LTR 13.6% 12.5¢ liontown resources limited

Ok and following on from my last post on lets talk specific LTR...

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    Ok and following on from my last post on lets talk specific LTR only, so many here refer to LTR as being a Tier 1 deposit but I would say I am one of the few who seems to seek to quantify whether it is or not through financial analysis. And my conclusion is possibly to date a Tier 1, depending on assumptions used, and there are a lot of assumptions been used so the DFS will decide the matter itself.

    The December PFS here had a US$696 per tonne price, based on an open cut method and yielded a post tax IRR of about 25% - that is not a Tier 1 outcome result you would typically see - Tier 1 get higher outcomes btw - btw IMO, as was the configuration in that Ann of 2mtpa btw orefeed which wasn't different to other Australian producing plays btw (with the exception of Greenbushes), so again not a Ter 1 output configuration either. A Tier 1 deposit is one you can mine that is low cost and easily scalable and highly profitable - one producing at least 1 mtpa of 6% grade spodumene if you want to be compared to Greennbushes btw which is a Tier 1 deposit btw.

    What makes a Tier 1 deposit is start small - say 5 mtpa configuration - and increase that configuration to say 10 mtpa to 20 mtpa, producing spodumene concentrate of plus 1 mtpa per year (and using your position to control the market, if possible. Tier one means easily assessable and mineable resource in a cost effective manner to control a market.

    Obviously if your selling a product it meets quality specifications is the point so that is not Tier 1 in itself - prices don't significantly differ if you meet specifications between suppliers (i.. 6% grade spodumene is worth x% if sold below x% Fe023, and penalties apply if impurities are above x% Fe203). For a Tier 1 lithium resource the other key is can it supply resource at sufficient quantities for the chemical grade market (i.e. your batteries) and technical grade market (i.e. your ceramics etc) - note, Greenbushes does both

    So here are four questions - open questions if truly seeking to determine whether LTR's resource is Tier 1, on a development scale:

    1. What production costs do you think will occur in the underground section of the mine, and open cut section of the mine?

    2. Given the deposit is hetrogeneous (i.e. you only have look at resource grade in the underground and open cut sections, and likely strip ratios which will be higher in the open cut section, to understand that), how does it impact the process flowsheet and adaptability of it, scalability and plant capex installed, and the floatation process itself?

    3. What is the scalability and constraints to scalability in the underground sections? I mean LTR will, if feasible, become the world's first underground lithium mine, and I wonder how that will be assessed in a production/opex risk basis as well btw. I worked on a 5 mtpa throughput in my own financial analysis here btw, as can certainly see an underground section working at that scale but not sure at a higher configuration.

    4. Relating to the 3 points above, and a key to economy of scale arguments, what orefeed configuration scale will LTR enter the market at?

    I have previously given my views on each, but a Tier 1 deposit needs to contextualise those four questions before it can be called a Tier 1 deposit, and that becomes the ambit of the DFS btw. No point having a good resource if it is not economic to mine and/or difficult to scale up because of being a underground operation and/or simply has a scale not that different to your non-Greenbushes plays, for example and/or you just don't make a lot ofprofit because of high extraction costs. I think LTR is viable, always have said so, but I made several assumptions on those four questions in my own modelling here as provided the other week.

    There are negatives and positives in any stock, and discussion IMO should seek to look at both, and that is how I post, whether I hold or not. Not everything is a bed of roses in any stock because if it were SP for exploration plays will yield much higher market caps, as the drill bit decides the end result, and if there is something there then financial analysis decides the rest as to whether it is viable or not and/or what scale maximises profit/returns.

    If anyone has a view on the questions above please share. That is how I assess Tier 1 deposits, and there are not that many of them around btw, IMO, but they do exist in copper, vanadium and iron ore in particular IMO

    For the record I have never used the term Tier 1 in any of the stocks I hold or comment on because a Tier 1 deposit too me is how it can control the market through cost competitiveness, how easily it is scoped up to take advantage of growth, and how good are the transport systems to market, but if we are referring to examples of Tier 1 deposits BHPB's/Rio's Pilbara based iron ore falls into that category as does Greenbushes mine IMO. Why do I put Greenbushes in that category - it previously supplied more than 40% of the world's lithium needs, i.e. seaborne trade based, albeit that came at a time lithium demand itself was limited with the predominant demand been in greases and ceramics etc (pre 2014), but it has done very well in seeking to keep market share - whether it can keep itself as Tier 1 as it goes deeper into the resource is the only question IMO.

    Terms get thrown around in investment circles, but that is how I think about the Tier 1 term itself.

    All IMO IMO IMO
 
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