Hi dawgfather, with MC comparisons I try and stick to comparing companies within their respective groups, Explorers, Developers and Producers.
Leo is a developer and given it's in the process of building a mine, project execution is its primary risk. This is accentuated by its location, and FFX.
In the above we are halfway through development.
By execution, it needs to build and commission a plant, with a lot of the equipment coming from overseas.
It also needs to commission its logistics. Distance to port, along with a border crossing.
On the plant we have Wenbo Wang of Ganfeng, probably one of, if not the most experienced people around for spodumene flow sheets.
On the logistics DSO is the perfect opportunity to test this to the full, and Iron out any issues. I would anticipate a re rate on the first shipment leaving the port hopefully in late Q3.
There is also a slight shortfall in funds to see us through the full commissioning process, however DSO can fill this if Spod prices remain strong (north of $4000 USD T). If DSO prices is decent funding rerate.
There is also an opportunity to pre sell some spod concentrate to Ganfeng who will be gagging to get the product for their purpose built facility, if the DSO cannot fill the gap.
Would suggest an understanding of ECOWAS is good for any potential investors. What Sov Risk discount would you like to applied to your investment?
Keep in mind there are gold mines operating in Mali quite profitably. An unhedged ounce of gold from Resolute fetches a similar price to an unhedged Ounce from Newcrest. It will be the same with spod, with most companies using formulas (not disclosed by most) for their contracted pricing. Leo will not be selling Spod at a 60% discount, thats for sure.
FFX overhang is out of the companies control. With 17.6% at FFX, where it ends up is important. If a commitment for it to be distributed to FFX holders in June next year occurs I would expect a rerate.
On this point, we don't know how many FFX holders still have LLL shares. If someone gets an offer over the line accepted by enough FFX holders, this stake would be a blocking stake. Take a look at ESS to see what MIN has done for an example of what would not be good for LLL holders. If someone is seriously interested then their could well be capping occurring here. This is holding back the MC. It is a overhang regardless of what rick and Simon protest. IMO.
I would suggest research on Simon Hay's achievements at GXY and here so far to quell any worries about Managements abilities compared to FFX.
On Opex and Capex I won't say too much other than you have a good idea with Sigma, and LLL is likely going to be a lot lower.
Below is the LLL to LTR MC % since LLL listing. The average prior to the TO offer 28th March for LTR was 19.5%
As at close on Friday 12%. Did the market get LLL valuation terribly wrong before? Or will the valuation gap close?
Its already starting to close as can be seen by the chart below, since close of trade on the 28th March.
Bar another offer I would expect the ratio to return to the prior average within the next 5-6 months, if not prior. Add on top of that the logistics execution rerate and a MRE upgrade and likely 1Mtpa re rate.
I sold some LTR on the basis the valuation gap will close. So far a good move.
(20min delay)