PAM Thread - What is the future for PAM? Is PAM the next VUL?, page-2

Sorry some formatting issues when copying from my onenote! Some words were joined together and I have no idea why.

Tried to edit it but it says 3 minutes have past so I'll paste the fixed version below.

My thoughts and observations so far. Is PAM the next VUL? Or with even better potential? There has been a lot of interest in PAM so I have been compiling my observations which helps to consolidate my thoughts on the stock. Since this is a long post, I have created a new thread. Hopefully some people find this interesting and useful. I think there is strong potential long term value in PAM, potentially similar or even more value compared to VUL when you look at everything it may have going for it.

Let me know what you think and if there is anything else to add as I'm keen to learn more. I'm sure there are many other things to consider.

My view is a buy and hold long term for the following reasons:

Near zero to zero-carbon advantage

• Geo-thermal zero carbon lithium - five special prospecting license applications which include two geothermal lithium fields. Reasonable output goal of phase 1 with "5,000 - 10,000tpa lithium carbonate" and "20,000" or more in the future which seems to be similar to Vulcan. PAM can potentially develop both geothermal lithium and lithium from lepidolite
• PAM is confident in either a near zero or zero carbon footprint - "PAM is highly confident that it can produce lithium products from lepidolite with a near zero carbon footprint, geothermal lithium provides PAM the potential to produce lithium products with a Zero Carbon Footprint."
• PAM can use power from the nearby Rajjaprabha Hydro-electric Power Station that could achieve the near zero carbon footprint for their projects which will be strong selling point for their products.
• Either a near zero or zero carbon footprint will be very attractive to PAM's future partners, manufacturers in Asia, investors and the Thailand government. Few competitors in this area have a zero or near zero carbon lithum mining.

Surfing the geo-thermal wave

• PAM seems at least 12 months behind VUL, although VUL needed time as the first mover to educate investors in Australia and make them excited about geo-thermal zero carbon lithium.
• PAM can ride the global awareness and path that VUL and Cornish Lithium has created to get more investor support and partners quickly speeding up their development.

Fast development in a low cost environment

• Located in a much lower cost environment than Vulcan (Thailand vs Germany) so has a highly competitive development and operating costs compared to other lithium competitors
• Cheap local labour costs means being able to get more developed quickly and catch up to comparative stocks like VUL over the next couple years (e.g. recent double shift drilling that was done by PAM).
• A average 800 USD per month salary for a Thailand worker and average 4000 euro (4700 USD) per month salary for a German worker. You can almost get 6 workers in Thailand for the price of 1 worker in Germany. 6 workers for the price of 1 working in double shifts can achieve a lot. A director in a video has mentioned Thailand salaries are a quarter of salaries in Australia, so it might be a 4 to 1 ratio instead if comparing with Australia.
• PAM could do the same as its competitors but at least 1/3 of the operating cost which seems to be the more realistic number based on a PAM director. They can hire more people for much less to speed up development.
• Operating in a low cost environment and low cost extraction means the company can still be profitable and protected if there is a downward movement in lithium prices in the future. Other lithium companies can have profit margins squeezed to zero if there is any impact in lithium prices.
• Less funding challenges compared to other lithium companies due to the low operating costs
• PAM has mentioned they have been working through COVID and has very little local staff impact from COVID so development speed will remain fast.
• PAM's projects are in close proximity which has allowed them to leverage their existing resources (e.g. moving drilling equipment between projects) quickly and effectively. Savings costs and speeding up the development speed of their projects.
• Director mentioned a goal of dual listing of PAM in Singapore or Europe in 2022 which will open it up to more investors and stock liquidity allowing the company to grow faster

Low cost curve advantage

• PAM only focuses on projects with a low cost curve advantage to reduce risk, improve competitiveness and with higher profits
• Positive drill results so far on the current lithium lepidolite and tungsten projects held by PAM.
• Lithium from Lepidolite is apparently one of the lowest cost sources of lithium hydroxide - lowest operating and capital expenditure.
• Director has mentioned that that it will still be profitable even with a lower quality lithium grades due to the low cost curve advantage

Planned company evolution into higher profit margin products with less risk

• PAM's goal is to create and sell higher value downstream products in their projects - moving from selling low complexity products to advanced products (i.e. advanced metal production) with higher profit margins, reducing risk and greater access to more types of customers (e.g. lithium carbonate with lithium, ammonium paratungstate with tungsten).
• They plan to grow beyond being just an exploration and mining company, to being a more profitable and diversified industrial company in the medium to long term.

