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Talking of Hastings, did anyone else notice the implicit valuation placed on our JV from page 9 & 10 of: "Independent Investment Research Report May 2018" (2 May, 2018) https://hastingstechmetals.com/ https://hastingstechmetals.com/download/46/research-reports/2126/independent-investment-research-report-may-2018.pdf ===[ Other Resources - 12 Years Full NPV A$405m Risk 27% Risked Value A$111m ... The "Other Resources - 12 Years" line is based on indicative production from years nine to twenty, using the resources remaining after years one to eight. The un-discounted cash flows for this time period are based on the after tax free cash flow for the final full year of operation of the DFS case, with these then discounted back to the present. The risk weighting for these cash flows is based on the resource confidence weighted average of the following risk factors: - Measured Resources are weighted at 65%. - Indicated Resources are weighted at 45%. - Inferred Resources are weighted at 15%. In addition the value has been multiplied by the effective Hastings equity share of the resources, which our calculations indicate is 87% ]=== Therefore according to their analysis (which isn't far off that of my own), the risked value of our portion of that mined in the subsequent 12 years is: A$111m * (13 % / 87%) = A$16.6m = �9.5m This is the NPV8 risked valuation they have implicitly attributed to KDNC. Un-risked, but still discounted to the present, this is: 9.5m / 27% = �35m So I'd say barring strong appreciation of RE prices, we could be looking at a sale somewhere in the region �10-35m (likely low to middling of this range). But will we sell? If we think we can grow the cash faster elsewhere rather than holding on to the expectation that RE prices will appreciate considerably, as some are forecasting due to the EV/renewable energy (wind) revolution which could easily lead to the likely sell price doubling, tripling even. A good hedge might be to accept part cash, part shares, so we can exit on timescales which suit us? And to think it currently contributes approximately zero to our market cap. For now! ;-) Ob.

What's that in pounds after tax? ;-) You'll notice they didn't include decommissioning costs, that's because it's just a feasibility study out to 19 years. It'll be going for much longer than that, and very likely with more stages. That's why I think it is perfectly valid to consider our today value from years 20-39. Similarly for Hastings: we could consider our today value assuming our JV is mined in years 10-20. Of course our BoD are probably a little weary of doing so for both Sonora or Yangibana as it isn't "officially" in the mining plan. ;-)

Stage 2 certainly looks like it's designed to be funded organically. In terms of equity issued - my back of the envelope scribblings are showing a near worst case scenario, I think it is very likely they'll be able to raise debt as well as equity (perhaps above 82p even!) since the LCE sale price they'll be able to achieve will be greater than the $11,000/t they've used in the FS, i.e. the early cash flows will be sufficient to both service and pay back the debt and build the stage 2 plant. IMHO. ;-) A �40m valuations of our Sonora JV at the time of funding is a conservative valuation - with the stated caveats. Whether our share price will start to reflect that valuation on anticipation of the possibility of a sale is anybody's guess! Personally I think the JV is worth an order of magnitude more than that to us due to the 35ktpa likely being increased significantly in the mid 20's to meet exponentially growing lithium demand and our JV being mined then, but I try to keep it real on occasion ;-)

ing excited! Ob.

We are seeing lithium feasibility studies going out to 30-40 years. e.g. Nemask's (33 years) and Galaxy's (40 years). As I demonstrated yesterday it's reasonably straightforward to work out the net present value of our JV if it is mined at a rate of 35ktpa in years 20-39. We know from table 22.1.2 of the feasibility study the total undiscounted post tax cash flow in years 6-19 @11,000/t LCE is $2,583m - which is an average of: $2,583m / 14 = $184.5m/y Since the infrastructure is already in place, it's a simple matter to calculate the additional present value of that $184.5m/y between 20-39 years by summing the discounted cash flows from each year. i.e.: $184.5m / (1.08^20) + $184.5m / (1.08^21) + ... + $184.5m / (1.08^39) = $39.6m + $36.7m + ... + $9.2m = $420m I'd say it is fair to say that the majority of that would likely come from our JV, so in the absence of knowing the details of the operating contract we are talking $420m * 30% = �95m to KDNC. @Kiran states (and I confirmed) that in the first 19 years (which includes CapEx), our NPV8 is $30m, which after tax is likely around �15m to KDNC. So under the current mining plan extended out to 39 years, discount factors, and LCE price of $11,000 that's a total NPV to KDNC of around �110m. For BCN their after tax NPV8 increases from $802m by (70% * $420m) to $1,096m = �825m Revisiting a calculation from Friday: BCN need to raise around $420m = �315m and have authority to issue up to 365m new shares. They've got around $19m in cash, so let's say they are going for �300m, and for simplicity let's assume an all equity raise @82p (we are led to believe that part of the funding will be debt) 365m * �0.82 = �299m Under this scenario they will have all the necessary funds for stage 1 and presumably stage 2 will be funded organically. Therefore there would be around 500m shares in issue with �315m in the bank. If at this point the share price re-rates to the calculated post-tax $11,000/t LCE NPV8 of the 39 year project attributable to BCN estimated above (�825m). Added to the �315m in the bank this is a market cap of �1,140. Divided by the approximate 500m shares in issue results in a share price of: �1,140m / 500 = �2.28 However, if the share price doesn't re-rate, say it sticks at 82p for a while - then the share price would be at a discount of around 64% to the NPV8. The point being that under this scenario, the value to us of our BCN share holding remains approximately the same, but the value of our Sonora JV would still be significant: �110m * 36%= �40m The caveats on this *conservative* estimate are that: we've managed to achieve a good operating contract, years 20-39 are from the JV, the LCE price doesn't decrease below $11,000 and BCN's share price doesn't re-rate on funding, plus others no doubt! Lots of estimates at play. DYOR but I'm gett

