Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
They all-but say about Cinovec.
I think as long as Cinovec is not in DFS with proven process (SMS Group) it is still not on the radar.
When they deliver both, they will be a strategic way to source lithium in Europe and get easy grant and soft financing.
We have to wait a few months for this to happen and in the meantime hope for an offtake.
But I am under the impression CEZ would like to secure is own lithium from Cinovec.
Maybe Check lithium is not available for OEM at the moment because CEZ want it all !
DISCLAIMER : RK Equity is in business with EMH
RK Equity Report, based on PFS and assumptions describe on the document.
https://www.europeanmet.com/wp-content/uploads/2021/02/EMH-Feb-Report-2021-FD.pdf
It is hopelessly wrong.
So far EMH is funded until Definitive feasability study (DFS)
500 m$ is the Capital expenditure (CAPEX) to build the mine, purchase the operating tools and the conversion plant.
At the moment, EU is very offensive on developing a local industry for battery production. Therefore EMH could receive a grant up to 100 m$ and low interrest loan for 350 m$ (70 % of CAPEX) ..meaning they would only need to raise around 50 m$ on Equity.
The difference between loan and equity, is loan do not affect number of share, there are no dilution
While Equity means EMH issue new share and the potential value (NPV) is then divided by more share : Dilution
If EMH raise 50 m$ It means around 50 million new share, so around 230 millon including fully diluted share as of today.
IF NPV is 1.1 B$, EMH has 49 % = 539 m$ for 230 m share it is 2.34 m$ / Share
This is a very conservative valuation.
If we have a look at the financial plan of the PFS based on 25 ktpa, we have an Ebitda of 105 m$/y, On RK Equity score board average Entreprise Value (EV)/ EBITDA is 8 so a valuation of 840 just for EMH 49 % Stake or 3.65 $/share
But it seems easy to go for 50 ktpa with a second shift -> valuation 1B6 for EMH 49 % -> 7 $/share
Current focus on Cinovec is roughtly 5 to 10 % of the available ressource, we don’t know how much lithium there are on the additional land, but it is very likely that there are ... further developpement possible
So on a short term (12 months) if everything goes as planned (DFS, Lithium Market stays bullish) you can expect 3 to 4 bagger.
On long term potential is still way biger
It’s funny, I wrote EMN will have to raise 50 m USD ie + 100 million share... And tonight they announce they issue 50 m share to raise 30 m AUD =23 m USD
So we are at 400 m share issued ... and more to come when they will finance capex ...
Dilution is high on this stock
I did my own research on EMN and I decided not to invest.
The project is clear, easy to proceed (no mining required), very low carbon and environmental friendly, very well located on Czechia,
Manganese is not used in every battery chemistry, but is used on the long Range battery of both for Tesla and VW .. meaning a substantial demand is raising with the BEV.
But
- There are no hidden reserve, the 3 tailings have been tested and evaluated and if the ressource is clean and abundant (7 %), it has been completely taken into consideration with no extra ressource for further developpement
- Currently EMN do not own the land where the tailing are located
- Project is NOT funded until DFS.
- Final mining permission is not granted
- The business plan with a 10 % discount rate give’s a NPV of 600 m$
- The average Cash flow over 25 years is 128 m$/y ... with an ebitda ratio of 8 (average from RK equity score board) the potential valuation is 1 B$.
But we already have 350 millions fully diluted share issued, and there will be more equity offering to
- extra finance to complete, demonstration plant payment, DFS study, mining permission and land purchase.
- EMN will then need 400 m$ to built the commercial size plant.
Even if recent partnership could help to raise 360 m$ Financial loan, there is still 50 m$ to raise on equity offer ... with current price of 0.5 $, it means another 100 millions share issued.
So a NPV value of 600 m$ for 450 m share is 1.33 $/share, or 2.2 $/share on Ebitda ratio.
The upside potential seems poor compare to the current risk and I insist on no extra ressource to be expected.
If you have a look on the company presentation and the DFS documents, it is clearly stated that the process used by EMH is made to porudce highest quality lithium hydroxyde ou carbonate.
They are very confident to be able to produce the best available battery grade hydroxyde.
It is not demonstrated at scale, but it clearly implied and will be discussed further on the DFS.