ADY 0.00% 0.6¢ admiralty resources nl.

valuation

  1. 14,562 Posts.
    We cant do a valuation on this as none of us including the company knows the cost of extracting the Lithium.

    Read all of the reports carefully. They say a number of times that they do not yet know what extraction method they might use. In fact they are searching for a new method of extraction as the proven methods are too costly! It in th ereports if you read them.

    The method that SQM use will cost ADY $1 per pound. SQM costing are at 50c per pound but their source stock is much more concentrated. Again this is in the report. One suggested method will cost ADY 73c per pound just for the reagents! Add to this the cost of the plant, people, financing, maintenance, transport, corporate overheads etc and you fast get beyond 80c per pound to extract.

    The report states clearly on page 20 that they will get revenue of 80c per pound on the Li chloride. They admit that SQM average 74.4c per pound revenue but argue that this should really be 80c. OK accept their 80c ( even though I have found independtenly a price of 71c per pound).

    At that level they cant make any profit. Therefore they are still searching for some new process that will make extraction cheaper. That bit of info is also in the report. Read it for yourself.

    Now seeing that they dont know yet of an extraction method which is cheap enough to make a profit, how can they come up with a profit number and then a value? Its a bit of a mystery.

    Sure you can ASSUME a cost and ASSUME a profit, but what is it actually based on?

    SQM are doing it for real and at a cost of 50c per pound to extract the Lithium, they still only earn 15% of total revenues as profit. ADY therefore need to find a process that lets them get to these levels to be comparable in profit terms. If ADY make only 5% profit say, then they need revenue of $1.5B per year to get $75m profit. That a heck of a lot more tons than they mention in the report.

    Hey, they may well raise the dollars, as people seem to be ready to back almost anything. The announcement of the convertible notes issue will boost the price. Good luck to them but they will need to be pretty smart in coming up with new processes to get near the value that they report. The market realizes this as well and that is why they are 6-7c and not some other crazy number.

    If they do happen to go up then you have an opportunity to make some money, but I would not hold for long unless you see an announcement that they have perfected a new extraction method.
 
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