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78.0¢ avz minerals limited

Potential Takeover Offer Price, page-91

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mistie

1,751 Posts.

1072

21/09/17

16:14

Post #: 27374514
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Originally posted by springinhetveld ↑

I wrote this earlier on an other thread here in the AVZ forum. Seems very fitting in this thread though....

A couple of years ago I learned that Morgan Stanley values early exploration lithium explorers using a value of 24$US per tonne of potential LCE "in the ground". Please note that the real value for LCE long term was about 6000$ per tonne and current spot price is approaching 20000$ per tonne. So using 24$US give a very conservative estimate!

So if we take the lower end of the current resource expectation of 1B tonnes at 1.25% we can compute the Morgan Stanley price for AVZ, and this would be as follows.
1000 MegaTonnes of 1.25% Li2O with a conversion factor of 2.47 for Li2O to LCE and 24$US per tonne, gives us: 1000 * 1.25% * 2.47 * 24 = 740 m$US.

We have to convert this to AUS$ (1:0.75) and take only our 60% stake so we get:
740 / 0.75 *60% = 590 m$AUS

So IMHO a realistic TO value for the AVZ 60% of Manono would be 590 m$AUS
This corresponds to an SP of 0.31$ for 1900m shares.

There are a couple of things I am not sure of in the above computations:
1) Should we use a recovery rate percentage? What would be a realistic figure for Manono. Guess should be similar to the one from PLS which is 58% but this is because of the Tin parts (AJM has 80%). So for this simple computation maybe 80% would be proper to value in some of the tin credits.
2) The value of 24$US is from Morgan Stanley in 2015. Might be a bit higher now.

So 1) would lower the estimate whereas 2) would increase the estimate. So I leave the estimate as it is.

My conclusion is that a realistic, but very conservative, valuation for a TO offer would be around 600m$, i.e., around 30c per share.

Of course the question here if this Morgan Stanley based approach is valid for such a monster of a resource. This resource is so large that very probable it will never be completely mined. So the true value will depend much more on the level of the annual production then the size of the resource. But I have no clue how to value that for such an early stage producer. But if we would base the value of AVZ on figures similar to PLS we would get to a 1b$ valuation (just like PLS). But that is too much for this early stage I think.

In any case not worried about the current drop in SP (got in at 2.2c anyway) this will get to 22c (my Disallowed) for sure!

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FYI

https://seekingalpha.com/article/4108404-can-congo-become-saudi-arabia-lithium

AVZ Price at posting: 9.7¢ Sentiment: Buy Disclosure: Held
6 Upvote

0 Great analysis

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