In the last couple of weeks we have had the NT minister for...

In the last couple of weeks we have had the NT minister for primary industry and resources (Kirby) comment on mines to be opened in the NT, and the Chief minister (Gunner) comment on CXO and it being expected to be in production by the end of this year - starting to get some preliminary announcements out of government aren’t we? As is the usual case, politicians like to elude to upcoming announcements before they make them, especially when it could be on potentially controversial issues. We have seen multiple hints now from a few sources. Yesterday we saw a large buy on close, which is either someone knowing more than we do, or perhaps someone picking up on the preliminary messaging out of the NT government and figuring that CXO is a good bet now. Announcement next week?

Someone posted on here recently that they had a friend that would not invest in CXO because of the short mine life....this provides some insight into what some investors are looking for. It would be interesting to know what that person thinks is a more appropriate mine life before they would invest. I am in CXO because whilst the figures now suggest 3.5yrs, I am confident that this figure is only going to grow, and I would rather be in before a longer mine life is announced than having to pay more for the stock after it is announced, especially as the writing appears to be on the wall (so to speak). I am taking all the risk early in this investment, but all the signs are starting to point to that risk diminishing as now even government is talking about our project.

We saw this week that RIO is getting into lithium and renewables, and I think i read somewhere that BHP will also - when the big players finally decide to get involved, you can assured that lithium 2.0 is beginning. There was an article in the AFR this morning about Albemarle seeing a positive future for lithium prices starting later this year and some comments about the limited amount of supply that this being produced at the moment on the back of the lithium slowdown. This lack of supply will likely turn into increased demand towards the end of this year and this should put some emphasis on price growth.....just about the time CXO hopefully will be nearing production - hopefully this means lucky us!

I ran some Price/Earnings numbers this morning. From what I could work out, the average P/E multiple of mining/resource companies is about 10, but I ran some scenarios from a P/E of 5 up to 15. I based it on nameplate production of 166,000,000 AUD (110,000,000 US) per year, and ran the numbers based on both 800,000,000 SOI (current) and 1,200,000,000 (allowing for additional shares to be issued later). Here’s some projections:

SOI: 800,000,000
P/E multiple: 5 - SP $1.03
P/E multiple: 7.5 - SP $1.55
P/E multiple 10 - SP $2.07
P/E Multiple 15 - SP $3.11

SOI: 1,200,000,000
P/E multiple: 5 - SP $0.69
P/E multiple: 7.5 - SP $1.03
P/E multiple: 10 - SP $1.38
P/E multiple: 15 - SP $2.075

Now this exercise is purely academic prior to actually reaching nameplate, and obviously assumes a more positive sentiment in the global market, but it is worth remembering that the 166m revenue figure is based on approx $600 per tonne, the reality over the next few years is that it may be more than that. The potential is amazing, but what of the reality?