I like the idea of having a separate thread on valuation issues. Well done.
A few points to add …
It is clear (to me at least!) that Tier 1 spodumene mines currently have two different values. Industry participants value these quality assets at a much higher level (~60% higher) than are the public markets (ASX, NYSE etc). This is evidenced by recent transactions (Wodgina, KDR, SQM minority interest, Tianqi 50% sell down of Greenbushes to ALB). This is why PLS is exploring the funding of the balance of Stage 2 and all of Stage 3 by selling a project interest to an industry partner, rather than issuing new shares.
The point being, that if the partnering process is successfully concluded, there should be a material uplift to the value of PLS. At the current share price, PLS is valued at little more than Stage 1. A successful partnering outcome would deliver low cost funding to Stages 2 and 3, with offtake commitments and downstream investment (which reduces the PLS risk profile IMO). The valuation of PLS on the ASX will likely still be undervalued but could be materially higher than where it is today. Ofcourse you need to take a view as to whether the partnering process will be successfully concluded.
Re spod pricing – the average LOM price in the Stage 3 SS was US$765 (real, @ 0.75 exchange rate). The US$537 number is a little dated. I am assuming US$715 in my valuation (lower in next 18 months), based on a "new normal" concentrate price of US$12,000 to US$14,000 per tonne.
Recoveries (and therefore costs) and the exchange rate are the other two big variables.
AIMO
PLS Price at posting:
68.0¢ Sentiment: Buy Disclosure: Held
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