LRS (ASX) LRS General Discussion

Originally posted by 10X Hunter: ↑

I've spent my weekend comparing and analysing Sigma's PEA with PAC partners report to come up with my conservative predictions here. The main reason for this exercise is so we know what we can reasonably expect from LRS' upcoming PEA, at least we don't over-expect from this PEA and better assess our self-worth.
To compare an apple to an apple, as this is LRS' first version of PEA (there will be possible further upgrades and FS to update the key figures of this upcoming PEA in the future), I've used the initial version of Sigma's PEA for comparison.

I might be wrong somewhere or the information used for comparison might not be the most accurate so please provide any counter thoughts or views wherever available. Additionally, there are a few holders and brainstormers who have always provided their great input and technical analysis to LRS' progress, announcements and reports and I urge them to please provide your input if you think I've missed any key area of comparison.
Here are a few of my comparisons for discussion...

**Metallurgical Tests Comparison**
Below is a link to Sigma's Metallurgical Test Results announcement from Jan 2021.
https://ir.sigmalithiumresources.com/wp-content/uploads/2023/08/26-01-2020.pdf
The report suggests 66% to 70% recovery for 6.3mm and 10mm - 6% SC. Looking at the graph, 70% to 75% recovery was possible for 5.5% SC. To compare the recovery with LRS' tests, our tests resulted in more than 90% recoveries for 5.5% SC.
Sigma's PEA used a recovery rate of 60.4%. PAC Ps used a recovery rate of 65% for LRS which seems reasonable and conservative as compared to the actual DMS testing results. Correct me if I am wrong but I believe if we see 65% to 70% recovery rate used in the PEA, that would still be conservative.
On a side note, our higher recovery rate means we can expect a bit bigger ktpa production than Sigma's if I'm not wrong.

---------‐----------------------------------------------

**PEA Comparison (assuming LRS's PEA to consider 6.0% SC and not 5.5%)**
Below is link to Sigma's PEA announcement from Apr 2022.
https://ir.sigmalithiumresources.com/wp-content/uploads/2023/08/11-04-2022.pdf

Sigma PEA Phase 1
Strip ratio - 16.6:1
Production - 230ktpa(6.0%) or 250ktps(5.5%)
CAPEX - US$123m (AU$193m)
All in CIF China cost(OPEX) - US$463/t
Lithium Con Price - US$1954/t
After Tax IRR - 424%
After Tax Payback period - 4 months
After Tax NPV - US$1.6B ( AU$2.51B)
Discount rate - 8%
Average Annual After Tax-Free Cash Flow - US$273m (AU$428m)

Sigma PEA Phase 2
Strip ratio - 12.5:1
Production - 450ktpa(6.0%)
(given this was only PEA, no further Economic Analysis for Phase2 supplied in the announcement)

PAC Ps report Phase2 for LRS- comments in () are my assessment of PAC's figures and in comparison with Sigma, what I would actually expect as part of the upcoming PEA.

Strip ratio - 13:1
{Unless someone can justify, this figure PAC predicted can be more conservative, closer to Sigma's 16.6:1? i.e. 14.5:1 or close to give us higher OPEX}
Production - 612ktpa(5.5%)
{again, Phase 2 production of approx 350 to 500 ktpa seems more realistic to me as compared to PAC's 612ktpa}
CAPEX - US$225m (AU$353m)
{this CAPEX seems a bit low for 612ktpa but about right if we were to assume 450 to 500 ktpa production}
All in CIF China cost(OPEX) - US$175/t
{depends on strip ratio used although US$175/t seems a bit low even for a strip ratio of 13:1 as compared to Sigma's US$463/t for strip ratio of 16.6:1.}
Lithium Con Price - US$1500/t
{sounds alright, I expect PEA to have $1500 to $2000 still bit conservative for production in 2026}
Discount rate - 10%
{8 to 10% sounds right}
After Tax NPV - US$2.5B (AU$3.6B)
{a lot depends on strip ratio and hence depends on OPEX but being conservative, I can expect PEA to show NPV of AU$2.0B to $2.8B}

Of course the factors like Li price, overall market sentiment and each company's current life-cycle stage(main factor in this instance I believe) do matter a lot, however the market was pricing Sigma's MC @ US$1.58B on and around 11/04/2022 when their PEA announcement was dropped with Phase1 NPV of US$1.6B.

All my assumptions. GLTAH. DYOR.

Expand

These are good assumptions. I think the conservative range is reasonable for NPV which I'll be looking at very carefully when PEA drops.

I'd be conservative with the MC after PEA, from memory The lithium price was very different during that time for Sigma where now it's on a large decline.

TBH I don't expect much movement when PEA comes, likely even a stagnant or drop in SP as traders/placement holders wash into buying pressure. We'd see a gradual move in the time post-PEA as further institutions take long-term positions and the inevitable price of Lithium begins it's climb again.

Probably post-October as this is generally a rocky time for the broader market.

I'd say a new ATH by mid to late Q1 next year.

Until then I'll be steadily accumulating, this has $1+ all over it.

This will be life-changing for some. Even for those a little late to the party.

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0.165	1818853	22
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(20min delay)
Last 15.0¢		Change 0.000(0.00%)		Mkt cap ! $419.9M

Open	High	Low	Value	Volume
15.5¢	15.5¢	15.0¢	$780.5K	5.147M

LRS General Discussion, page-13864

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