So some of you may know I started a online spreadsheet to open source a bunch of research and collaboratively work with others to value particular sectors. I trade in and out of a bunch of the below stocks depending on their valuation compared to peers. I think everyone is coming to the realisation that there is going to be a major shortage of critical metals (lithium being one of them) and most of the lithium stocks will do very well in the long term. At any given time though some will be better value then others and its about selecting those stocks to ride the leverage. All information is referenced to its source ASX Announcement if you disagree with the information feel free to help by keeping the spreadsheet up to date with latest studies and JORC estimates so it can be compared to its peers.
Now if we look at this on face value on comparison FFX looks a little undervalued however when you look at the value of the gold they are sitting on the valuations begin to look a little silly. See a good review of the gold value here: https://hotcopper.com.au/threads/ffx-npv-calculation-morila-alone.5906758/ Even at todays gold price we should be multiples of where we are currently
*NOTE all values are for comparison purposes only, please DYOR. Valuations are done from data pulled at 9:55am, these all change on a fluid basis, so please check my excel sheet for a close to "live" valuation comparison as possible.
So now we have the company doing some "price discovery for the lithium assets", now if we want to figure out what its worth we can look at its peers. What I find funny is if we are even valued close to the average or our peers (even excluding outliers CXO and PLL) the share price target for the spin out is higher then our current Share Price.
If we base our EV (Total diluted shares + Options - Cash + Debt) compared to the total Lithium in our resource (benchmarked against peers) then we come up with a share price target of $0.67/share.
If we look at EV : total Lithium Mine LCE (The total amount of recoverable LCE in the LOM plan) then we come up with a share price target of $0.89/share.
Finally we have the EV : NPV where we would get a share price target of $0.60/share.
In any case once we undergo this "price discovery" I think we are all in for a big surprise in that the spin off will attract a significant valuation. The gold on top of that is just gravy. To be this bears many resemblances to ALK and ASM, where the Dubbo project gained no traction in the market place until it was spun out into its own company and is now valued higher then then original company.
Below is why I have excluded PLL and CXO which both have very strategic locations:
The philosophy is to imagine these mines in production as they are currently all in DFS/PFS/SS stage. In that scenario if they are doing a earn in whats the full earn in. They have all used similar pricing for their products however the devil is in the detail and not all NPV's are the same. What I have done is look at how much LCE (Lithium Carbonate Equivalent) each company has in JORC Resource (Row 15), How much LCE is recoverable in the current mine plan (Row 19) and then the NPV of the project (Row 26). I've then compared each of these metrics to the market capitalisation and EV to see which stocks are cheep and expensive compared to one another. (rows 30:41). Every stock is a buy at the right price.
Below is a link for anyone to have a play with and include their own DD. I've kept the values in the columns C:L and then the source of each of those values in cells U:AF (this is important for transparency, Reference publicly available information where you can and keep).
Obviously someone is going to go in there and destroy my sheet so I encourage you to make a copy and work locally and then message me to update the main one. It would be awesome if we could all have a play and work collaboratively.
* Identified Areas for improvement: 1) Add in cost per unit of product and annual production of product to place them on a cost curve 2) Separate out vertically integrated vs stand alone NPV's For deposits include non lithium minerals (i.e; tin, tungsten, tantalum and include them on a LCE Equivalent basis) (if someone wants to collect the conversion is easy and can be done live using googlefinance formulas) 3) Manually calculate NPV's at the same commodity prices (right now use the lithium pricing to compare how optimistic the company is too its peers and adjust NPV as appropriate)
In Summary I think conservatively our gold is worth $1+ in the next 12 months as the mill is recommissioned and fed with fresh ore. Up until this morning we were trading at the same value before it was unveiled that there was 2Moz+ of resource. Based on the above analysis, in todays environment the lithium is worth (on a peer comparison basis) $0.60 and we are currently at $0.22. GLTAL
FFX Price at posting:
21.0¢ Sentiment: Buy Disclosure: Held
(20min delay)