@asxDragonslayerre: Post #: 73648495Nice post.Thanks for...

@asxDragonslayer
re: Post #: 73648495


Nice post.
Thanks for sharing.

I've spent some time adjusting my DCF model to accomodate the estimates recently released by the company wrt to the increased resource and potential production/LOM.

This allows evaluation of various potential scenarios, and is especially useful for understanding the sensitivity of key project metrics to factors like capex, pricing, etc.

A few scenarios summarised below.

Key inputs/assumptions/points wrt these scenarios include:

1/ The model incorporates staged expansion of production: 2ktpa --> 12ktpa --> 24ktpa

2/ The LOM is adjusted, accordingly, based on the total estimated production quantity recently announced i.e. Total LOM for these scenarios (with the staged production output) is 27 years, with total Li2CO3 product equivalent to 22 years @ 24ktpa.

3/ Stage 1: 2ktpa; ramped to 2ktpa in 2026, production of 500t in 2024 and 1500t in 2025
Opex: starts at USD$10k/t

4/ Stage 2: 10ktpa expansion; total production ramped to 12ktpa in 2029, production of 5kt in 2027 and 10kt in 2028
Capex: USD$220M + $39M contingency
Opex: Starts at USD$8k/t
Circa 2.5 years to build

5/ Stage 3: further 12ktpa expansion; total production ramped to 24ktpa in 2032, production of 16kt in 2030 and 22kt in 2031
Capex: USD$280M + $49M contingency
Opex: Starts at USD$7500/t
Circa 2.5 years to build

6/ Total Capex, as above, S2 + S3 = USD$588M (including contingency)

7/ Opex is inflated at 2% p.a.

8/ Admin and sustaining capital costs are included in the model, also inflated at 2% p.a.
(note: sustaining capital is significant, totalling over USD$250M over the LOM)

9/ Product pricing is inflated at 2% p.a.

10/ SOI increases to 1.6B i.e. circa 200M new shares are issued

11/ S2 Capex is largely funded as prepayment, with a 20% discount applied to S2 product to reflect a cost for this prepayment, until that value of product is supplied

12/ S3 Capital is treated similarly, however, this consequential "cost" could also represent a debt-funding deal or some similar arrangement.

13/ Discount rate: 8%


Some key OUTPUTS:

SCENARIO A:
["constant" product pricing USD$20k/t, inflated by 2% p.a.]
- Pre-Tax project NPV: circa USD$2.0B
- Post-Tax AGY NPV component (77.5% moving to 90% ownership): circa USD$1.2B = circa AUD$1.9B = circa AUD$1.16 per share
- EPS exceeds AUD$0.18 after 2030

SCENARIO B:
["constant" product pricing USD$25k/t, inflated by 2% p.a.]
- Pre-Tax project NPV: circa USD$3.1B
- Post-Tax AGY NPV component (77.5% moving to 90% ownership): circa USD$1.9B = circa AUD$2.9B = circa AUD$1.78 per share
- EPS exceeds AUD$0.25 after 2030

SCENARIO C:
["constant" product pricing USD$30k/t, inflated by 2% p.a.]
- Pre-Tax project NPV: circa USD$4.1B
- Post-Tax AGY NPV component (77.5% moving to 90% ownership): circa USD$2.6B = circa AUD$3.8B = circa AUD$2.39 per share
- EPS exceeds AUD$0.33 after 2030


NICE.


Some might like to use an NPV-based valuation, some prefer a P/E approach, others like some combo of the two.
(Don't forget what opportunities are presented for company growth (eg. new projects), when hundreds of millions of $$ start accumulating in the bank.)
Some even like to stick their finger in the air (or somewhere else) and invent whatever "fair value" suits their narrative.
DYOR everyone.


Note:
These are just a few scenarios based on a particular production profile, and for a specific Capex and Opex landscape.
I'll post some more scenarios when I get a chance e.g. to illustrate the likely impact of differing Capex on NPV.
I haven't triple-checked the numbers, so DYOMaths.
Oh, and if you don't like these scenarios, then build your own model and post your own findings!

Also note:
Watch the haters jump in with their comments like "so you think the Capex will be xyz" nonsense.... NO, they are just some scenarios. Duh. .



IMO
Not advice
DYOR