Benzo do you even understand leverage??!.
Let me explain it very, very roughly for you - if say The market thinks CLA can eventually produce 5mill tons a year at a cost of USD 45,000 a ton cost per ton. (which very roughly seems to be the case at the moment)
then very very roughly if the cobalt price is 95,000 a ton (as it was when CLA was 24 cents ) it cos the market extrapolated that hopefully CLA could eventually maybe make an EBITDA profit of very very roughly 50,000 USD per ton.
5 mill tons x 50,000 a ton = 250 billion USD EBITDA (each year!)
So divide that by 800 mill shares as there are in CLA and thats an EBITDA a profit of very very roughly 312$ per share. per year (of course pre tax, repayment of loans etcetc etc. - even a small risk of that easily warranted a 24 cent share price. NO? or as I said even a 1$ share price becuase if it came/or comes to pass on a 10 x PE that would put CLA around 3,120$ a share (Very, very, very, very, roughly)
now very if the cobalt price falls to USD 45,000 a ton or lower -like now.- CLA would make absoluletly sweet FA a share-indeed it would lose loads every ton it mined. so at these pricesit's worth ZERO!
so thats why when cobalt fell 50% CLA share value should fall 100% to zero - thats called leverage!!!.
so why is it at 5 cents now? because its like an out-the-money option. people are essentially buying a time premium and gambling that the price of cobalt will go back up above 45,000 or so a ton as an average price over the next 3-3 decades or so.
so if cobalt -which is now 32,000 a ton, -doubles back up to just to USD 64,000 a ton -ie it goes up 100% (which is quite possible and could happen anytime in just a few weeks)
then very very very roughly the market will again envisage that CLA could make USD 20,000 a ton profit mining in the future.
So if they can do 5mill tons as they declared they intend to then they would make an (EBITDA) profit of around 5 mill tons X 20,000USD -or very, very roughly (only for the purposes of this explanation)- a theoretical EBITDA profit of USD 100 billion a year profit.
that would be $1.20 per share (EBITDA). put that on a 10x pe and it would be 125$ a share earnings per year (ebitda).
so if Cobalt goes up again just 100% from here. then CLA could in theory -if all goes well etc etc...go up from 5 cents to over 100$ a share.-which is an increase of 2,000%!!!
This is a very very rough very very basic explanation for simplicity purposes to show leveraging only- (so please dont jump down my throat you doubters-im not ramping here I'm just explaining leverage to Benzo )
So now Benzo can you see why when cobalt falls by 50% CLA tanked by 80%??? (as have most all other cobalt explorers and producers or even those like Cobalt 27 whose just holding piles of mined cobalt).
but the good news is reverse is true x 10 or more on the way up.
thats called leveraging
Thats why I'm holding longer term. I believe in the EV revolution, and I believe cobalt won't be significantly substituted out of batteries in next decade. so im happy to wait a bit.
If im wrong ill loose most of the the 400,000 I invested.-which hurts
if I'm right Ill make a million or two.-which feels amazing.
That's it. pretty simple -no need to cry and grumble -thats just how this end of the markets works.
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