Predictions for Leo coming out of suspension…, page-42

Worst case is surely that Leo ends up with 32% of Goulamia (with Ganfeng owning 48% and Mali 20%). Assume no compensation for Mali’s 20%.

Assume 6% spodumene price holds at current level (US$1280 according to Fastmarkets) and will remain flat in real terms. The DFS assumed an average spodumene price of US$978 per tonne, but let’s assume costs have gone up 25% since the DFS (2022). Let’s also assume no new disasters occur.

The DFS had post-tax NPV of A$4.1bn… let’s assume that holds, noting the size of Stage 2 has increased. For comparison: PLS, which is of similar scale, has an EV of over A$8bn (ie double the Goulamia NPV) at current spodumene prices.

Leo’s 32% share of the NPV is worth A$1.3bn. Taking into account PLS’s valuation, but applying a West Africa discount of 50%, Leo’s EV should be close to its share of the NPV, ie A$1.3bn = $1.08 per share… once the mine is operating successfully! Note that spodumene prices have fallen around 86% since the peak and lithium producers have fallen 40-60%.

Let’s apply a further 50% discount given the stage we’re at, which gives us a fair value share price of 54c today. As we get into production Leo should get back over $1 and if spodumene prices recover a multiple of that.

Please feel free to attack or comment on my assumptions and calculations.

Links:
https://www.fastmarkets.com/insights/falling-spodumene-prices-pressure-pilbara-minerals-quarterly-revenue/
https://minedocs.com/22/Goulamina-FS-12062021.pdf