China: Spodumene shortages. Production cuts. Prices tighter., page-3

There is a lot of Inteligent suggestion & research around GMM and its target value/growth ;

Valuation: We value GMM on a net asset valuation basis, comprising a 50% interest in our base case Mt Cattlin NPV10%, 50% of our nominal valuation for James Bay, net of corporate and other adjustments. We set an initial target price of A$0.40/share (representing a P/NAV of 0.50x), but note that there is potential for upside in our valuation through higher spodumene prices, and a potential expansion of production at Mt Cattlin.

Initial capex to re-commence production has been estimated at A$7.5m, with key capital items including refurbishment of the current crushing circuit (~A$3m), upgrade of fines circuit and installation of new equipment to ameliorate past poor metallurgical aspects (A$4.5m). GMM have indicated that new and refurbished equipment within the wet plant will be installed with sufficient redundancy to allow for any potential expansion of production to ~200ktpa of spodumene concentrate.


Based on the above assumptions/estimates, we derive a base case, post-tax NPV10% for Mt Cattlin of A$253m.

We highlight the optionality offered by the potential to expand plant capacity and production. Noting that the project is not resource constrained (current assumed mine life of 15 years), and with the likelihood of relatively low capital costs to expand the plant, we see clear potential for enhanced value for the operation should production be increased. We note that any expansion would be reliant on sufficient market demand for spodumene concentrate, but noting current and expected tightness in the spodumene market, an expansion could be a distinct possibility in our view.

Based on the above assumptions/estimates, we derive a base case, post-tax NPV10% for Mt Cattlin of A$253m.
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On this basis, we have also modelled an “expansion case” for Mt Cattlin, whereby plant throughput is increased 60% to 1.6Mtpa, lifting production to 208ktpa of spodumene concentrate. In this scenario, we have assumed expansion capex of A$45m (consisting of upgraded crushing circuit, additional fines recovery capacity and TSF expansion costs), starting 1H’17.
An expanded project would lift our project valuation (NPV10%) 44% to A$364m.

http://www.galaxyresources.com.au/Investor/reports/20151216-CanaccordResearch.pdf

Add on the Tantalum Offtake negotiations, possible resource expansion and potential upfront payments and this stock is looking very serious imo

The Timing of this project coming on stream q1 is so good right now.

PD