GXY (ASX) News: GXY COLUMN-Lithium supply pipeline is filling but will it be enough? Andy Home

Originally posted by Sukurio ↑

For my risk assessment I assume that it is possible. There are commentators out there who generally assume that no one will be able to do what they say bases on several cases where costs were underestimated and output was overestimated. But I assume they will go ahead with something. The question of most significance for me is unchanged:

Does GXY have enough cash generation from Mt Cattlin to justify a debt facility for long enough to turn SDV pilot plant into a fully operational plant? For me 'yes' is a buy and 'no' is a sell.

This news doesn't change my opinion so far.

GL

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Allow me to put some numbers to this comment:

The question is - "Is there enough to justify a debt facility to see SDV through to production"?

Assumptions:
* Facility is $300M with the rest financed by other deals. I don't think this is much of a stretch.
* Loan deposit of $60M which we should be at comfortably by next quarter, right.
* Interest rate of 9%. Noted that the current business loan interest rate is somewhere around 7.8%
* Term of 10 years.
* SDV income is not allowed to be counted.
* Free cash flow from Mt Cattlin is $5M per month for first 24 months which is about in line with several other projected project claims (assuming they all somehow come online in 2019). I think this is conservative because it assumes no ramp up of production, no increase in capture and no changes to price.
* The price is instantly adjusted as soon as new production comes online.

Standing start would be $240M to be paid for 10 years (120 Months)
Normally the repayments for this (at 9%) would be $3.05M per month. MC is turning well over 5M ATM.

I make that with monthly payments of $5M from free cash flow from MC in the first 24 Months GXY could pay $120M and would have paid $36.2M in interest leaving $156.2M to pay the rest over the remaining 96 months.

How much at that point would you need to pay per month to pay the loan off? 2.29M per month, or less than half of the profit. So the price of Spod could drop to $600 per T and GXY would still romp it in on MC alone, with zero ramp up, zero recovery improvements and zero input from SDV which is likely to have already been producing for a few years by then.

So the follow up question is "How likely is the price of spod to fall below $600/T"?

According to this:
https://www.911metallurgist.com/blog/froth-flotation-spodumene-processing-lithium-extraction
The base case is US$700/T in 2025. may not be completely accurate but as an indicator is not a bad start.

All this points to SDV sooner or later getting off the ground, (or aquifer).

and it's a decent looking prospect.

GLTA