Morning all,
In lieu of the 29% rise in Chinese SC6 spot prices over the last month, I've updated the below
Manono - Price & Cost Sensitivities table to reflect a dozen or so possible to realistic outcomes from here on, as well as updating the accompanying key variables and assumptions table.
A few key key points to the below:
1. SP assumptions (based on EPS) have been converted from USD into Aussie dollars, based on the current exchange rate.
2. Current table assumes that AVZ will increase their stake in Dathcom to 90% (purchasing a further 15% from Comminiere)
3. Current table / assumed equity component allows for up to 1.2 billion shares to be issued between FID and first production at an average price of 25c per share (conservative price IMO given what's to come both internally and externally), bringing the total no. shares on issue (SOI) to ~4.2billion.
All in all, can confidently say that the price assumptions for SC6 in the April 2020 DFS are already conservative, given that today's SC6 spot price of US$700 (upper range) is above the US$673p/t DFS estimate, which is btw averaged over the current 20-year LOM.
Based on the above SOI assumptions above, current DFS estimates (soon to be revised) and once AVZ enters production, AVZ should be trading somewhere between
$1.23 (P/E 23)
- $2.61 (P/E 49) IMO - refer to Case 1 in the table below, but obviously dependent on the P/E it attracts at that time.
However, IMO my 5.3c earnings estimate in Case 1 is extremely conservative, as it does not include a) probable discount to the standard rate card costs for transportation b) excludes any VAT refund/rebate that may be applied after SEZ terms have been finalised and c) other efficiencies/improvements/savings that have been mentioned in previous posts, some of which are expected to be tabled in the upcoming optimised DFS.
However, if we dare to assume a 100% VAT refund (even for the first few years), a $90/t average discount to standard Transport rate card costs, and assume a USD$873 SC6 price by the time AVZ enters production - refer to Case 3, then AVZ could be trading anywhere between
$2.44 and $5.20 IMO.
View attachment 3083114View attachment 3083117CURRENT SNAPSHOT & DEVELOPMENT PEER COMPARISONView attachment 3083153As you can see, AVZ still trading below its 2017 valuation (both relative and Market Cap. wise), a 45% discount to it's current NPV, and at a MASSIVE discount relative to hard rock development peers on an EV/t Li20 basis. This is despite AVZ only recently confirming a commitment of 540,000t of SC6 from major OT partners. This commitment would normally be considered as 'off the charts' for any existing spodumene producer, however for a company that is still in development, such a large feat is practically unheard of. Yet AVZ is STILL valued at a whopping 87% to its development peers!! Crazy stuff IMO.
AN EVOLUTION OF VALUATIONS THAT FURTHER HIGHLIGHTS THE INCREASING DISCONNECT BETWEEN AVZ AND ITS HARD ROCK DEVELOPMENT PEERSView attachment 3083159LITHIUM ETF + 45 LITHIUM STOCKS - 12 MONTH PERFORMANCEView attachment 3083168AVZ vs XSO vs NASDAQ vs 3x HARD ROCK DEVELOPMENT PEERS - MONTHLY HA (JAPANESE AVERAGE) CHARTSView attachment 3083171AVZ 4 HOUR CHART SINCE FIRST OFFTAKE ANNOUNCED - 3 MONTH (~60 trading days) CHANNEL FORMATION. Human body (midsection with added head and legs
) reversal?
View attachment 3083186AVZ SP TARGET CATALYSTS: APRIL 2021 TO FIRST PRODUCTION View attachment 3083210GLTA
Cheers
Elpha
p.s. with $7.1m est. cash at bank as at 31st March, there doesn't appear to be any need for an equity raise before FID (especially at or below the current SP - see below). There's also 79,333,335 unlisted options at 6c (~$4.8m) still to be converted over the next 12 months, some of which I expect will be converted at some point during the current quarter.
View attachment 3083252p.s.s. the ludicrous country risk discount currently being applied to the Manono project (& likely other unfunded development projects in the DRC) will contract and begin to work in AVZ's favour i.e. once a) AVZ confirms project finance IMO and b) The DRC is recognised globally as the No.1 destination for battery raw materials - at which time it's status and prosperity (especially under Tshisikedi) will grow immeasurably this decade.
View attachment 3083366Country Risk Discount? 87% (lol) will become more like 15-25% in due course, still conservative given that 10% is an official reference.
View attachment 3083333
