Afternoon all,
Good post from @Obe wan yesterday, highlighting all the many positives that AVZ holders can look forward to in the short term. However I'm not sure that they will equate to an est. 220% in total gross gains over the next 3 months, and am far more comfortable maintaining that a 75-100% net target is achievable over the next 6-12 weeks, all IMO and as my previous FA and TA analysis suggests.
https://hotcopper.com.au/threads/sp...e-leste-prospect.4662331/page-2#post-37663289
https://hotcopper.com.au/threads/running-discussion-on-sp.4111732/page-257#post-37603841
https://hotcopper.com.au/threads/running-discussion-on-sp.4111732/page-258#post-37614721
The first point of difference is that I don't believe that the DFS will be complete before the 2nd half of this year, due to the detail and scope of work required (much of which is still to be done) that can very easily fall behind schedule, particularly if wet weather events and other issues beyond the company's control (eg. outsourced work) cause delays.
Furthermore, management don't have the greatest track record for delivering 'expected' news on time IMO, and thus am looking at said timeframes with a degree of skepticism and caution. Also, I don't anticipate that an OT agreement or financing will be signed, sealed and delivered until the DFS is complete and the numbers for potential lenders are rock solid (no pun intended).
Secondly, as the saying goes 'a rising tide lifts all boats' and thus IMO AVZ's performance will still be subject to the Lithium sector's overall performance over the next few months. Personally, I'm not expecting a massive re-rate to occur across the sector until the 2nd half of this year. And if the Lithium ETF and spot prices are any guide, then the sector still has a number of immediate headwinds to overcome. Side note: LIT was down again last night (over 2%) and spot prices continue to dampen sentiment (though as we know they do not paint the full picture which IMO is much rosier than most pundits are led to believe).
So here's my take on Obe wan's list (for what it's worth). I've removed the potential DFS, OT and financing percentage gains (for now) and have included some potential negatives that may impact the SP in the interim. I believe that this approach provides for a more balanced and rational assessment and caters for tempered expectations in the near term.
Potential Positives
1. Transport Study ——— > 15-30% (robustness of this study IMO will be dependent on infrastructure requirements, level of support from Govts and others, and proposed timelines for completion of route)
2. Scoping Study———————> 15-25% (anticipating the IRR for 5/10mtpa to be in excess of 100%)
3. Met Tests————————— > 5-10% (anticipating to be outstanding)
4. Paterson report ——————> 10%
5. Chairman —————-———-> 10-20% (dependent on his/her reputation and quality of CV)
6. JORC update—————-——-- -> 10-15%
7. DFS—————-—————--> won't see until next half (IMHO).
8. Offtake —————————> won't see until next half (IMHO)
9. Financing————————> won't see until next half (IMHO)
10. Other research reports-——> 5-10%
11. 5 year tax holiday—————> 10-15%
12. 10% extra project interest —> 15%
13. Industry news and sector perf. -> 5-20% in total
Total potential gross gain est. ---------> +100-170% * **
Potential Negatives
1. Industry news and sector performance --------> -5-20% in total
2. Natural profit taking and drifting in between news events ---> -15-30% in total
4. DRC related risks (instability, outbreaks, sudden changes of Govt policy, challenges arising from MMCS vs DRC arbitration) ------> -5-20%
Total potential gross loss est. ---------> -25-70% *
Total net gain est. -------> +75-100% *
* A big unknown is whether Huayou will convert some or all of their 186m options at 10c. If they do, then one could assume that the SP will move very quickly back to the conversion price. However, IMO the more likely scenario is that they won't convert any, and instead focus their attention and resources on negotiating suitable terms for an OT agreement in the 2nd half.
** The other elephant in the room is if an entity decides to launch a hostile takeover. Again I don't see this happening until a) the transport route is confirmed and determined to be feasible and b) other crucial details required for the DFS become known. However if a TO bid were to suddenly materialise, then I'll gladly double my +75-100% bet, and raise you half of that again.
All IMO and GLTA
Cheers
Elpha
