PFS2 Valuation

Hi All,

With PFS2 for Goulamina due this coming quarter I thought it would be a good time to reopen discussions about possible project NPV and intrinsic shareholder value. Welcome your comments/feedback. The below NPV calculations relate to Goulamina only - don't forget the gold!

Key Assumptions;
-2 MTPA throughput for 20 years (ie. 40 MT resource) at 1.39% Li2O grade (from PFS1) = 374 kT per annum production of 6% spodumene concentrate.
-Offtakes at $US 600/t spod concentrate.
-All in operating costs of $US 300/t spod concentrate.
-Initial capex of $US 126M (from PFS1 for 2 MTPA plant).
-Sustaining capex of $US 2.6M per annum (from PFS1).
-60:40 debt/equity ratio to fund initial capex (assume 40% equity funded at $AUD 1/share).
-FX USD/AUD of 0.75.
-Company tax rate of 25%.
-Discount rate 10%.

Results;
-Post tax NPV in today's terms (2018) equivalent to $AUD 681M - NICE!
-Assuming 312M fully diluted shares on issue (existing 245M + 67M from funding initial capex at $1/share) means intrinsic shareholder value is currently $AUD 2.18 per share; a 485% discount on today's price.
-Project IRR of 108%.

Comments;
-Post tax NPV in 2020 terms is $AUD 825M, equivalent to $AUD 2.65 per share.
-Assumptions used for analysis are CONSERVATIVE. Particularly before DFS there is definite upside on C1 costs (could use $275/t at this stage), offtake price (currently around $900/t), feed Li2O grades (1.5%+ for JORC) and with our monster resource we'll likely expand to 4 MTPA (or even go 4 MTPA at start). Plus there's the option for a lithium carbonate plant as per PFS1. Plus I haven't factored in reduction in cost for initial/sustaining capital from PFS1, considered depreciation/amortisation before applying tax rate etc. etc.
-For example assuming 2 MTPA at $900/t offtake or 4 MTPA at $600/t offtake doubles our post tax NPV to roughly $AUD 1.5B post tax, whereby we would be approaching $5/share intrinsic value.

Overall this shows we have HUGE HUGE upside and this is referring to the Goulamina Lithium project only, we've got the intrinsic value of the gold too.. Welcome any comments/queries/iterations you'd like to see.

Cheers,
dgdgdm.