14th December 2018 : Valuation considerations. Our current base-case valuation for European Metals is 45p/sh fully-diluted (c.A$0.79/sh) based on a risked sum-of-the-parts NAV valuation for the Cinovec project on a lithium carbonate basis. Our valuation standpoint is highly cautious at present; we use conservative modelling assumptions and risk our valuation heavily. We also present a flex case where we assume that EMH adjusts its strategy to produce a battery-market facing lithium hydroxide product. Our fully diluted risked NAV under a lithium hydroxide scenario increases to 80p/sh (A$1.40/sh). This implies EMH is trading at an undemanding 0.4x P/NAV to our base-case and 0.2x to our hydroxide scenario. Our valuation does not factor in leverage to higher lithium prices – we use $10,000/t for carbonate and $12,000/t for hydroxide. Our base case valuation at $12,000/t lithium carbonate, 1.0x NAV and 8% discount rate increases to 137p/sh, fully funded.
RIDICULOUSLY STRONG STRONG BUY
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EMH Price at posting:
36.5¢ Sentiment: Buy Disclosure: Held
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