I think this was based on the 9%28 Jan 2019 11:59
Valuation considerations. Our current base-case valuation for European Metals is 45p/sh fully-diluted (c.A$0.79/sh) based on a risked sum-of-the-parts NAV valuation for the Cinovec project on a lithium carbonate basis. Our valuation standpoint is highly cautious at present; we use conservative modelling assumptions and risk our valuation heavily. We also present a flex case where we assume that EMH adjusts its strategy to produce a battery-market facing lithium hydroxide product. Our fully diluted risked NAV under a lithium hydroxide scenario increases to 80p/sh (A$1.40/sh). This implies EMH is trading at an undemanding 0.4x P/NAV to our base-case and 0.2x to our hydroxide scenario. Our valuation does not factor in leverage to higher lithium prices – we use $10,000/t for carbonate and $12,000/t for hydroxide. Our base case valuation at $12,000/t lithium carbonate, 1.0x NAV and 8% discount rate increases to 137p/sh, fully funded.
EMH is trading well below our risked NAV but we see considerable scope for renewed price traction as the company meets development milestones. Permitting progress is key to improved investor sentiment but the market should not lose sight of the fact that Cinovec is the largest European lithium deposit, a non-brine, non-spodumene resource with true vertical integration potential to produce battery-grade lithium hydroxide directly to the EV/battery market on EMH’s doorstep. Whilst funding and permitting risk remains, the current market valuation is undemanding and despite challenging lithium market conditions at present, EMH offers a compelling call on a multi-decade commodity play.
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