You just might be ready for the deep dive ;-) http://wps.pearsoned.co.uk/ema_ge_berk_cf_2_core/148/37903/9703256.cw/content/index.html http://people.tamu.edu/~mahajan/solutions/

Indeed @cadellin - isn't hindsight a wonderful thing? If you truly believe that even today it is better to invest directly in EMH and BCN (and any of our other listed assets), rather than in KDNC, then for the life of me I don't understand why you don't just cut your losses and do just that. Unless of course it's a tax thing... ;-)

@Absolutely @cadellin - everyone should realise this is a theoretical discussion - there is absolutely no guarantee that BCN's share price will rise from today's after funding, and especially if the equity raise is below the share price at the time. What happens is up to the market, which is anybodies guess. I'd be surprised if it didn't breach 2 pounds within a year of funding: it could breach it on the day though! And as for KDNC, only time will tell if it was worth the long walk down the yellow brick road ;-)

That's what I was asking you to check. I make the additional post-tax NPV8 of the project for year 20-39 in the region of $420m which is coincidentally that of the CapEx of stage 1. That is a coincidence by the way! ;-)

I doubt it. Remember that $1,678m in year 18 of your compound interest is worth @NPV8 today: 1,678 / (1.08^18) = $420m ;-) Whereas the NPV8 of the project is worth almost twice that. Put another way, if you could own all of the project by investing $420m today, then your $420m is worth the NPV of the project, plus the original $420m = $1240m, and if you extend out to year 39 perhaps another $420m - call it 4 times its original worth. Bargain. Unfortunately you've got original investors and JV's to contend with ;-)

I've got a bad feeling I'm going to be explaining IRR any minute now... ;-)

;-) 18 years of 8% yearly compound interest from $420m gets you to $1,678m.

Oh no, what have I done? We now have two $420m figures to disambiguate! One referring to the initial stage 1 CapEx and one referring to the 20-39 years after tax NPV8 cash flows... ;-) According to: https://www.thecalculatorsite.com/finance/calculators/compoundinterestcalculator.php 14 years of 8% compound interest (paid yearly) starting @$420m is $1,233m. Paid monthly it's: $1,282m

@Ob "Extending the mine plan out to 39 years results in an NPV8 for years 20-39 at that average of:" Turns out I extended to 40 years @tomcat. To 39 years would have been an additional NPV8 of the project of $420m not $428m as I stated.

Indeed @tomcat - you've got to ask yourself why BCN's feasibility study doesn't look as good as it could have. How many years did Nemaska include in theirs (which was funded last week), and why did BCN stop at 19 when they could have (easily) matched Nemaska's 33 years, in fact doubling, tripling that even? It's because they are confident the funding is in the bag IMHO. Let's say they added another 10 years. We know from table 22.1.2 the total undiscounted post tax cash flow in years 6-19 @11,000/t LCE is $2,583m - which is an average of: $2,583m / 14 = $184.5m/y An NPV8 for years 20-29 at that average is: $286.86m (check this @tomcat - year 20 is discounted by 20 years as they do in table 22.1.2) and as we know, it's likely the majority of it will come from the JV. Best case scenario, all of it does, which would mean an NPV8 to KDNC of: 30% * $287m = $86m =�65m Add that to the �15-20m we calculated it was likely worth @$11,000/t under the current mining plan (which includes CapEx costs) and we've got an NPV8 to KDNC of around �80m. Extending the mine plan out to 39 years results in an NPV8 for years 20-39 at that average of: $428m (check this @tomcat ;-)) and it's even more likely the majority will come from the JV. Best case scenario, all of it does, so that would be an NPV8 of: 30% * $428m = $128m = �96m Add that to the �15-20m in the current mining plan and we've got an NPV8 to KDNC of over �110m. This is even before a more realistic sale price is used. Even though we are talking triple digits, I'm expecting significantly higher than this as the LCE sale price continues to rise and the production rate from Sonora increases from 35ktpa, undoubtedly leading to our JV area being mined much sooner and in greater volume than currently anticipated. Now just how good a JV operating contract did our BoD manage to strike I wonder!? @Kiran said we voted in favour of the re-domicile this time as he believed good progress was being made in relation to this. Good progress does not mean done and dusted! One last thing - @Barksy: it's great to see you remaining hopeful, but you should never forget to doubt! Otherwise it could be baked beans on toast for life... ;-) As ever, the above could contain mistakes or oversights, which I would appreciate being pointed out to me if so! As ever DYOR ;-) Ob.

