What's PLS worth?, page-76

I've referred to the S2 DFS announcement dd 3 Aug 2018 and an earlier S1 presentation dd 15 June 2017 for a refresher on a couple of key parameters.

• USD/AUD is 0.75 for both S2 and S1.
• Avg LOM realised Li 6% spod price is USD633/t CIF (S2 DFS) and USD537/t CFR (S1 preso). Bear in mind that the price difference of USD96/t include the shipping insurance component.
• Converting, avg LOM Li spod price is AUD844/t CIF (DFS) and AUD716/t CFR (preso).

Recent prod & sales update announced on 17 June 2019 provided the comparable parameters.

• Current Li 6% spod price is USD600-640/t CFR, say USD620/t CFR, which is still USD83/t higher than avg LOM realised 6% spod price in S1 preso.
• Current USD/AUD is between 0.69 to 0.70, say 0.70 to be conservative; on converting gives AUD885/t, which is AUD169/t higher than that in S1 preso

If PLS is assumed to be in a weaker position because it needs to sell excess spod stock, there is a threshold of USD83/t or AUD169/t that can be discounted before breaching the S1 key parameters. So, how weak is PLS' position?

The Mar'19 quarterly showed the following:

• Loan facility fully drawn at USD100M, which was AUD141M, but has since increased to AUD145M due to exchange rates.
• Cash availability of AUD103M and projected Jun'19 qtr cash spend of AUD85M (incl. interest servicing), leaving a balance of AUD18M, which is before accounting for sales receipts from GF and GL for the same period.
• If GF and GL sales receipts are assumed at midway of 23-45kt, or 34kt, that gives a receipt of 34,000 x AUD885/t = AUD30M.
• If the balance of 11kt spod is assumed to be sold at a discount of 13.39% to bring it down from USD620/t to USD537/t, that gives a receipt of 11,000 x 537/0.7 = AUD8.4M.
• The total cash availability at end-Jun'19 is projected as 18M + 30M + 8.4M = AUD56.4M.

Assuming that projected Sep'19 qtr cash spend is the same as Jun'19 qtr, this means that the sales receipt for Sep'19 qtr must be at least AUD29M. Is this achievable? Just looking at the reduced sales receipt from GF and GL in Jun'19 qtr, which total AUD30M, before one-off other offtake sales, my view is that it is achievable. Furthermore, the projected cash availability should buy enough time to last until end-Sep'19, being the announcement timeline for the joint-venture good news, if any.

What it means for me as an investor is that a sp of 55c is attractive, especially when compared to the last cr price of 70c and the sale of 77.6M shares to GF for 64.38c. I have topped up accordingly. All the best to other investors.