20% MC/NPV is what it should be right now at current BFS stage.
30%-35% is after off-take agreements and financing deals.
Higher MC/NPV is at construction to production stage.
HIO is such a high quality project if you are familiar with all the supporting infrastructures that HIO is endowed with (nearby water, ports, rails, roads, power, rich mining history Broken Hill workforce, "Major Project Status" awarded by the federal government, "State Significant Development" awarded by NSW government, full support from regional Broken Hill community/council). Its product is of highest grade and lowest impurities in the world, and sits right in the centre of green steel, net zero emission movement with new steel furnaces (DRI/EAF new steel mills) and thus should command an even higher MC/NPV.
Of all the scenarios of NPVs that I have listed before, the most likely scenario IMO is 350mil tons resource utilization at long term average price of Fe62% = USD $120/ton which gives us a NPV8% of around AUD $14bil. A project with NPV8% of USD $2bil (AUD $2.7bil) is already considered as a great project within the junior mining start-up projects, let alone $8bil or $10 or $14bil.
SP at 20% MC/NPV ratio = 20% × $14bil ÷ 750mil share = $3.73. That is the sp it should be at today.
SP at 30% MC/NPV ratio = 30% × $14bil ÷ 750 mil shares = $5.60. That is the sp it should get to after off-take agreements and financing deals.
My GLN lithium stock has the main project (HMW) in Argentina (not as good as Australia in terms of sovereign risk) which has After-Tax NPV8% = USD $1.338bil = AUD $1.785bil (versus HIO's After-tax NPV8% of AUD $14bil at mid-case scenario) and GLN's MC today = $580mil (versus HIO's MC = $92mil today). 90% of GLN's MC is attributed to its main project HMW with the balance of 10% attributed to its 2nd project Candelas.
90% × $580mil ÷ AUD $1.785bil = 29% MC/NPV.
GLN and HIO have very similar milestones ahead of them in almost the same time frames:
GLN: - Highest lithium brine grade in the world: 946mg/L - Resource drilling: currently ongoing - Next resource upgrade: March-April 2022 - Pilot plant construction: March-April 2022 - BFS/DFS completion: Dec 2022 - Off-take deals expected: unknown
HIO:
- Highest iron ore concentrate grade in the world: Fe69.9% - Resource drilling: currently ongoing - Next resource upgrade: March-April 2022 - Pilot plant construction: March-April 2022 - BFS/DFS completion: Dec 2022 - Off-take deals expected: March/April 2022 onwards as in latest AGM presentation ASX announcement few weeks ago.
GLN sp went from 11c (1 year ago) to current $1.98 (today) and my maths (and a lot of research, peers comparisons,..) says it will go to at least $5-$6 by end of 2022). That is more than 5000% gain. However at current $1.98 sp, it has around 200% further gain potential towards end of 2022 while I see HIO's sp has many many times multiples of that 200% gain potential.
HIO Price at posting:
13.0¢ Sentiment: Buy Disclosure: Held