Regional support and demand

• There is huge future demand locally in Thailand and support from the Thailand government as "Thailand Aiming to be 4th EV Hub in Asia - Thailand's Ministry of Industry wants to make Thailand a major EV production hub within five years, Thailand is already the leading auto manufacturer in South East Asia and the fourth largest auto manufacturer in Asia".
• The Thailand government already has an eye on PAM and will roll out their support if they are supporting their local manufacturing.
• Very easy access to the Malaysian car manufacturing market which is close to PAM's projects.
• Easy access to the large Japan, Korea and China battery and EV markets. Close distance to multiple major markets in Asia.
• More manufacturers are creating their battery and car factories in Asia for the lost cost environment
• Population in Asia is much larger than Europe so there is more potential demand for EV cars in the future especially with the Thailand government goal of being a leading EV production hub in South East Asia (4.5+ billion in Asia vs 746+ million population in Europe in 2018).

Limited Competition and potential market leader

• PAM is one of the few lithum explorers in South East Asia so there are very few potential future competitors in their region. This could set up PAM to be one of the main suppliers to this region.
• The near zero to zero-carbon advantage can make PAM the preferred supplier in Asia so manufacturers can achieve their own near zero to zero-carbon products
• Limited competition in the geothermal zero carbon lithium space so the few projects will get more focus in the future compared to the lithium projects. The others are:
  • Controlled Thermal Resources, a private company focusing on geothermal lithium in the Salton Sea in California.
  • Cornish Lithium, a private company focused on the hard rock lithium and geothermal lithium in Cornwell.
  • Vulcan Energy Resources, a public ASX company focusing on Upper Rhine Valley Germany with SP $13 to $14 in early September 2021.

Local community support

• PAM invested in local social initiatives (Village Scientist, education, health and sport) over the last few years. This reduces potential with project development issues with communities like some other lithium projects (e.g. Infinity Lithium Corporation ASX:INF)

Diversity of income

• Additional lithium and tin deposits were identified for the prospecting license applications providing diversity and potential future expansion into other lithium resources. PAM plans to have multiple lithium sources feeding into one factory
• Pan Asia Metals is much more than lithium, there have other battery and critical metals
• Potential diversified income with the Khao Soon Tungsten project - they describe it as potentially a world-class tungsten mine at the bottom of the cost curve. China supplies around 80% of Tungsten and there is interest in new sources.
• Potential diversified income discussed with tin as the area is traditionally rich with tin mining. Tin prices are higher than copper now.
• Potential diversified income with copper and gold - there was a trading halt on 13 October 2020 as the directors tried to gift the company "the Lemyethna Copper-Gold Project approximately 400km in area… in South Western Myanmar" as a pleasant surprise gift to shareholders. It was seen by the ASX as too much outside of the company direction in their first weeks of their IPO. The directors admitted it was too early and may gift the project to PAM at a more suitable date in the future. Gold and copper may be an exciting future prospect.
• Potential additional future sources of geothermal lithium as PAM is operating in an underexplored geothermal area - "PAM has been conducting additional studies to investigate potential for both geothermal and hard-rick lithium prospectivity in other areas within Thailand"
• It is too early days for PAM to mention anything about selling excess energy from their geothermal production back to the grid like VUL. VUL has this dual income advantage which investors love. It could be an option for PAM to do the same once they develop their project.
  • The prospect of geothermal energy is similar to Cornish Lithium but PAM has higher discharge temperatures of up to "78°C vs 51°C" for the Cornish project which may be a positive sign.

Strong Management and Board

• PAM's Board and management have strong experience including in South East Asia
• PAM is mainly held by the current management and initial investors who funded it with their own money. They would only make decisions with the best intentions and to make profits.
• Good management strategy and philosophy who believe in only very doable low cost curve projects that will be profitable. They have cast out many potential projects which don't fit this bill showing good judgement. That is important as a shareholder.

