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With apologies to Ian Dury reasons to be cheerful are three. The following analysis is based on the latest WH Ireland analysis from February, which as it states is company sponsored (so on the optimistic side, but also fact checked for misstatements). The analysis shows fair value at £1.29 based on LI price of USD 12,500 and Tin at USD 21,000. It ascribes risk at 50% for the main project, and 10% for the doubling of capacity. It uses a sensitivity analysis provided by the company which shows that a 25% increase in LI price results in a 50% uplift in NPV. So what has changed since then, and what might WH Ireland have as fair value now?
1) The price of LI has increased to getting on for USD18,000, and the company itself has suggested that a new model now would not use less than USD15,000 in its assumptions. The price of tin is now at USD37,000 so USD30,000 longer term is not unreasonable, and a 50% increase in the tin price assumption is circa equivalent to a USD1,000 increase in the price of Li. So price of LI up by USD2,500, Tin equivalent uplift of USD1,000 giving USD3,500 or circa 25% above the February assumed price, and a 50% increase in NPV. Plug it into the model and you get an increase in fair value from £1.29 to £1.98.
2) Their model assumes a 10% chance of their being a doubling of production, which comes into play after first production - the company allowed this as a possibility in the analysis. Since then the possibility has been reiterated in Rodney Hoopers research report, and there have been several references to it by the company the latest being effectively 'watch this space' for further news. Upon a formal announcement that they are running a parallel study on doubling production it is not unreasonable to ascribe a 50% COS rather than the current 10%.
3) Their model ascribes a 50% COS to the main first stage project. Since then the DFS has made important progress in terms of production testing, and we should shortly hear confirmation of the final drilling analysis (if positive), the outcome of the 'imminent' EIA response and subsequent mining permit. Assuming positive news, it might not be unreasonable to assume an increase in the COS to 75% (the main residual risk which I believe is negligible is finance).
If you take the fair value of £1.98 from point one above, and tweak the probabilities as indicated in points two and three, then fair value rises to £4.12 against todays sp of just under £1 at time of writing.
Of course everyone will have their own view of prices and future COS of the project, both positive and negative, and my analysis is just my own update on published analysis. For me the key thing is that even if you apply a significantly more pessimistic view you still end up with a fair value way ahead of where we currently stand .
The answers to some of the assumptions made should come imminently, and give the market a better understanding of why most of us here are very bullish on EMH.
All IMHO,
Didn’t know that, another urban myth busted! Also very positive here, hoping for offtake news this month linked to the much trailed vw/Skoda deal. But other things that could give a further boost are a move to a main market USA listing, a Czech stock market listing, and of course the big one, an indication that they are considering doubling or more the production capacity. With the price of tin and lithium ahead of the pfs and analyst assumptions the stars are pretty much aligned here!
Thanks - I will stick to what I had originally understood as per Rodney Hooper unless anyone can tell me different. Incidentally for those who say the PFS is outdated they are right to a point, as latest presentations (paid for by the company so they have an input) use revised assumptions, including an increase in price, and the possibility of additional production, so we do have some idea both of what current thinking may be and blue sky potential.
In regard to volume my understanding was one shift 25k tonnes and two shifts 50kt. But I have also seen it suggested here that one shift could produce double ie 50kt and therefore 100kt on two shifts. If the latter is correct I would be grateful for any indications of the source for this.
https://insideevs.com/news/493286/volkswagen-power-day-companys-version-battery-day/
And this, note the 2025 date......
Today, Europe is a global battery hotspot. And by 2025, our actions under the European Battery Alliance will result in an industry robust to power at least six million electric cars each year. Our success lies in collaboration, with some 300 partnerships between industrial and scientific actors foreseen under this project alone.”
They will need to get a move on!
Good spot Mullins and am surprised no one else has commented yet. See also
https://ec.europa.eu/commission/presscorner/detail/en/IP_21_226
And the key bit...
The project will cover the entire battery value chain from extraction of raw materials, design and manufacturing of battery cells and packs, and finally the recycling and disposal in a circular economy, with a strong focus on sustainability
So reading between the lines, and confirmation of what was mentioned about ev’s in the brexit agreement, is that they are trying to keep the entire value chain including extraction within Europe. That must include Cinovec, and should clear away any remaining political or funding obstacles. An expected announcement, but also surely one that now puts more of a spotlight on EMH?
Sorry Noise our messages crossed so I did not see yours. The other thing about a large sale going through is that with the market spooked it takes out stop losses and weak holders. Both Australia and UK saw a sharp drop in early trading before levelling off for the rest of the day.
I commented a few days ago about the block of shares that came onto the market, following the drawdown of the debt facility with our sophisticated investor. Today a further block of 1.6m shares became available to trade following the exercise of options notified by rns of the 18th January. Of course the price drop maybe unconnected to the options, but presumably as they were nil cost the intention was for them to be sold and that is a fair quantity for the market to absorb.