Hi all,
Many of you may know of me via my posts over the years on the AVZ forum. Am a new FFX shareholder & decided to start buying a couple of weeks ago as I see a unique opportunity here, particularly after Ganfeng's commitment on the Lithium side and the BOD's decision to create additional value by demerging the gold and Lithium businesses. Anyhow, despite being a long time reader of this forum, am pretty sure that this is my first post on the FFX thread.
In terms of stock market opportunities, I consider myself to be a contrarian investor by nature. I like buying speculative growth stocks when they're being hammered by overly emotional investors & traders (i.e. being greedy when others are fearful) , and have little to no interest in so-called blue chip stocks (preferring property & other asset classes to provide 'safer' returns).
Concerning the current situation in Mali, it appears that the majority of ASX investors are considerably more risk averse towards increased geopolitical uncertainty in Africa than the rest of the international community, as evidenced below with FFX (-31.5% return) the worst performing mining company operating in Mali YTD (and by some margin).
Also, if there's any sign of trouble then IMO ASX investors tend to 'throw the baby out with the bathwater' and ask questions later (much like the Wall Street bipolar mentality IMO)
RSG (the only other ASX listed stock in the below chart) has performed slightly better (-24%) than FFX YTD, however it too has performed well below its internationally listed peers operating in Mali.
As you can see,
Kodal Minerals (the only other publicly listed stock with a Lithium project in Mali that I'm aware of) is the best performing stock (-0.8% YTD) out of this group of eight companies, and their predominantly English & European shareholders do not appear to be overly concerned (if at all) by the current sanctions, current spat with France & increased Russian & Chinese involvement to help provide intelligence, supplies & general security in the region.
So will mining in Mali be halted or continue unabated? Only time will tell. However, if history is anything to go by, I suspect that the greatest show in town will continue on as normal, or close thereto.
i.e. western sanctions will eventually be lifted IMO and in the meantime Mali has other allies to help with its immediate needs, a potential humanitarian disaster of considerable proportions can & should be avoided by all involved (that is why negotiations between ECOWAS and Mali's pro-mining, pro-peace, pro-employment and anti-terrorist caretakers will continue IMO), elections will be held (and a compromise on the actual date will be reached IMO), and responsible mining companies (corporate citizens) operating in Mali will continue to mine valuable resources, employ tens of thousands of locals (directly and indirectly) and continues pay billions in taxes to the state.
The FFX opportunity following a -31.5% performance YTD
At 63cps and with a
Market Cap of ~A$740m fully diluted, FFX shareholders have exposure to
1) ~A$150m cash balance as at 31st Dec
2) Ganfeng's technical expertise (this cannot be overstated IMO) and their commitment of
US$130m (~A$183m) cash payment plus
up to US$120m in debt funding as
LLL's Lithium JV partner.
3) 50% of a large Lithium development project with a current Enterprise Value of
~A$429m (attributing ~73% of FFX total Enterprise Value & as per Petra Capital estimate basis) with peak production of
880k tonnes SC6 (Top 5 global producer of SC6), an NPV of at least
A$4.1billion and a
post tax IRR of 83% .
However, given the rapid & consistent increase in SC6 price estimates due to a large structural supply deficit looming, these 2-month old NPV and IRR no.s are already too conservative IMO.
EV of A$429m represents a
64% discount to Petra Capital's
A$1.2b indicative valuation for 50% of Goulamina.
4) a large gold project with a current Enterprise Value of
A$161m (assuming ~27% of FFX's total Enterprise Value) - on track to deliver
100koz this year,
150koz next year and
200koz in 2024, and again a a
64% discount to Petra Capital's
A$450m indicative valuation for Morilla.
5) est. 2022 cash buffer of
A$60m at Morilla (assuming 97koz produced) based on an updated model from Sprott.
6) considerable
exploration upside for both Lithium and Gold (some of the biggest opportunities globally include hunting for elephant offspring (extensions) in elephant country.
7) diversification with 2x projects in separate locations (albeit both in Mali),
8) opportunity to participate in
considerable value creation (IMO)
via upcoming demerger and shareholder entitlement offer tbc.
GLTA and bring on the details of the demerger and a record date.
Cheers
Elpha