Future updates

• PAM expects to release further project lithium and metal acquisitions in the coming few months which the stock market will no doubt receive well - "PAM is focusing on that part of Southeast Asian tin-tungsten belt which contains lithium enriched granites and which is geothermally active, both a requirement for geothermal lithium. PAM expects to announce further project acquisitions in the coming months, which will enhance this initiative"
• Short term - Regarding new geothermal and hard-rock prospectivity in other areas of Thailand - "The Company expects to report additional opportunities with these initiatives in the near term."
• Short term - Technical and economic update on the Reung Kiet Lithium Project (lithium through lepidolite) in Q1 2022
• Medium to long term - "Pan Asia Metals has a pipeline of target opportunities which are at various stages of consideration. In the years ahead, Pan Asia Metals plans to develop its existing projects while also expanding its portfolio via targeted and value-accretive acquisitions"

Any risks?

A potential risk is if future feasibility studies show that geothermal lithium won't be possible (e.g. no scale of the resource, further testing shows low levels of lithium, etc). This might cause attention to divert away from PAM. It is still early days. However, Paul lock states:

• "The potential for a geothermal style lithium project is strong, with the underlying geothermal system similar to that of Cornish Lithium except that at Kata Thong the granite is exposed at surface with nearby geothermal discharges up to 78°C at surface and a hotter geothermal system modelled to depths down to 2km"

I do not think there is any political risk. The riots against the current PM of Thailand are mainly in the large cities like Bangkok and the mining area is quite remote. I think there is a low risk here.

It would be good to know the scope of Lithium quantity of VUL and PAM to see their outputs although this will probably take more time for them to scope. With PAM potentially finding additional new sources, I think they could have a longer term advantage. I think there is a low risk here.

Would lithium demand decrease? It doesn't seem like it, beyond the EV market there may be extra lithium needs such as with battery style grids (e.g. Victorian Big Battery grid), battery packs with solar panels in homes once the technology is mainstream, and battery grids to store solar/wind/hydro farm energy.

If PAM are able to do lithium and in good volumes, near or at zero carbon and have a similar supply of lithium, I think they have potential to be similar or bigger than VUL in the future.

What might happen next?

A question I have. If PAM only have their near zero carbon lithium products from lepidolite and the geothermal component is not possible. Would this stop you from investing into PAM? Why or Why not? What impact would this have on the SP?

It is early days for PAM and they still have a lot of work to do. Given the cheaper and quicker development of the projects in the low cost environment combined with future good news released by PAM on their lithium projects. I'm bullish on PAM that in 12 months it would have attracted as many investors, partners and support as VUL, bringing it to near where VUL is now at $10 a stock by September 2022.

PAM seems to have stronger upsides than VUL in several areas (lower cost operating environment, greater potential for diversified income, larger future market in Asia). It has strong potential to be the biggest lithium project and supplier in Asia to meet their massive lithium demands. The market will eventually learn about these upsides when they are substantiated with further news compared to other competitors and provide them with confidence to invest in PAM.

My guess is that PAM will take a bit of time to gain momentum in 2021 with more awareness and updates needed from the company. It will be volatile in the short term as it finds it feet but the market will eat it up eventually like VUL. But it looks positive so far and may reach a point where it goes crazy like VUL with future positive news releases where the broader market learns and gains confidence in PAM.

PAM is the Asia focused equivalent of VUL and both in the ASX so they are already being compared in news articles. Checking the prices, VUL was around 69 cents in early September 2020 and is now $13+ in September 2021 which is more than1900%+ growth. PAM was around the same SP at 68 cents on closing on Tuesday 7 September. In the long term, my view is PAM could grow larger than VUL. However, it would be interesting to see the other way. What advantages do you see VUL potentially having over PAM?

Would love to hear what you think and hope this would be a place people could add to. Anything else to add with other reasons or risks? Do you think my view of the12 month SP is too high or too low?

These are my thoughts and observations. We are all learning together. None of this is financial advice and only for discussion.

Side thoughts

• If you date a girl called Pam (Pamela), she might be a keeper just like PAM. This is not relationship advice.
• If PAM goes big and if you have a daughter in the future, you could name her Pamela and give her some PAM stocks to celebrate. This is not baby naming advice.
• I prefer Thai food over German food however that has not biased my observations of PAM and VUL. Please support both cuisines. This is not cuisine advice.

Interesting facts

• A video from a few years ago showed that PAM originally wanted to IPO in London. Luckily they decided to IPO in Australia
• Lithium is the lightest metal on Earth so you can call someone a lithium-head if they just like metal music only a little