AVZ 1.54% 32.0¢ avz minerals limited

Running discussion on SP, page-51626

  1. 1,236 Posts.
    lightbulb Created with Sketch. 7976
    Hi @Freehold et al,

    If one compares the Enterprise Value / tonne of Li20 Reserves, then AVZ's SP has the potential to run to $1.38 just to match LTR's current $2073/t valuation on that basis (see below).

    AVZ Snapshot & Peer Comparison 14092021.png




    To match LTRs valuation on an Enterprise Value per tonne of Li20 Resources basis, then AVZ's SP potential is even higher at $1.85 per share.

    Also, given the red-hot outlook for Lithium demand (perpetual deficits forecasted for the rest of this decade) & EVs, personally I don't see why either of these AVZ SP targets are unreasonable in the short to medium term, especially post ML award, BFS, Project Finance, FID & MSEZ.

    And just to remind, LTR have yet to accomplish these milestones, and therein lies four major hurdles to production IMO (note: an SEZ not possible for LTR as far as I'm aware).

    LTR vs AVZ - 2021 YTD 140921 Performance comparison.png

    Additional comparison notes to the above to consider; (inc. some points Freehold has kindly stated and assuming that the current market valuation of LTR is fair [note: LTR holders will likely tell you that LTR is still undervalued, as they are understandably comparing Kathleen Valley (KV) to PLS's Pilgangoora])

    1. LTR control much smaller, less homogenous and deeper deposits than Manono

    2. LTR JORC Resources are at a substantially lower overall grade.

    3. LTR have yet to produce a DFS (let alone a BFS) so in terms of project certainty (where certainty = value), are not nearly as advanced as AVZ.

    4. LTR have significantly higher mining cost overheads due to a much higher strip ratio and almost certainly higher labour costs IMO. Australia is among the highest (labour cost) countries in the world, especially when it comes to mining.

    5. It is unlikely LTR will achieve as low a carbon footprint as AVZ, mainly because the majority of AVZ's energy requirements will be sourced from their refurbished, carbon neutral HEPP within 2-3 years. I expect AVZ will still require the use of diesel for refining etc. (at least during the early years of production) & due to AVZ's haulage requirements (longer distance), SC6 will likely contribute to greater transport CO2 emissions than LTR (i.e. from KV to port). However, AVZ's plan to produce & ship Primary Lithium Sulfate will significantly reduce AVZ's overall CO2 transport emissions due to less tonnes aka higher concentrations of Lithium being transported (vs SC6). I expect both LTR and AVZ will 100% electrify their entire fleet of vehicles.

    6. Due to AVZ effectively being the master of their own electricity costs and having nearby Hydroelectricity availability & certainty of supply (i.e. post the HEPP refurbishment), AVZ's ongoing energy costs will likely be significantly lower than LTR IMO.

    7. KV is located in a Tier 1 country, Manono is considered a Tier 3 location. However, an SEZ with major tax & duty concessions, possible Sovereign Guarantee etc. IMO more than offsets the heavy discounts currently being applied due to Manono's inferior location.

    8. LTR are closer to port and China than AVZ. But AVZ are closer to European demand, plus shipping PLS to a Hydroxide plant (JV setup or otherwise) either in Africa or Europe is much closer and less costly than shipping SC6 directly to China from either Australia or the DRC.

    9. LTR have World Class management and IMO that is probably their single greatest asset.
    AVZ also have world class execs within their ranks IMO, but as a collective they have (so far at least) yet to prove themselves together as a World Class Management Team (again IMO).

    However, let's see what the next 1 - 24 months brings. Their 'image' (i.e. from near zeroes to Perth based heroes potential) could very possibly skyrocket in that timeframe IMO, made a bit easier by the fact that they control the Numero Uno Hard Rock deposit globally in a RED-HOT SECTOR.
    [sidenote: checkout CXO's performance today, historically they too have been criticised for seemingly endless delays and not adhering to their own schedule].
    Plus we know that NF & co. seem determined to play the long game and they have stated more than once in the past that "it takes time to build a World Class mine".

    10. LTR will likely have higher taxes to pay than AVZ due to AVZ's proposed MSEZ and associated benefits.

    11. LTR royalty rate for spodumene is 5% compared to AVZ at 3.5% (note: Lithium considered a non-strategic metal in the DRC, hence the lower royalty rate vs Cobalt etc.)

    12. AVZ have Offtakes for SC6 & Tin products already, whereas LTR currently has Zero OTs in place to the best of my knowledge.

    13. Exploration upside for AVZ is (in the words of Freehold) 'simply massive', and given Lithium is economically present at/from surface means ice-cream scoop mining from the get go. Conversely, LTR will have to drill & dig deeper on an already deep deposit if they are to significantly add to their resource size.

    14. AVZ has 130kt of Tin Reserves with an in-ground value of ~A$5.9 billion (US$33,500p/t *130kt = $4.355 billion /0.735 AUD/USD). Conversely, LTR have a non-Lithium project with ZERO reserves and an 'own valuation' of A$95-$110 million.

    15. AVZ has much higher transport costs on a per tonne basis (probably the highest globally to be honest). However, there have been statements made in past presentations that suggest management are aiming to significantly improve (by up to 50%) on the standard rate card quotes that were used to estimate transport costs in the April 2020 DFS i.e. averaged across DRC, Tanzanian & Angolan rail networks. The rates estimated in the upcoming BFS should show a reduction (and hopefully a significant one), and this will IMO likely mitigate the possible higher shipping costs (i.e. vs 2020 DFS) that all exporters are currently experiencing.

    16. Sovereign Risk for Africa is generally factored at a 10% discount to Low Sovereign Risk outfits.

    For my mind, it's a no brainer which company; a) has the better Lithium project & future production profile and; b) has more upside from their current SP as well as a much higher ceiling in terms of potential/future project valuation.

    Also agree with Freehold that AVZ will surpass LTR over time, and easily IMO. But I'll throw it over to everyone else's opinion re: the following question;

    Post ML award & a positive BFS (scheduled to be released within the next few weeks), and given the latest comparison analysis to LTR, what do you think is a fair valuation / SP target for AVZ over the next few months?



    GLTA and note the above analysis, potential SP targets, thoughts and overall opinion etc. should not be considered as financial advice of any kind.

    Please DYOR.

    Cheers
    Elpha
    Last edited by elphamale: 14/09/21
 
watchlist Created with Sketch. Add AVZ (ASX) to my watchlist
(20min delay)
Last
32.0¢
Change
-0.005(1.54%)
Mkt cap ! $1.045B
Open High Low Value Volume
32.5¢ 33.0¢ 31.5¢ $4.672M 14.58M

Buyers (Bids)

No. Vol. Price($)
20 851687 31.5¢
 

Sellers (Offers)

Price($) Vol. No.
32.0¢ 27570 1
View Market Depth
Last trade - 16.10pm 25/10/2021 (20 minute delay) ?
(live)
Last
32.5¢
  Change
-0.005 ( 0.56 %)
Open High Low Volume
33.0¢ 33.0¢ 31.5¢ 5885946
Last updated 15.59pm 25/10/2021 (live) ?
AVZ (ASX) Chart
arrow-down-2 Created with Sketch. arrow-down-2 Created with Sketch.