directors based just off share price movements to the exclusion of all else is patently stupid. The macro environment remains problematic but the EV megatrend isnt going anywhere in my view either, so all the fundamentals that made this a buy for me some years back remain in place.


So on the whole I would say the price probably is about right at this point in time, given where we are in the development life cycle for these reasons ;

1) we dont have a dfs out yet. To use the language of a traditional resource project, we don't precisely know the "method of mining" yet, which a dfs fleshes and costs out . It would seem we are going the chloride first route then moving onto a carbonate Battery grade production approach. I agree with this approach but we dont know the economics here. Cost to produce in this method, capex costs, throughputs etc ? We are all guessing here on all of these. I am going to be very disappointed if this is not all addressed in the dfs when management keeps saying we are going this way forward in the short run at least.
2) related to point 1 , given we are going down the chloride path, how much are we going to sell this liquid spodumene for ? How deep is the market for this ? No one really has a clue at the moment. Again at the moment all we can do is guess . The dfs should really try and put some hard numbers on this and again I am going to be disapointed if they don't and instead use a generic long run BG carbonate model of production.
3) The proof on price will ultimately be in the pudding but and this is where an offtake agreement for this chloride is key for valuation. I agree with waiting to firm up an offtake but the reality is this is adding to uncertainty in the short term. So as we are going a slightly different route to market initially the lack of offtake is definately adding to uncertainty around what price can be achieved here ?
3) I think Jp's performance has been pretty good but the whole performance shares thing to the rest of the board was a total joke. A distraction too from the main game and not a good look to the wider market. I was intending on going to the AGM and throwing some bombs at Homsany but I had some personal and work issues that came out of left field that prevented me getting there which I regret.
4) its been a terrible year for the market , that doesn't explain direct peer comparisons but still part of the puzzle here.
5) The Argentina factor is a real factor here. A lot of institutional money looking for some lithium exposure will happy take a punt on Australian plays, which means really hard rock plays as that is all there is in Australia. Many will bork at Argentina which is not a Tier 1 jurisdiction and not likely to become a Tier 1 anytime soon.
6) The hard rock vs brine plays is also separate and complicating factor. Brine plays are really just as much a chemical refining play as a resource play although Galan may yet prove the exception to this traditional rule if they go to a chloride low processing mode of production. Brine assets take many years to develop the chemical refining side to a high level. Much higher risk than hard rock plays that basically strip mine the rock, concentrate it and whack it on a boat to China. Processing risk is almost Zero here although that said Altura still managed to F*** it up. Look at Orocobre / Galaxy ( now Ake) assets in Argentina if you want to understand the issue of the difficulty of bringing brine plays to market at a high % meeting Battery grade quality of production. There is also the issue of qualifying to specification this level of production to someone using it, which again adds much more time than a hard rock play. 10 years on and the former Ore assets are barely at 60 % meeting BG offtakes. Again this speaks to maybe the soundness of going chloride first or of course you can go the hail mary dle path of Lake, choose your risk profile here.......

Add all these factors together and hence I am not surprised at all where the price is.

However putting aside the reasons why I think it is probably fairly priced ( as a long run development play) you also have the following reason why I think it looks very cheap ;

1) ignore the development pathway and risks to becoming a long term business and just look at it as lithium assets. Look at what other similar assets sold for in the last 12 months. ie Neo lithium, Rin Con etc ( same Argentina Jurisdiction too, so country risk cant be a factor here with these comparisons ). Assets no better than we have a HMW and arguably our grade is better than both of those and they were sold for way higher price than our market cap today. Add in then Candelas and Greenbushes opportunities and the value per share looks incredibly cheap. I am first to acknowledge I have posted many times the company remains cheap and my primary reason for continuing to saying this is by way of these comparisons. Go to any premium property market or address and how often do you see House A sell for $ X and house next door that is pretty much identical sell for less than half of $ X ? Not very often. But that is what continues to be the case here with where the market cap sits. No one can seriously argue markets are rational and efficient when these facts continue to exist. Daniel talked recently in a webinar that lithium assets this year have sold for somewhere between $40-$50 USD per effective Tonne of carbonate that could be produced from that asset on an ongoing annual basis. So on that valuation metric, if HMW west can produce 30 KTPa sale prices for these sort of assets this year have been in ballpark of $1.20 BN USD, or roughly $1.50 BN AUD. Makes $ 440 M look cheap.

So that leads me to a thought experiment.........is the market right tonight our asset is worth $440 M AUD based off our closing value or would I rather hold on the probability that valuation gap closes in the next 2 years to be much closer to the $ 1.50 BN that other assets very similar to ours have sold for............knowing of course that the whole EV megatrend is probably not going anywhere in the next 1-2 years ? For mine easy decision to hold and continue to be patient.

Hope my thoughts provides some perspective here........