Valuations of PLS

@Gordo7 in response to your question yesterday I have tried to pen some thoughts down. Keep in mind that the below information is quite subjective and relies on a number of assumpitons.

Assumptions:

• Resource size = 70Mt
• Grade = 1.26%
• Recovery = 77%
• 2Mtpa plant years 1 + 2
• 4Mtpa therein
• 2Mtpa = 325kt Spodumene
• 4Mtpa = 650kt Spodumene
• Initial Capex = $150m
• Additional Capex (for 4Mtpa components) = $50m
• Depreciation will be straight line over 10 years
• Cost of Production = $200/tonne
• Tech grade = 15% of production
• Tech grade sells for 67% pricing premium
• Exchange Rate = 0.75
• GLC pays $35m in full.
• Further pre-payments of $35m

Alright so I know in reality that the valuation model will be a continuous curve but I have outlined 3 discrete scenarios:

Bear Case (Probability 15%)

My bear case scenario is that LOM Spodumene price for Chemical Grade is $475. This assumes oversupply pervades in the future.
On the basis of this assumption I generate an NPV_10% Valuation of $1.32bn

If you take a simple 10x P/E ratio based on cashflows of year 3 once we reach full production, this would give a 1.95bn valuation.

Status Quo (Probability 35%)

My status quo scenario is that LOM Spodumene price for Chemical Grade is $600 (which we know has been received at the moment). This assumes a relative balance in Supply and Demand.

On the basis of this assumption I generate NPV_10% Valuation of $1.92bn

If you take a simple 10x P/E ratio based on cashflows of year 3 once we reach full production, this would give a 2.78bn valuation.

Bull Case (50% Probability)

My bull case (which is still not super bull) is that LOM Spodumene price for Chemical Grade is $700. This assumes an undersupply in Spodumene as demand is higher than expected.

On the basis of this assumption I generate NPV_10% Valuation of $2.40bn

If you take a simple 10x P/E ratio based on cashflows of year 3 once we reach full production, this would give a 3.45bn valuation.

Ok from here taking a probability based valuation I get a weighed NPV of $2.07bn. Now that is my de risked valuation.

I think the fair value risk valuation right now is about 65% of that valuation = $1.35bn. Based on current shares on issue of approx. 1.15bn
this gives a share price of $1.17

I generate the 65% risked valuation on the basis of the following events:

• 10% addition for approval of all mining licences.
• 10% for Binding Offtakes for all of our product.
• 10% for funding of the plant (probably ties into BOA’s)
• 5% for meeting construction schedule.

Due to the fact I favour probabilities towards the status quo or bull market I don’t think time to market is critical.
As I have said plenty of this is a subjective process and based on my own opinions and others may well disagree with plenty of it but there it is.