First some pertinent facts on PLH:
1. PLH has a Li mica project in SPAIN called the San Jose Project ("SJP")
2.. The SJP has a JORC Li2CO3 R&R = 1.3mts. The product value of the entire R&R is around US$13b on A$17b.
3 In Spain the CTR = 25% and there are no mining royalties
4. PLH is earning up to 75% ownership of SJP. It has 50% currently.
5. The other 25% is owned by SACYR a Spanish construction company with a US200m facility from Macquarie Capital to develop mining projects in Spain.
6. PLH has an alliance with a large CHINESE Li Company specializing in the production of Li2CO3 from mica feedstock.
7. A Scoping Study ("SS") was produced on 18/10/17 and the PFS is due CY2018 Q2.
8. The plan is to produce about 15kts pa Lithium Carbonate ("LIC") to feed directly into the EEC battery plants
I have updated the SS with current spot price of LIC:
A. Key Assumptions:
1. JORC Indicated Resources = 900kts LIC
2 Mine Life = 24 yrs
3. Annual Production = 15 kts LIC
4. LIC Price = US$18k/t FOB
5. AUDUSD = 0.80
6. OPEX FOB = US$5004/t LOM
7. CTR = 25%
8. CAPEX = US$273m
9. Sustaining Capex = US$2m pa
10. Project Finance: Debt/equity: 70%/30% at A$0.20
B Results:
1. Post tax NPV (8%) = A$1471m x 75% = A$1103m
2. Post tax NPV (8%) = A$1.96 x 75% = A$1.47 (Per fully diluted share)
3. FCF = A$170m pa
4. FCF Valuation = A$170m x 10 times = A$1700m x 75% = A$1275m
5. FCF Valuation = A$3.02 x 75% = A$2.27 (Per fully diluted share)
The SJP NPV =A$1.47 and the FCF Valuation = A$2.27. The NPV applies pre production and the FCF applies once production is in full swing (And LOM >10 yrs. The case here.)
The Current PLH SP = A$0.12. So the NPV is 12 times the current SP and the FCF valuation is 19 times.
PLH is one of those rare shares which appears to have been currently overlooked by the market BUT the valuation gap is now so large than I suspect that there will be a substantial rerating of PLH within the next 3 months. The catalyst may be the PFS due for release in CY2018 Q2, offtake agreements or a European JV partner.
Nevertheless all my work so please always DYOR.
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