Here's a direct link to the important bit on why we've all had it wrong these past few years, and even more so for future supply costs where the vast majority of lithium mined will be making its way into batteries. "Melbourne Mining Club Luncheon @MTH 27/04/18" https://www.youtube.com/watch?v=aoF6KUPtNkU#?t=23m27s ===[ ...I'm here to tell you that conventional wisdom is fundamentally wrong ]=== This really is quite revelationary. I wonder if Matt Bohlsen will pick up on it? He's normally on the ball all things lithium. Ob.

That's the revelation @tomcat, and unless I've been researching the wrong articles all this time, it appears to have been a closely guarded industry secret, until now... Watch the video, he explains the reasoning of why the common knowledge of Brine=High CapEx; low OpEx. Hard Rock=Low CapEx; high OpEx - is just wrong for battery grade lithium. I suspect our BoD don't realise this either, or if they do, they've been keeping the secret, as they roll out the same global cost curve diagrams we are all familiar with which show Brine as being in the lowest quarter... It could just be that when it comes to high grade lithium compounds, soft rock (aka clay), is the lowest of the bunch, and especially so after credits. ;-) Ob.

Great presentation here letting our cost advantage out of the bag: "Ken Brinsden, MD & Chief Executive Officer, Pilbara Minerals" (27 Apr 2018) http://www.melbourneminingclub.com/events/luncheons/ken-brinsden-md-chief-executive-officer-pilbara-minerals/ On page 14 of the presentation (around the 24-26 minute mark) he's suggesting that it's likely that Sonora, and other mineral operations, are appreciably below most Brine operations on the battery grade cost curve because additional processing is required for Brines which are not typically included in these graphs as the costs are borne by the buyer, not the supplier. This is excellent news! The presentation was linked to from a series of articles taking a deep dive into the predictions of Tony Seba at: "Testing Tony Seba�s EV Predictions 1 (Spring Is Coming)" (May 18, 2018) https://therationalpessimist.com/2018/05/18/back-testing-tony-seba-1/ There are 8 articles published over the past few week which I can highly recommend reading. In summary, there is a new energy revolution taking in place in China, *today*, which most Western analysts are completely unaware of. I can see why our BoD say: "We continue to view the medium and long term prospects for the Company with confidence."- it's just the near term which is nail biting! Come on BCN: be ahead of schedule for once and make everyone's May by announcing funding next week! ;-) Ob.

Just in case my last post kept it too real, here is part 2: aka the ramp. I'll keep it short and sweet: the �43m market cap (approx 0.55p) estimated in part 1 is nothing compared to what we might expect to look forward to if (more like when, eh @Bannor!?) the rest of JV1 is included in the mining plan. We should be talking low, potentially middling triple digit millions if LCE prices stay steady or continue to rise - assuming we sign a half decent operating contract with BCN! A lot rides on our JV contract and of course BCN getting funding. I'm reasonably confident on both - but not "all in" confident! ;-) Ob.

Just thought I'd finish what we started last weekend @tomcat ;-) Number of BCN shares in issue is approximately 134m and @87p that's a market cap of approximately �117m They need to raise around $420m = �315m and have authority to issue up to 365m new shares. They've got around $19m in cash, so let's say they are going for �300m, and for simplicity let's assume an all equity raise @82p (we are led to believe that part of the funding will be debt) 365m * �0.82 = �299m Under this scenario they will have all the necessary funds for stage 1 and presumably stage 2 will be funded organically. Therefore there would be around 500m shares in issue with �315m in the bank. Let's assume at this point the share price re-rates to the post-tax $11,000/t LCE NPV8 of the project which is $802m = �600m. Added to the �315m in the bank this is a market cap of �915m. Divided by the approximate 500m shares in issue results in a share price of: 915 / 500 = �1.83 So someone investing today in BCN @87p might expect a return of 110% (but of course the LCE price is actually higher than $11,000/t and BCN isn't just Sonora!) What about KDNC? Our market cap @0.22p is: 0.22p * 7,851,440,338 = �17.3m If BCN shares re-rated as above, our remaining 10,720,000 shares would be worth an additional: 10,720,000 * (�1.83 - �0.87) = �10.3m Add this to the JV1 GBP after tax value of around �15.8m ($30m pre-tax according to @Kiran) which we were discussing last weekend results in a KDNC market cap of: �17.3m + 10.3m + �15.8m = �43.4m or a share price of: �43.4m / 7,851,440,338 = 0.55p So someone investing today in KDNC @0.22p might expect a return of 150% on this news alone, which is higher than the 110% estimated for BCN above, all else being equal. And of course if BCN fails to get funding our downside is significantly reduced compared to theirs, as we have other assets ;-) WARNING: The above is all just my opinion, based on my own research, and is why I continue to view KDNC as a strong buy at these prices, even more so than BCN. But don't believe me - check my working out, do your own calculations, make different assumptions to suit you. It may play out as above, or it may not: I take comfort that our BoD have been saying pretty much the same over the past few months - but not so directly as I am prepared to ;-) Ob.