LTR 1.15% $1.72 liontown resources limited

Share Price, DFS and the GS Report - Am I missing something ?

  1. 3 Posts.
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    *** Standard Disclaimer - In no way advice, DYOR.

    I'm watching with awe as the share price drops progressively (as is the case with many other stocks / shares!). I have to keep reminding myself to buy in slow and steady on the way down. Factors I'm tracking include:

    1. End of year tax harvesting. (really? surely this is a negligible point. Happy to be educated on those that know more)
    2. General market sentiment, primarily due to increasing interest rates. For those of us who've been around for a couple decades, we know how tightening cycles end. Is this a permanent pivot point? I've thought so before, only for the market to threaten to crash and the quick lowering of rates. If this has been a permanent pivot (and the next 30 years are rising interest rates), good luck to anyone who holds assets that typically produce no income (e.g. Crypto, NFT) and bonds will also suffer (depending on your horizon).
    3. Linked to above point 2, certain classes of non-income producing stocks will suffer more than others.
    4. "The Goldman report" (discussed towards the end of this post) and the other one too I guess (that I haven't read. I did read the GS one).

    For me, the decision to invest and continue to invest boils down to two simple pages of information:
    https://hotcopper.com.au/data/attachments/4453/4453309-68e496677c7d1c145905a4c975b4a524.jpg

    and I also liked:
    https://hotcopper.com.au/data/attachments/4453/4453336-9f8cb0dde512122f94e2dd2b8c84b75b.jpg
    because this chart can give you an idea of what the $ impact might be if you are wrong about an assumption. Interesting that the sensitivity analysis (upside) tops out at $ 2,000! Gives you an idea of long term NPV if the spod price sustains a high amount... But also let's one appreciate the downside if spod is lower than $1,300 / $1,400 (the zero point).

    So, with the DFS @ 4.2B, and 2,192,225,198 shares on issue, each share is worth $1.92 (over the life of the mine so to say). (coincidentally, this is why adding shares dilutes the worth of your shares that you're holding)

    The above Figure 1, with the NPV and number of shares lets us figure out how the Spod price (over the life of the mine) will impact share price. I love seeing the prices PLS are landing (!) but one cannot hope for this to last... but what will it be? On to that dastardly Goldman report...

    I read the GS report today. I'm equal parts cynical and realist (I'm not ignorant to the financially strategic play options available to juggernaut companies like GS (Think Inception, or the Matrix, layers upon layers, circles within circles). Every large company with multiple agendas is similar.

    The GS report is not outrageous. It provides a basis and a prediction. It's tough to put your name against predictions. I've no doubt they have large and complex .xls spreadsheets which underpin the analysis. But without going into the significant detail that would underpin such a report, I'm left to highlight the factors that might appear a bit unsupported by their report. I'll list them here (most, if not all that have been discussed in various Lithium forums):

    1. Not all Lithiums are created equally. Spod seems to be preferred? GS Report Exhibit 26: GS Lithium supply-demand balance shows the increasing Brine and Spod supply but what is the interplay between between the different sources of Lithium supply? Particularly, what is the price interplay?
    2. (Demand) Based on Gov mandated Green targets, and what I'm anecdotally seeing with vehicle manufacturers and non-vehicle battery manufacturers (Tesla Powerwall, similar or larger applications) is an explosion in demand. GS estimates have a 20-something % increase in demand estimates for 2023-2025. As a layperson, and noting the 'now now now' push for Green tech to hit looming net zero targets, this would appear seriously undercooked.
    3. (Supply) Similarly (but conversely) in the same Ex 26 table, the supply increase seems quite high and too optimistic. Many posters have discussed the 2, gusting 3 years to start production - and that's even from a final approval decision, let alone production ramp up and all the time taken before the final decision point. This also - to me as a layperson - seems quite optimistic based on the general progression timelines I've seen discussed longitudinally with company releases (and this was during the good times of cheap money). No doubt the increased Spod prices might accelerate things, but there's only so much one can accelerate construction of a mine in a world with supply chain issues and staff shortages.
    4. Lithium Balance to Cash Price mechanism. Not sure how their black box works here, but the other factors probably trump this anyway.

    Would love to see 'under the hood' of the GS report to see this above detail. Apparently the public release is a 'redacted version'? I wonder if there's more detail in any more complete versions of such a report. (I haven't looked that hard, and there's probably gurus on forums like this that know 100x times more than me smile.png

    So what does this all mean? (Ignoring inflation - which likely means one could probably add 15% on to any costs in the DFS [insert laugh/cry emoji here])

    1. The GS report has spod coming down to 1,100, 800 and 800 for 2023, 2024 and 2025 respectively. based on a laypersons look at the factors above (particularly noting the supply response lag), I just can't see this happening.
    2. For every $1,000k (mine life average) above the DFS price (say $1,400), add $10b (about $4.50 per share) to NPV (wonder if I got that eyeball estimate wrong lol) - Note: price needs to be 'life of mine average'.
    3. I'm guessing we wont see below $2,000 for a very long time, if not ever. (this is the upper end of the Fig 1 sensitivity analysis). All else equal, this yields $ 3.39 a share over the life of the mine.

    So they're selling LTR at $0.88 a share at the moment ? Ok...

    Complete layperson's stab at this. Constructive criticism that helps me understand these factors better is absolutely welcome.

    Am I missing something ?

    *** Standard Disclaimer - In no way advice, DYOR. How I'm currently seeing things, not advice for you.








 
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