Since the appointment of Renaissance Capital as M&A advisor with Uranium One is a strong signal that they want to buy us, I did my personal analysis of what a fair price would be to buy Prospect Resources.
I did three comparisons to find a range of a fair value for PSC, one acquisition of a lithium developer and two value comparisons with new lithium spodumene producers:
- Kidman Resources acquisition by Wesfarmers
- Pilbara Minerals spodumene producer
- Altura Mining spodumene producer
To have a transparent comparison, here are some key figures taken from our latest updatet DFS and some selling and cost prices from the lithium industry.
PSC will produce three lithium products with different OPEX and selling prices, which are averaged selling prices over the Life of Mine (LOM), taken into the latest updatet DFS from the leading independent market analysis firm Benchmark Mineral Intelligence. I have not taken into consideration our Tantalum and Caesium.
- Spodumene low iron - 173'000 tpa - 701 US$/t FOB - price factor 1 - OPEX 268 US$/t - chemical market for batteries
- Petalite low iron - 24'000 tpa - 483 US$/t FOB - price factor 0.66 - OPEX 428 US$/t - chemical market for e.g. grease
- Petalite ultra low iron - 100'000 tpa (98'000 tpa) - 894 US$/t FOB - price factor 1.61 - OPEX 458 US$/t - technical premium market for glass & ceramics
Bear in mind for our negociations with Uranium One, that prices for 6% lithium spodumene concentrate were falling since the beginning of 2018 (the same for carbonate and hydroxide) and are selling now around 400 US$/t or even slighty lower. All analysts say that the prices most probably are at the bottom now and with demand picking up again, especially from Europe, the prices should recover. Even Morgan Stanley is saying that now! Pilbara Minerals & Altura Mining OPEX are around 350 US$/t right now, these prices are not sustainable and have to rise. We are lucky that we will be the lowest cost spodumene producer worldwide and this affects us right now only indirectly. After our 18 months construction and 6 months ramping up time the prices should hopefully be at those DFS levels again.
Kidman Resources acquisition by WesfarmersThe Mt Holland Lithium project owned 50% by SQM and 50% by Wesfarmes has 189 Mt @ 1,5% Li2O (7,03 Mt LCE) and was sold to Wesfarmers from Kidman Resources in 2019 for 776 Mio. AUD (50%). The total value of the project is 1'552 Mio. AUD.
PSC Arcadia project has 37,4 Mt @ 1,22% (1,12 Mt LCE).
7,03 Mt LCE : 1,12 Mt LCE = 6,28 factor.
1'552 Mio. AUD : 6,28 = 247,13 Mio. AUD
247,13 Mio. AUD x 87% Arcadia ownership = 215,00 Mio. AUD
215 Mio. AUD would our project be worth if we would have only 6% lithium spodumene concentrate as product.
Since we have three different priced lithium products here is the maths for our project incl. our almost doubled low iron petalite recovery.
Spodumene 173'000 tpa = 58,25% of total lithium production = 125,24 Mio. AUD
Petalite low iron 24'000 tpa = 8,08% of total lithium production = 17,37 Mio. AUD x price factor 0.66 (DFS) = 11,46 Mio. AUD
Petalite ultra low iron 100'000 tpa = 33,67% of total lithium production = 72,39 Mio. AUD x price factor 1.61 (DFS) = 116,55 Mio. AUD
Additional petalite ultra low iron (~double recovery 94%) 94'000 tpa = 116,55 Mio. AUD x 0,94 recovery factor = 109,56 Mio. AUD
The total amount of our three products is
362,81 Mio. AUD which equate to a share price of
1,27 AUD.
Pilbara MineralsPilbara Minerals market capitalisation is around 778 Mio. AUD right now. Their project has 223 Mt @ 1,27% Li2O.
223 Mt : 37,4 Mt = 5,96 factor
1,27% : 1,22% = 1,04 factor
778 Mio. AUD : 5,96 factor = 130,54 Mio. AUD : 1,04 factor = 125,52 Mio. AUD x 0,87% Arcadia ownership = 109,20 Mio. AUD.
I have applied the same maths of our project proportions, like with the Kidman Resources 215 Mio. AUD, now here with the Pilbara Minerals comparison 109,20 AUD. The total amount of the four points is 184,28 Mio. AUD.
The Prospect Resources
market capitalisation in production should be around 184,28 Mio. AUD compared with the project of Pilbara Minerals with 778 Mio. AUD.
Like with the Kidman Resources acquisition, Uranium One should pay approximately a ~50% premium of the last 30-60 day volume weighted average price (vwap) / market capitalisation.
Pilbara Minerals comparison market capitalisation for PSC 184,28 Mio. AUD x 50% buyer premium =
276,42 Mio. AUD = 0,97 AUD per share.Altura MiningAltura Mining market capitalisation is around 173 Mio. AUD right now. Their project has 46 Mt @ 1,06% Li2O.
46 Mt : 37,4 Mt = 1,23 factor
1,06% : 1,22% = 0,87 factor
173 Mio. AUD : 1,23 factor = 140,65 Mio. AUD : 0,87 factor = 161,67 Mio. AUD x 0,87% Arcadia ownership = 140,65 Mio. AUD.
I have applied the same maths of our project proportions, like with the Kidman Resources 215 Mio. AUD, now here with the Altura Mining comparison 140,65 AUD. The total amount of the four points is 237,36 Mio. AUD.
The Prospect Resources
market capitalisation in production should be around 237,36 Mio. AUD compared with the project of Altura Mining with 173 Mio. AUD.
Like with the Kidman Resources acquisition, Uranium One should pay approximately a ~50% premium of the last 30-60 day volume weighted average price (vwap) / market capitalisation.
Altura Mining comparison market capitalisation for PSC 237,36 Mio. AUD x 50% buyer premium =
356,04 Mio. AUD = 1,25 AUD per share.I am well aware that this is only a comparison method!
Each project, company or acquisition is different and may have a lot of specific points to consider or that can not be compaired equaliy.
Considering that I compared a 2019 acquisition and calculated with recent market capitalisations of our peers, and is in line within the range of
0,80 - 1,31 AUD per share of the latest Pitt Street Research report, gives me a fair evidence that Uranium One should pay us within this value range.
- Kidman Resources comparison - 362,81 Mio. AUD = 1,27 AUD per share
- Pilbara Minerals comparison - 276,42 Mio. AUD = 0,97 AUD per share
- Altura Mining comparison - 356,04 Mio. AUD = 1,25 AUD per share
- Pitt Street Report - 0,80 - 1,31 AUD per share
I am very excited about the coming weeks and the next months. The acquisition could happen quick now.
Looking forward to the updated economics of our DFS regarding the two latest announcements with the almost double petalite recovery and the spodumene low iron floatation success.
Good luck to all!
And as always.
This is my personal opinion only and it is not financial advice. Do your own research.
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