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KLL kalium lakes limited

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SO4 vs KLL and KLL vs KLL120 - A Simple Model, page-5

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aruc6393

2,540 Posts.

746

23/09/21

18:14

Post #: 56304436
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Originally posted by Bwatson: ↑

Just a simple calc based on the companies latest numbers.

At current prices both KLL and SO4 have dropped off in terms of attractiveness, SO4 much more than KLL ofcourse, but KLL too blew out on OPEX and then proposed an illogical expansion.

Overall Assumptions:
AUD at 0.73 long term.
SOP Price Steady State of 550. Not a fan of using peak prices.

SO4 Assumptions:
600 million share raise at SO4 to fund additional capex, pay of debt coupons until they ramp up.
20% risk on production at SO4 seeing they can't even get to half the rate right now.
I've assumed 50% of Cost/Tonne will still apply even if SO4 are able to cost cuts for their lowered production.
5% Royalty Rate + 1.5% Native/Land Royalties
Depreciated plant over 20 years (not a 100% on tax guidelines on this)
KLL Assumptions:
5% WA Royalty + 1.9% Owners + 1.1% Native Royalty
Cost Per Tonne of $300 US (Assume 10% Up on their 120ktpa study, unfortunately KLL have sidestepped giving updated Opex for their 100ktpa base operation).
Assume their cost increases are LOM (as per their own study), any reversal in haulage inflation is a benefit, but not counted on.
Depreciated Plant over 20 years
Assume they can reach 100% of their stated plant output, but not considering 100ktpa as guaranteed. Essentially 10% risk on production.

I'm only guessing on SO4 recapitalization details and have included a lot of risk on the production side. The 100M raise is only rumored as yet, could be much better (which would remove dilutive effect), or much worse.

Without the mooted 20ktpa expansion, will take KLL about 20 years to fully pay of the plant (keep in mind no company does this, more likely they keep debt steady with some expansions) vs pretty much never for SO4 without a cap raise, or reaching 100% production.

The cost actual we're seeing from SO4 and KLL now, makes AMN and APC's optimistic cash costs a bit suspect too, and until either SO4 and KLL come through I suspect it will be hard for anyone in the SOP space to get much progress on Financing besides maybe NAIF/Gov avenues (with a lot of DD).

I think KLL is modestly undervalued probably valuing it closer to 26-30c as it was earlier this year, but the risk of the board proposed Capex and associated raising is clearly weighing the price. This is just considering the model doesn't take into account for KLL Carnegie and the EcoMag venture which will be given some value in the SP.

Perhaps BCI, but their SOP side is the least certain seeing they'd be a trailblazer for Sea derived SOP, and their funding will be anchored by the salt business so they probably will, but not on the merit of the SOP part.

KLL vs KLL 120 (assume 200 million shares @ 0.15 to cover 66% of Capex, 15 mil extra debt).

Keen to hear any Feedback, points I may have missed, or improvements to the model.

@sevo keen for your thoughts too.

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Hi Bwatson,

Thanks for spending some time modelling future income. Looks good, but I have a few queries/comments which you may want to consider. A caveat this with the fact that I am no expert, so happy to be corrected:

Costs of goods sold looks a little high and you may be double charging costs of corporate opex, fixed corporate. 18 August 2021 announcement shows LOM Operating All In Sustaining Costs (AISC) at $375/T - this includes all mining, processing, administration, product haulage, port costs and head office corporate costs, and sustaining costs for the 120ktpa case. You may be double charging Corporate Opex and Fixed corporate? If sustaining costs are also included in the AISC then it may also be the case that you are double charging depreciation?
Life of mine is 50 years based on 18 August 2021 (you have 20 yrs)
If you are counting depreciation as an item outside of AISC, then your depreciation charge appears high at $20m pa. If the plant costs $400m, then I have a straight line depreciation of 50 years at $8m pa.
18 August 2021 announcement has average EBITDA pa as $70.7m vs your calculated EBITDA of only $34.6m, a significant difference. Perhaps the above changes may result in your calculated annual EBITDA come closer to KLL's modelled annual EBITDA?
KLL Price at posting: 21.0¢ Sentiment: Hold Disclosure: Held
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