With the recent rise in share price I have decided to do a an updated peer valuation to see what where a good place to sell may be. The share price and other parameters (Shares + options on issue, cash in bank, cash burn, resource size, etc.) change each day so I have updated my spreadsheet after a 6 month hiatus.
What is clear is there still remains a significant disconnect between FFX and its peers. I suspect this will close come closer to the record date for the demerger (and finally close on the listing of LLL).
The European mines are significantly lagging behind in terms of valuation and I think its because all the hurdles and red tape are just grinding progress to a halt, as such I have reduced the scope of the comparison to a few individuals. Enterprise valuation is accurate as of 1/4/22 (I have extrapolated out cash burn from last quarterlies).
As all the peers are now fully funded I have decided to focus in on production rate, Resources all seem to be open with the exception of CXO but that doesn't seem to be holding back their market cap. Yes the ownership of FFX and AVZ is currently higher but if we go 12 months down the track this is what they will be.
Right now we have phenomenal lithium prices of around $5,000/t spod. Is this sustainable or realistic? I'm not to say however the current breakeven price for current Lithium Hydroxide prices is around $7,500/t so I'd say it can still go up further. A Model 3 70kWh Tesla battery uses 63kg of Lithium Carbonate Li2CO3, Li2CO3 is currently $78/kg up from $15/kg last year. So the cost in a Model 3 has gone from $945 to $4,914 for the lithium alone. Ultimately this will have impact on the end price of the product and an equilibrium will be met. At current prices I'd be surprised if there isn't a lithium project on the planet which isn't profitable. It's just about how quickly supply can come online and at what rate demand grows.
If we look at spodumene prices at 50% of what there are today we get annual profit numbers (adjusted for ownership, in Aussie Dollars).
Surprisingly if we use 50% of the current spod price to look at PE Ratios CXO is trading at the same as current producer PLS. AVZ is not far behind and LTR and FFX are lagging. It's noteworthy that FFX also has its gold asset which is not included here at all.
TLDR:
Value of Lithium attributable to FFX based on peers: $3Bn or $2.61 per share
Value of Gold attributable to FFX (NPV Derived): $750Mn or $0.63 per share
Value of Cash of FFX: $120Mn or $0.10 per share
Total Value of FFX today = $3.34/share
Post demerger I suspect FFX will trade at 20% of LLL + Gold + Cash or $1.25/share. So your literally getting your LLL shares $0.07/share for free buying shares today (on a peer basis).
Goodluck all, next few months will be great, we are so undervalued that even if lithium prices drop in half our share price will still go up. Easy to see why J Capital has backed us.
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