AVZ (ASX) Largest lithium resource with lowest valuation 2

Originally posted by 8horse ↑

I've compiled few tables and chart, mainly based on official announcements and web info.
This post is ONLY for sharing and NOT considered as advice.
Please accept my apology if there is any error.

Disclosure: Hold AVZ shares.

1. PEER COMPARISON:

Currently, AVZ's market cap is $291m, fully diluted market cap is $371m, with estimated net cash of $15m, fully funded for next drilling program, initial JORC resource is scheduled in March 2018 quarter.
AVZ's EXPLORATION TARGETED attributable lithium recourse is around 19.7Mt LCE using the middle range, where the total JORC compliant lithium resources for other peers listed (BGS, EMH, KDR, PLS, AJM & GXY) are 15.61Mt LCE.

View attachment 785034

1.1. PEER COMPARISON - Largest Lithium Deposit (However AVZ still needs to be proved)

My chart has already taken ownership into account, ball size reflects attributable LCE tons.

View attachment 785043

1.2. PEER COMPARISON - Lowest Valuation
As illustrated from the following chart, EV/Resource for AVZ exploration targeted attributable lithium resource is the Lowest, currently sitting at $17/t.

View attachment 785052

2. POTENTIAL INVESTMENT/TAKEOVER & OFFTAKE

AVZ's advisor, Michael Langford's team, AirGuide, seems have been meeting with Chinese companies I listed in the following table.
View attachment 785055
Sourced: Internet.

3. RISKS TO BE CONSIDERED - Early Stage without JORC & Location

Courtesy to fellow post, spade_of_aces for providing the following chart.
Mining juniors with huge resources, usually have a stellar run during early stages before commencement of production.

In late 2014, PLS released outstanding drilling results as follows:
View attachment 785079

Comparing with AVZ's recent drilling results:
- MO17DD001: 235m @ 1.66% Li2O & 1001ppm Sn (24.5m - 263.9m)
- MO17DD002: 202.8m @ 1.57% Li2O & 1078ppm Sn (65.5m - 268.3m)
- MO17DD007: 250.9m @ 1.48% Li2O & 913ppm Sn (1.9m - 252.8m) including 97.85m @ 1.75% Li2O & 901ppm Sn

View attachment 785058

PLS, resource started from, 50-60Mt @1.5%, then upgraded to 80Mt @1.25% then targeted 100-110Mt, final JORC 128Mt @1.25%.
Another example, is BGS, initial exploration target was very low, final JORC resource is much higher.
I believe AVZ's current exploration target for Manono project is conservative, as someone pointed out, it could be reaching 2 billion tons. So I think exploration target resource, overestimation risk is low.

LOCATION - SOVEREIGN RISK:

Re Infrastructure:

AVZ's partners, Dathomir and Cominiere have agreed that Dathomir will secure up
to USD45M funding for the rehabilitation of the Piana Mwanga hydroelectric power station.

Dathomir has agreed that it will secure up to an estimated USD300 million for the rehabilitation and rebuilding of the road from Lubumbashi to Manono for heavy truck haulage.

4. VALUATION FOR EXERCISE ONLY
Seekalpha's article was written before the upgrade of the exploration target to 1Bt- 1.2Bt @ 1.25% -1.5% Li2O.
Estimated fair value could be anywhere between A$1.33 and A$13.4 per share for 800Mt @1% -1.5% Li2O.

https://seekingalpha.com/article/4108404-can-congo-become-saudi-arabia-lithium?page=2

5. MY PERSONAL TAKE

TianQi Lithium acquired Talison (100%) for total about CNY5b (~A$1b) in 2012 before lithium boom, then sold 49% to Rockwood for US$475m; (Greenbushes deposit:118.5Mt @2.4% Li2O - 6.1Mt LCE)

AVZ's Manono deposit exploration target: 1Bt - 1.2Bt @1.25% - 1.5% Li2O (AVZ's shared mid figure: ~19.65Mt LCE, Three times of Greenbushes'.

Lithium price is up +300% since 2012.
Based on TianQi Lithium acquisition of Talison/Greenbushes depoisit in WA, for $1b in 2012,
AVZ's attributable Exploration targeted lithium resource is three times of Greenbushes',
Theoretically, $1b (TianQi Lithium paid) x 3 times deposit x 4 (300% increase in lithium price 2012-2017) = $12b,
then Discounted for RISK factor ratio (Early exploration stage, country risk)
- 95% discount for risk = 27c per share
- 90% discount for risk = 54c per share

My first version (please note the typo for quoted price 13.5c):
https://hotcopper.com.au/threads/la...uation.3763359/?post_id=27989385#.WeqIw8eg_tQ

ALL IMO, DYOR & GLTA

Expand

thanks @8horse for putting in the effort with another great post,

Question, ................ is your "Discount for risk" @ 95% and 90% , an extreme estimation of discount?
as i would have thought that the investment already in DRC by the Chinese would bring this "risk"down considerably,
i understand the Ëarly exploration stage", but again, AVZ are running off the back of validated historical data, ( brownfields stage ) backed up by the recent 7 drill holes,

Again just wanting to understand why you feel the 95-90% Discount for risk is validated in an estimation of share price,
Thnx again, ............ ur posts are valued by all,