I think there is a type of race on for lithium producers, as not all projects will prove economic with less favourable carbonate pricing. My idea is to back companies that have the potential to be profitable, even if price was to undergo mean reversion, so sitting low on the cost curve. Agree also that each company will be driven by its own set of circumstances, as key events arise. I still can't see a better valued lithium explorer, with potential near-term production, than PLH. I think
@Chev88 already has it tipped, so will just leave the updated notes i've been accumulating as news has been coming out.
I also notice Peak Asset Management have just released a video interview with Chairman, Adrian Byass, which gives a good overview of the company.
https://www.peakassetmanagement.com.au/peaktv-plh/
- Lithium (Spain) + Potash (MOP) (Gabon)
- Near-term (<3years) LiCO3 producer
- JV is between PLH and Valoriza Mineria (wholly owned mining arm of SACYR SA - Spanish infrastructure giant!). This should see excellent expedience with issues like permitting and drilling timelines (no delays).
- Spain, low sovereign risk (see BKY's seamless transitioning of their uranium project recently). Also, 25% tax rate with zero royalties.
- Large amount of historical data and flowsheets from previous owner sees them a good couple of years ahead of where they would have been with a typical lithium project acquisition, with a few historical hits.
- 14Mt @ 0.95% Li20; 80Mt @ 0.56% Li2O (global)
- ~10 holes should see them able to JORC the resource (my estimation - not confirmed with company)
- Reading into mgmt dialogue, the ore body contains some much higher grade zones but are non-JORC and aren't being formally released. These grades are more comparable to the Pilgangoora explorers and some African style lithium deposits. They should be able to re-confirm these zones and re-rate handsomely.
- Production appears to be possible in < 3 years, which is key for capturing the carbonate pricing opportunity. In any case, they should be low on the cost curve, based on the historical feasability study and would be quite profitable at long-run average LiCO3 prices.
- On-site production process, due to abundant supply of nearby limestone and cheap supply of domestic sulphuric acid supplies, means that they can produce a go-to-market product and capture some of the margin other producers forgo to third party producers.
- No value being attributed to the potash projects, however the company are quite bullish this project, due to proximity to end users (large freight advantage), infrastructure in-place and being along strike from ELM's deposit. Recent corporate activity for ELM's resource suggests interest in the region/product.
- Last two CR: $2M @ 8.5c and $6.6M @ 22c, via Peloton. Hartleys are net +10M fpo (~$2M) since the acquisitions and I believe and have a fair few clients in on this one.
- Mitsubishi recently gave notice and now own around 8% of stock and #1 holder. Their last investment I know of was the big SVL CR when Bowdens was vended in. Good trade for them.
- 138M fpo, with $9M cash, so @ 17.5c, the EV is only $15M,which is crazy low imo.
- Chairman is Adrian Byass and the mgmt team have experience bringing projects to production + trade sale. Company have earmarked an announcement regarding a new domestic manager for Spain and they have recently implemented the same for Gabon. Mgmt comprise most of the largest shareholders on the register.
- Risks:
- Poor drilling results in either/both Spain/Gabon. This seems unlikely given the historical data the company has to work with; particularly for the San Jose lithium project, which progressed to a feasability study and contains known, medium-to-high-grade intercepts, across a broad zone (8,400m diamond + RC, over 40 x 75m grid)
- Sovereign risk: Spain extremely low risk nation to do mining business in. Gabon, some recent violence and protests over election results, however generally a safe region to operate in.
- Failing to secure offtake: unlikely, given the strong demand for lithium and the proximity of the resource to end users, not that proximity is particulary an issue, with regard to lithium. Potash proximity to Brazil a key demand point.
- Failure to secure capex funding. Unlikely, given the reasonable amounts required and strong economics of the project (assuming current assumptions hold true and historical data can be verified or improved on)
- p.13-14 show some peer comparisons, in terms of mc vs resource
http://hotcopper.com.au/threads/ann-company-presentation-plh-ax.2874663/#.WASh6Oh942w
