What’s PLS worth?
As per my post on the daily SP chatter string, I’ve started a new string for valuation/analysis/critique. Hopefully this string can be more dedicated to fundamental analysis of PLS rather than wild speculation.
IMO there’s a lot I like PLS … it’s a true Tier 1 asset (large asset, projected to be at sharp end for cost), leveraged to growth of EV and I also like the relationship/options with Posco. However, being in commissioning/construction mode and producing a new mineral with volatile pricing – it’s at the high end of the risk spectrum and SP volitivity. So, what’s it worth today?
Market Analysts:
- ThompsonReuters consensus 12 month SP target is $1.02 across 7 analysts.
- High$1.20 (unchanged since Aug18); Low $0.70.
- 5 of the 7 analysts have downgraded the SP target since start Apr19
Bringing those 12 month targets back to SP as of today, the analysts have an averagevalue of ~90c.
I prefer to try to understand the range of values based on key risks. IMO the biggest of these are:
- SP6 price received
- SP6 yield (driving both costs/dmt and production tonnes)
- Time frame for existing/new production to achieve design performance
Potential CAPEX blowouts and other OPEX are minor risks IMO (ie. I think these can be well managed by KB and his team). On the upside, Posco JV and Stage 3 could add value, but as I said on the other string, there are too few details to estimate value IMO. If others have methods of valuing these (as opposed to just speculating what they’re worth) – perhaps they can add them to the string.
I’ve therefore created a matrix of values based on:
- Operating cost basis uses latest Stage 3 advice (US$290/t at 75% yield). This is much higher than the Stage 1 LOM figure (US$207/t) but PLS have since adjusted down the yield and possibly other components. Therefore, US$290 may be a tad conservative (but Stage 1 Feas too bullish).
- CashOPEX components affected by yield have been scaled (ie. mining &processing) those unaffected left as per Stage 3 advice (eg. Royalties, nativetitle)
- Simple 10x Net Operating Cash Flow valuation model at time of performance metric.
- Future performance discounted back to Jun19 at 12%pa.
Results below. I’ve included the Stage 1 only numbers to illustrate the importance of getting to design yield (15-20c worth in SP terms). Seems to me the analysts (on average) are projecting either much lower SP6 prices than PLS is currently achieving and/or a lack of confidence in PLS achieving design yield.
As a reference point, PLS based their Stage 1 Feasibility Study on a long term SP6 price of onlyUS$537/t.
Have others done similar price/yield/value analysis? Thoughts?
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What’s PLS worth?As per my post on the daily SP chatter string,...
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$4.09 |
Change
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Mkt cap ! $12.27B |
Open | High | Low | Value | Volume |
$4.08 | $4.15 | $4.07 | $13.79M | 3.360M |
Buyers (Bids)
No. | Vol. | Price($) |
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24 | 94618 | $4.08 |
Sellers (Offers)
Price($) | Vol. | No. |
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$4.09 | 24044 | 10 |
View Market Depth
No. | Vol. | Price($) |
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8 | 41864 | 4.090 |
23 | 131978 | 4.080 |
16 | 94085 | 4.070 |
13 | 69939 | 4.060 |
14 | 110581 | 4.050 |
Price($) | Vol. | No. |
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4.100 | 142280 | 33 |
4.110 | 107449 | 22 |
4.120 | 173953 | 22 |
4.130 | 133493 | 22 |
4.140 | 153890 | 17 |
Last trade - 10.34am 14/05/2024 (20 minute delay) ? |
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Last
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Change
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Last updated 10.52am 14/05/2024 ? |
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MAGNUM MINING AND EXPLORATION LIMITED
Neil Goodman, MD
Neil Goodman
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