Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
Hi, I've been holding since at least 2011 when SAV were called African Mining and Exploration (AME) I think it was and remember the intraday 17p high well on 14.6.18!...I don't post much due to time...huge congratulations to SAV on getting over this hurdle...somewhat akin to finally obtaining Planning Permission I'd say, with lots of development work ahead now we have the green light.
Re. the 'imminent' revised Scoping Study, I'm hoping we can get the Pre-Tax NPV8 to greater than US$1bn (2018 - $356m)...that would be eye-catching. If we are using a spodumene price of $2000+ then I hope our Payback period can be well under 1 year. Maybe the IRR can be north of 100% too. These would be wonderful, though not completely unique, numbers in the current high lithium price environment but it would make us very attractive and gain a lot of attention and hopefully the further higher share price. Investors often value lithium stocks as a percentage of your NPV number of course, discounting it for how early you are in the development process ie. you obviously get a much higher value once you are actually in production. I'd still like to see us get involved in a hydroxide plant or at least a large stake in a JV one as the money is there to fund these things, but maybe that's not SAV's game unlike, say, Piedmont and many others, though they are expensive things indeed.
You may enjoy seeing where SAV are on the leaderboard of lithium companies at 31st May courtesy of Howard Klein on Twitter - https://twitter.com/LithiumIonBull/status/1664310382964424705?s=20 - don't worry how many there are, we're going to need at least 200 Savannahs up and running by 2030 to cope with lithium demand under current predictions.
All the best for the onward journey SAVvy people...x
Comment on current and future lithium pricing:-
https://www.fool.com.au/2022/04/01/own-pilbara-minerals-shares-heres-why-the-ceo-is-so-bullish-on-lithium-prices/
Core Lithium has a similar lithium mine size to SAV (slightly higher 1.3% grade ) and similar DFS economics and no immediate plans for further processing beyond spodumene and has a £860m mkt cap. They do have a number of other mining projects at the exploration stage though, including gold, zinc, lead and other lithium...but no revenues anywhere.
https://corelithium.com.au/
This is what SAV's financial half year could look like at $1250/dmt a couple of years in to production....if it was producing lithium...one day...you can do your own mkt cap valuations off that....ha.
https://www.fool.com.au/2022/02/23/pilbara-mineral-asxpls-share-price-sinks-7-amid-half-year-results-and-ceo-exit/
Pilbara reported recently that they are expecting $2600 to $3000 for SC6 on contract prices for the current quarter and $1800 for the last quarter. They seem to have quite flexible pricing mechanisms to alter their contractual pricing to quickly make the most of the price rises. Others, like Greenbushes, seem to have more slow moving contract pricing mechanisms and are still below $1000 it seems. However, that will protect them much better if prices come back down one day.
Https://www.fool.com.au/2022/01/31/pilbara-minerals-asxpls-share-price-races-higher-after-strong-lithium-prices-offset-potential-guidance-downgrade/
But Piedmont is building a 100% owned hydroxide plant with much bigger capex, profits and NPV10, which is exactly what I'd like to see SAV do but I'm not sure they are going to. However, yes, Piedmont share price did go nuts just because it was Tesla that signed a smallish offtake...ha.
Keep an eye on the lithium metal prices folks, for the underlying enthusiasm about the sector helping drive share prices up...lithium carbonate exw domestic China in particular has come up from 42000 to 63000 yuan / tonne in just a few weeks and rising daily with global carbonate, hydroxide and spodumene now following behind. I'm pretty confident all of the forecasts for EV and battery growth from the big players like Benchmark etc are on the low side over the next few years and EV growth will exceed the projections and create a larger lithium supply imbalance than forecast until plenty of lithium mines eventually come on stream around 2023 onwards. This could be a two year window of imbalance with rising lithium prices, fast moving EV sales, lithium shortage and slow to approve / construct lithium mines in the wings. On top of that, investing in a lithium junior means you also get the upside in shareprice due to the growing nature of the business as it scales up to being an operator. Just don't assume the first year of operations will be smooth or as profitable as the long term DFS forecast even if SAV have second mover advantage and have learnt from many difficulties faces by Aussie hard rock mines in getting their plant working right.
Https://www.fastmarkets.com/commodities/industrial-minerals/lithium-price-spotlight
There's a share price range of 4.7p to 6.8p from 2017 and first half of 2019. You'd expect to hit the top of that before retracing back to the lower end of it. Once you've cleared the top end of that range you could say that you've 'cleared 5p'. Next stop after that is the 16.8p intraday high of June 2018. I'd expect an offtake to be needed to take us there but the current rises are in line with the general bull market in lithium stocks going on globally over the last three months or more. You could have had a 10 bagger in Ganfeng in the last 18 months.
If we can get the share price in to the teens then you could raise $100m in equity alone (with ~50% dilution) to persuade financiers to back a 100% SAV owned hydroxide plant and the much bigger NPV, profits and mkt cap that would bring. But....I am dreaming....:-)
Yes, I've not seen 'life of mine' included in the offtake text and it reads as a single player taking everything SAV will produce each year and for every year of the mine's existence....which would be a very big piece of news if it was that.....(plus a strategic investment in SAV from them or another party.) The previous timescale for the offtake was pre-Christmas 2020 but 'in coming months' seems to be the latest text.
Piedmont's share price and market cap soared after announcing Tesla would take a third of their spodumene for 5 years.
Risks include that we need the EIA to come in and the spodumene and hydroxide samples to be a very good quality....and how long it all takes....:-)
...and there she goes...hopefully the start of better things share price wise...other lithium plays have been on the up for a while so about time we joined in. The Tesla / Piedmont effect starting to appear may be one reason, plus a general feel that lithium will be in short supply soonish, plus money moving to green investments maybe. The Offtake will really move this a lot I suspect if we can get it over the line.
CM, SAV's lithium, assuming it does meet all the CERA quality benchmarks (that SAV themselves are defining), will be very much in demand in Europe, and ahead of supply agreements from China. As the demand for new EV's in Europe rises obviously the demand for lithium will rise beyond any current Chinese supply agreements. There isn't a functioning lithium mine in Europe, yet the EU wants to have control of its own supply. At worst, we'll have great demand for the SAV lithium, at best we might have a car company wanting to buy us out in due course in order to backwards integrate to reduce their lithium costs.
The SAV share price looks set to rise because the lithium price looks set to rise soon, whether we're in production or not. Tesla set the sector alight with its share price rise and continues to do us all a great favour. Other lithium miners are rising next because they are more prominent than us or have received a Tesla OT (Piedmont). Which probably means, if nothing eliminates SAV from the running, that we may also be due a nice rise soon as a laggard, especially as an OT is on the horizon potentially for all of our lithium supply in one go, not just part of it. We are very similar in quality and size to Piedmont with very similar timescales, though we have a better IRR but they have started to integrate a self owned hydroxide plant in their mix (I'd love us to be able to do that!). We are Europe's Piedmont in that sense and VW is our Tesla (hopefully). :-)