A slightly disappointing PFS sent the stock price crashing in April, presenting a good opportunity for new buyers.
https://seekingalpha.com/article/40...ive-low-cost-lithium-spodumene-project-europe
From LSE
European Metals is sitting on a massive lithium spodumene and tin-tungsten resource, the largest in Europe, and in the top 5 globally. Whilst the lithium grade is low, that is offset by excellent by-products, allowing the cost of production (net of by-product credits) forecast to be the lowest of any spodumene projects globally.
The current PFS result of a post-tax NPV8% of US$540m is average, and not yet that impressive, especially considering the high Capex of US$393m. This is mostly as it was based on a mere 9.9% of the resource. However, my view is that the resource will grow substantially (~50%) during the next year, and the company will increase the forecast lithium production for the FS or DFS, resulting in a significantly larger NPV. This was done by Pilbara Minerals with their stage 1 (NPV 10% of AU$709m) and stage 2 DFS (NPV10 of AU$1,165m).
Valuation is attractive right now due to the disappointing PFS reaction, and because they are still at a relatively early stage. Given the low cost of production, huge lithium resource, the company should be able to progress with the next stages (FS or DFS, permits, equity off-take partner). With each success, the stock price should steadily rise.
My current price target is AUD 2.86 for end 2019 (3.7 x gain), with upside if they expand their lithium production volumes as I expect. I rate them a strong speculative buy.
As usual, all comments are welcome.
