Pricing AGY, page-185

@GCar

That’s correct re using a PE. You simply can’t value a miner on earnings as resources are used over time and there is a finite life of mine. The value is always on the NPV on cashflows or NAV. You could use a PE for a diversified miner but for AGY it’s inappropriate.

@knicksafc
One way to look at valuation is to go back to the PEA which is useful. The key driver is the price of lithium, which has moved materially and changed the economics of Rincon.

I’ve been using Canaccords lithium forecasts from their excellent and detailed Lithium market research report from Feb 2021. Here’s a screenshot of their price deck, which shows material increases to the price of lithium carbonate.

You can see for South American prices a small price dip due to a supply side response but thereafter they forecast US$15k/t


So if my baseline lithium price moves higher I need to use another case from the PEA. Case vi is what I’m using


A more detailed view of that is below. The pre tax NPV increases to US$574m with a IRR (pre tax) of 71%. Anything above 30% is generally considered very strong. Anything above 40% is excellent.

It’s a bit annoying that they didn’t put a post tax NPV but I can just take off 25% (Argentina tax rate - I’m not accounting for various tax benefits or by product credits which will provide upside).

Its also worth noting they use a conservative discount rate of 10%. This discount rate will reduce as the project de-risks and project finance is implemented. This will boost the NPV. Further resource and life of mine extensions will boost the NPV too. These would be considered high probability occurrences.


So the case vi post tax NPV comes to US$430m. At a 75c exchange rate my $A NPV is $574m.

This compares to a post raise indicative market cap at 15c of $187m. I need to account for future capex which I’m estimating will come from the options and debt funding. There could be a need for another small raise to keep debt finders happy but dilution should be minimal.

So using a conservative 10% discount rate without tax credits and by product upside, the value of Rincon by itself is worth almost 3x the current SP or about 41c PS using fully diluted SOI of 1.4bn. Tonopah provides further upside but it’s hard to put a value on that now, while resource extensions will increase the NPV of Rincon. A rough guesstimate of the above probably gets me to 60c-70c pet share vs 15c now. That’s a fair risk v return.

Either way, when there is a significant gap between the intrinsic value and market value it’s generally a good way to generate returns particularly when there are material near term catalysts on the horizon.

All of this is imo and pls DYOR. Happy to be challenged or updated on any of the above assumptions. GLTAH