Sharing my numbers here. Of course
DYOR and make your own decisions.
I think the most recent broker price target we have available is Ballieau Holst @ $0.59 which incorporates upside from Stage 2 but does not give a clear view beyond 2020 ( for their report go here:
https://alturamining.com/wp-content/uploads/2018/05/AJM_02may18.pdf ).
Lots of assumptions below. Of course actual share price trajectory will depend on the company successfully implementing their development and marketing strategy. Plus there are all the execution risks to do with putting projects into production.
In summary the targets I have come up with are:
- 2020 price target: $0.56 to $0.74
- 2023 price target: $0.64 to $0.85 ( Stage 2 fully operating and all debt paid off )
Also interesting that my 2020 price target aligns well with the Ballieau Holst target.
Read on for an explanation for the analysis.
A key thing here is that we don't yet have a decision to mine for Stage 2. This will need to be underpinned by Binding Offtakes to cover the majority of Stage 2 production. If Stage 2 occurs in the timeframe indicated in the company presentation I think $0.56 to $0.74 per share is justified in the 2020 timeframe.
Assuming concentrate price and exchange rate remains constant and once debt is fully-paid down then a target range for 2023 is $0.64 to $0.85 is indicated ( at P/E 7.5 and 10.0 respectively which I think are conservative ).
Link to investor preso:
https://www.asx.com.au/asxpdf/20181121/pdf/440hgr0dh01bl8.pdf
Just discussing my assumptions first:
- I've used the fully-diluted share issue based on data in the 3B. Given they are now producing and have a track record securing finance, they may potentially be able finance Stage 2 without further dilution. Further dilution cannot be ruled out (which could affect the validity of these estimates).
- Investor preso provided a good high level view of production ramp up through 2019 and then with Stage 2 if it starts in 2020
- Indication is current price is in the USD $700 to $800/t ballpark at present ( @janeo from this post) and hence I used the midpoint which is USD $750/t. For the 5 years analysed I have assumed price remains constant ( which provides for conservative share price estimates ).
- I adjust concentrate price for 5% Mineral Royalty that needs to be paid to WA
- I assumed 10% for deductions & amortisation as a proportion of overall EBITDA
- Debt facility is priced at 14% pa and I've assumed progressive paydown of debt through to 2022 with no debt in 2023 ( see the set of 5 "Debt Outstanding" figures below )
- I've taken capital structure from the latest 3B to work out fully-diluted share issue ( therefore numbers assume no further dilution beyond known dilution )
- I think 7.5 to 10.0 is a good range for P/E. The ASX average is 15.0. I also provide share price estimates at P/E 5.0, 12.5 and 15.0 ( the upper end could easily apply if lithium sentiment improves )
Taking into account impact of interest commitments and paydown of debt we can get a bit of a picture for valuations through to 2023. But what comes next to drive earnings growth after 2023 ... ? A Stage 3? A downstream strategy? Might be a moot point if a T/O occurs down the track.
Happy for comments on the analysis.
Capital structure:
View attachment 1383727
Assumptions & estimates:
View attachment 1383733
AJM is one of the long-term lithium holdings in my super ( as AJM are in the ASX300 ). As noted earlier in this thread, I attended the investor briefing. This was to better understand their strategy and progress.
The perception I got from the discussion is that there could be offtakes in the near term (range of weeks to months) potentially supporting a decision to mine for Stage 2 in Q1 of 2019. We could see some good catalysts for the share price soon. The bot-action we have been seeing perhaps recognises this in addition to the production/cashflow growth being driven by ramp-up to nameplate for Stage 1 and $0.31 is perhaps fair value.
IMO $0.31 to $0.56 is a good range to work up through as we tick boxes towards and for Stage 2.
