Our DSO Operation

I don't think the market has really woken up to what we're sitting on yet.

Even without the headline finds some of us *may* have expected last year, we will be sitting on a hugely profitable mining operation within 2 years. Not to mention the possibility of processing locally (my preferred route, once we've got some cashflow going), and adding more value.

I've been reading up a bit on DSO. A few Analyst reports (not bang up to date) on DSO to digest (paid for or otherwise):

http://www.pilbaraminerals.com.au/site/PDF/1074_0/HartleysSignsofftakeforDSO14minLi2Oproduct
http://www.galaxyresources.com.au/Investor/16062017Canaccord.pdf

(Disclosure - I no longer hold either of the above companies).

"PLS has signed an offtake for DSO spodumene (1.5% Li2O) for 1.9Mt over two years."

"Based on a benchmark 5.5% spodumene price of US$600, we estimate that the DSO product could sell for US$100-130/t (on a lithium unit equivalence price, US$600/t equates to US$120/t including estimated recovery factors). This does not assume much of a penalty discount for the low grade, which we believe is correct based on current strong demand. We estimate that the value of the DSO is ~US$190m-250m of revenue, with back-of-the-envelope costs of ~$95m (~US$50/t)."

We have a deal for 1Mt from Grants alone.

I believe our costs will be well below PLS's, given our proximity to Darwin. But going by Hartley's conservative numbers, we're already sitting on roughly $100m revenue, with costs of around $50m say.

That gives us $50m profit, within a few years.

Yahua have an option for another 1Mt I seem to recall. So we can perhaps confidently double that profit figure looking at our geology.

We have an upgrade of the Grants resource on the way, and a maiden resource estimate for BP33. Plus dozens of other hot targets.

I'll be astounded if we don't have a minimum of a total 5-10Mt resource defined (across multiple close by tenements) by the end of this year.

Our Market Cap is < 30m.

Am I, or the market missing something?

The GXY report is a little outdated and gives a more pessimistic outlook. It suggests that the maximum price paid for DSO ex-China, would be around US$54 /t. Our extraction / processing (simply crushing as far as I understand) costs will be way under that I'm sure.

The DFS will be interesting. My guess is we'll be sitting on a net profit of well over $50m for our known reserves, let alone factoring our potential.

If anyone has any other back of envelope numbers, I'd be interested to see them.

CXO are surely not going to remain flying under the radar for much longer. I'm looking forward to the coming next few months in particular. We should see the SP surge.