The latest Investing Matters Podcast episode featuring financial educator and author Jared Dillian has been released. Listen here.
Let's see ;))))))
This is normally the case but yesterday was different, with the new rules coming in lots of people where changing to daily rolls to get around some elements of the new rules and the spread companies where offering favourable terms.
With words like this contained within the RNS you would have to think something is in the pipeline "Mina do Barroso is developing fast and it is clear that it will be a key feature in the up-stream part of the European lithium value chain and will help to drive European lithium independence. "
https://twitter.com/bradbear79/status/1008311531711410178?s=19
https://twitter.com/SavannahRes/status/1007930363228848128?s=19
With an existing Mining Licence, they intend to fast track this project and hope to start construction in Q2 2019, with first production by Q1 2020. With a 2.1 year payback, any exposure to forecast declines in lithium prices from 2021 onwards, if forthcoming, is minimised, particularly as the operating cost including insurance and freight to the Chinese customer is only $271 per tonne ($/t) of concentrates. This compares to the $685/t spodumene concentrate price assumed for this study, current prices of around $900/t and recently reports of high quality 6% Li₂O concentrates being sold for prices even higher than this. 75% of $241m converted into sterling at £1=US$1.34 equals £135m. We had previously valued Mina do Barroso at £45m, using other resource valuations as a guide. Bearing in mind the uncertainties that come with a Scoping Study, debate over the appropriate discount rate to use and a slight unease over the high tax rate, we significantly increase our Mina do Barroso valuation to £90m and overall Savannah Resources share price target to 17p each. £90m is a 33% discount to £135m, thus offering scope for increases as the environmental permit is upgraded and the mineral resource, the project’s capital costs and financial structure is firmed up. We continue to value the company’s Mozambiquan and Omani projects at £25m and £5m respectively, giving an overall valuation of £120m or17p/share.
I think the local buyer is in the works, constant reference to it by DA. "Mina do Barroso is developing fast and it is clear that it will be a key feature in the up-stream I of the European lithium value chain and will help to drive European lithium independence. "
Maroš Šefčovič, the European Commission’s vice president who runs the Energy Union said "European Commission funding would be channelled into mining in Portugal, where there are lithium deposits and into Finland and Sweden, where cobalt can be mined."
The potential for a near-term market rerating of Savannah is illustrated by the following chart. This shows the market capitalisations for various spodumene producers and project developers relative to the size and grade of their resources. It is particularly interesting to see that Savannah's Mina do Barosso project already has a quantified resource that is similar to Galaxy Resources' Mount Cattlin mine, yet Galaxy has a market capitalisation that is more than 8x larger than Savannah's.
Investment case Savannah Resources offers exposure to a pomolio of mineral exploration and development projects in Portugal, oman and Mozambique. We have used a combination of a riskadjusted DCF and market-related valuations to set our updated target price of 20p. This is some 51% above the present price of the stock, which suggests that the market is still assigning a considerable risk discount to the assets. We have now incorporated the results* om the recent Scoping Study for the Mina do Barroso lithium project in Portugal into our valuation. Following its acquisition of the project last year, Savannah has rapidly advanced the project, primarily by means of a significant drilling campaign. This has enabled an initial resource of 14 million tonnes grading 1.1% Li20 to be defined. However, the mineralisation remains open at depth and on strike, and so we are confident that more will be discovered when drilling restarts. In addition, the company has the rights to several other licences in Northern Portugal that also host large, outcropping pegmatites with evident spodumene mineralisation. The recently published resource has been taken as the basis for a mine evaluation project, based on similar-sized operations that are currently under development in Australia. We note that the study has come out with strongly positive results with exceptionally high projected operating margins at current spodumene concentrate prices. Much of the proposed mining area has already been fully permitted for mining of the same ore as a feedstock for the ceramics industry. These permits will need to be amended to include the required lithium processing plant, but this is not a major exercise and is expected to be completed in early 2019. The first mining area at Mina do Barroso could therefore be in construction and development in early 2019, with first production in Q1 2020. The outlook for lithium is particularly buoyant-it is rapidly making the transition from an obscure metal used in a few specialised applications to one that is used in many areas of society. In particular, demand is expected to increase massively over the next decade as it is used in the batteries of electric and hybrid electric vehicles. This is expected to drive demand for lithium* om the present 220,000 tonnes per year of LCE to more than 800,000 tonnes per year by 2025. Additional optionality for the company is given by the copper project in oman. This is an advanced project that can quickly be brought to account, once the remaining authorisations for development have been obtained. The third asset is the Mutamba heavy mineral sands project in Mozambique. This is a joint venture with Rio Tinto in which Savannah is the project manager and is currently earning- in to a 51% interest. It is unusual for Rio Tinto to enter into a joint venture with a much smaller company; we consider this to be a strong endorsement of
Target price To move from our undiscounted valuation to a target price, we have applied risk discounts where appropriate. The discounts are our entirely subjective estimate of a combination of project risk and country risk. In our opinion, none of the countries in which Savannah operates justify any specific discount over and above the normal discounts that apply to the sector. We have included a 50% risk discount over and above the unrisked DCF analysis for Mina do Barroso and for Mutamba. This is because the projects are still at a relatively early stage in terms of evaluation, de-risking, permitting and financing. As the various evaluation and development project milestones are passed, we would expect to reduce the discount at both projects. We therefore derive a discounted valuation of 19.8p per share, which we round to 20p per share for our target price.