Gordon Stein, CFO of CleanTech Lithium, explains why CTL acquired the 23 Laguna Verde licenses. Watch the video here.
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@VauxhallViva, I agree with wasa.
The development of the mine would be valued differently on the balance sheet and how the market perceives its value. The debt will of course be recorded as a liability on the balance sheet but at the same time, the mine should be recorded as an 'Asset in construction' on the balance sheet. The amounts spent on the production will be debited to a long-term asset account categorised as Construction Work-in-Progress. Construction Work-in-Progress is often reported as the last line within the balance sheet classification Property, Plant and Equipment. There will of course be no depreciation of the accumulated costs until the project is completed and the asset is placed into service. When the mine comes into production, it's accumulated costs will be removed from the Construction Work-in-Progress account and will be debited to the appropriate plant asset account.
Equally, market cap will be calculated by the share price and shares in circulation. Of course, this will be dependent on market sentiment.
What makes me confident about this share is that the projected NPV of the project is currently significantly higher than the current market cap!
Let's get this rolling.
To get a post raise SP, Im using a median figure of 2.3bn shares and the £250m mcap giving a pre construction minimum SP of 11p.
So investing at todays level I see as a chance to double your money in a potentially a matter of months.
However thats just a start and post construction, earnings at todays nickel price and Real/$ rate could be in the region of £75m after tax. Quick PE of 10 gives £750m (SP 32p).
However 2022/23 could well be the start of nickel being in very short supply as EVs go mainstream so PE could go much higher.
Vermehlo will surely have a market value/plan/been sold by then and will be adding to the mcap. As will the development plants for Araguaia stage 2.
So far as Im concerned lets just get on with the raise and get going Theres plenty in this for everyone!
Vaux how an accountant would value it (based on balance sheet and perhaps future p/e) and how the market values it are different things probably. Good example is eua which has a tiny balance sheet compared to the £1bn mcap but the market is ascribing a huge value to the resource. Here the market at the moment is ascribing bugger all value to the resource.
I am hopeful pickedpeck 0.7x npv might be achievable post finance as this then should factor current and future nickel price into the equation and not focus solely on the cash/debt etc. Thats good for investors because even if there are shorter term pullbacks on nickel price consensus in next 2 years is upwards trajectory. That would hopefully be north of £250m then depending on the shares in issue, anywhere from 15-25p might be achievable? But dont know. What I know is I wont sell those levels cos more is coming down the line. Gla
Many thanks for the update TheAccountant.
Am just trying to figure how to value HZM when the finance is in place. As an accountant maybe you could help?
Clearly the balance sheet will have £100m or so in cash on it after the raise. The banks debt facility if/when drawdown simultaneously increases both the assets and the liabilities by the same amount so no effect overall.
But the real change is that having the finance in place means that Araguaia itself then immediately has a revised value. It will be built! Its potential will be realised but accounting wise will the balance sheet reflect this and what pre construction value should be placed on it?
And wider than that what mcap should HZM be at that completion moment with £100m cash and a ready to go project the size of Araguaia?
Ive got a mcap of £250m minimum in my head..?
Thanks Accountant-very reassuring. This may be like "waiting for Godot", especially for the long termers, but it should be worth it.
I sent an email to HZM on the financing and received the following response:
The project finance process is progressing well. It is made up of a number of different tranches with all pieces progressing simultaneously. Some of the work streams have taken longer than anticipated due to the wider reaching effects of the Covid pandemic on the financial markets and on the ground in Brazil. However, the Company is pleased with progress to date with a number of key financing milestones reached, and advanced discussions are underway on other parts of the package. The Company will provide a formal update to the market in due course.
We’re also pleased to see the nickel price performing well, and the Company is well positioned to benefit from this as Araguaia moves towards start of construction.