Hi Bombers,
Thanks for your analysis here. My previous calculations for the Chloride path were based on lithium content (expressed as LCE) for both volume and pricing (assuming 75% payability) so having some more specifics as to what the actual volume and pricing will look like in Chloride terms is very helpful.
If I use your numbers to recalculate NPV and free cash flow (FCF) I get the following:
1) Post Tax
NPV in AUD:
$13.6 billion2) Post Tax Yearly
FCF in AUD:
$1.4 billionHere I used the following assumptions:
1) 75ktpa LiCl @ $22,400 US/t
2) $1,250 US/t Opex
3) $329m US Capex - this is 60% of the capex from the HMW PEA (JP again mentioned a 40% reduction in capex for the Chloride path in the Joe Lowry Podcast @ 10:41 mark). I have then adjusted this number upwards for the additional production output (i.e. moving from 20 to 25ktpa on an LCE basis), while assuming zero economies of scale.
4) 0.70 Exchange Rate; Royalties 3%; Tax Rate 35%; Discount Rate 8%
These numbers are useful for understanding what the valuation might look like if pricing remains at these nose bleed levels for the next few years. However, the DFS and therefore the company valuations leading into the production phase will be based on long term forecast pricing (which continues to move upwards, day by day it seems). Given that the current long term price forecasts are about one third of the current spot price I have taken your $22,400 US/t Chloride price and divided by 3 to get a potential long term price of $7,467 US/t that could be used in a DFS.
So using the same assumptions mentioned above for capex, opex, etc but with the
long term Chloride pricing of $7,467 US/t I get the following:
1) Post Tax
NPV in AUD:
$3.64 billion2) Post Tax Yearly
FCF in AUD:
$416 millionIf I plug these figures into my valuation model I get the following:
Note: I have reduced the range of PE multiples I am using for the production phase valuation to reflect a less technically complex/niche chemical product.So the above shows what the valuation roadmap might look like as we move towards production. However, once we are in production the valuation will not be based on the long term pricing in the DFS, it will be based on the prevailing pricing at the time (combined with future pricing expectations). So going back to your original Chloride pricing of $22,400 US/t (which reflects the current situation) that would give us an "in production" valuation which looks like this:
Note: I have highlighted the row associated with a 50% capex equity raise at a share price of $3.50 - which aligns with the DFS based valuation above (i.e. the target share price after the DFS is released and offtakes are obtained BUT before financing is acquired).Basically, when it comes to valuing a company in production the DFS and NPV figures becomes irrelevant, and the valuation is based on the post tax free cash flow (or earnings) and applying a suitable PE multiple. So the production valuation will really come down to your view of Lithium pricing in the short to medium term (long term pricing is less relevant).
Lastly, keep in mind that the dilution could be significantly lower than the 50% of capex I have specified above given that an offtake prepayment of
4 months of production would more than pay off the
entire capex for the project. With the lithium prices so high there will be lots of options as to how to raise funding for capex while minimising dilution.
ALL IMO DYOR.
(20min delay)