FOSTERS WRITE UP ON AUZ DEAL

This deal values us so much higher,

- AUZ reportedly set to sign an offtake and funding agreement with South Korean Chemical company SK Innovation (Subsidiary of SK Holdings) for its Sconi Nickel/Cobalt/Scandium project
- The agreement is set to involve 7 year offtake agreement for all the production of the Sconi project for their the nickel and cobalt, with a further 6 year option;
- 12ktpa cobalt and 60Ktpa nickel sulphate prices linked to LME;
- SK have an option to buy 19.9% of AUZ for A$65m;
- SK will provide inputs into the BFS and funding options and
- The product is targeted to be input into SK newly developed battery facilities in Hungary and Korea
- The option to acquire 19.9% for $65m, implies a valuation for AUZ of $325m.
- AUZ deal is yet another very positive data point highlighting the demand and willingness by industry to lock up cobalt supply in a tightening market.
- It also makes the relative valuation of JRV look very cheap $325 (AUZ) vs $100m for JRV for a comparable project, with upside of advanced business development opportunities and a very strong management team
- Quick snap shot below you can see that JRV has a very comparable resource to Sconi project. The bulk of the valuation is related to Sconi, Flemington project was acquired from JRV with $5m payment due later this year.
- Granted AUZ has a mining lease granted, environmental approvals in place and a mining study completed. BFS is targeted to be completed by mid-year.
- However JRV recent updated indicated a target date of Q3CY18 for BFS at Nico Young.
- Lets not also forget that JRV has the potential to differentiate itself from its peers if it can successfully demonstrate the project is economical using a heap leech processing approach rather than HPAL which is being proposed by Clean Teq and AUZ. This could result in a significant difference in capital, timing and complexity.