Partnership Process

Alright I have been thinking about this process a bit.

Using MIN transaction as a guide we saw ALB pay US$1.15bn for 49% of Wodgina.

Wodgina is a 260Mt deposit vs PLS at around 225Mt. Pretty similar. Both probably have further exploration success in them. Let's call that a scratch as they are both long life assets at expanded throughputs.

Wodgina grade is 1.17% and PLS 1.27%

PLS have had issues in ramping up production, it hasn't been perfect. However those issues are known. At the time of the transaction Wodgina had all that ahead of them still and therefore there own ramp up success is even less certain than PLS.

PLS have a course to fix theirs, we don't even know what issues Wodgina might have.

So all in all I would for the sake of argument call them fairly similar assets.

Now part of the deal was MIN are responsible for sole funding capex at Wodgina. So let's translate that through to PLS and say PLS are solely responsible for capex bill through to stage 2 completion and then any minority rights holder contributes on ownership basis to stage 3.

Wodgina deal was about A$3.3bn. We know ALB paid overs versus the other interested parties. What we don't know if if under bidders in the Wodgina deal offer similar what they did and lost the bid for Wodgina or if they step up to secure the asset this time. Let's say they offer 75% of what ALB did for Wodgina.

That would value the PLS transaction at A$500m for 20% up to A$1.25bn for 49%.

Even the lower end of that range would allow us to build out stage 2, and fund our share of POSCO refinery.

I would prefer we sold off more like 30% if that's the valuation metrics we use and that should just about fund us through to the completion of stage 3.

The second refinery can wait until they sort out cashflows etc and we can retain current debt to keep some leverage in the business.

Overall that would value the business at A$2.5bn on a forward looking basis that 3 stages + refinery one are largely funded (simple method rather than separating POSCO out). This leaves a lot of margin for weaker operating margins than stage 3 SS


Let's assume a further discount and we only trade at 70% of look through value. That gives us a number of $1.75bn. Or around $1.

I think reasonable conservatism in there and we are well on our way to that valuation. But the above might be the kinds of things on the mind of open short positions.

This valuation doesn't take into account any non-monetary benefits such as partners experience and leverage into downstream.