RE:RE:Chinese LI producers set price floor as demand evaporate Let's put it into perspective:
- Current spot price for SC6 is around US$4,200 let's say
- CRE FS is using a US$1,850 price for the project's economics
- Even if prices collapse further, still should be able to sign something in the $1,500 area or a formula based on the average past prices which still would work to around that IMO. Note that many battery plants are coming up outside of China in the next 2-3 years, and where all this supply will come from? China does control the market but for now.
- CRE’s FS NPV is US$1.9B @$1,850 price deck
- Assume they issue 200M shares to fund the construction (worse case) – we will have 450M shares outstanding
- Using the NPV and the new shares count, the value per share will be $US4.2 or around C$5.5. And that’s for fully funded mine with zero debt or offtake at lower prices. Between construction and production start the valuation is 80% moving toward 100% will give us a C$4.4 value at minimum moving to the C$5-C$6 range once the production starts and then starting to use multipliers. If in doubt check SGMLvaluaton progress (well they did not have CRE management but that’s another one).
-We are trading 25% of our current NPV, whereas our peers are 40%-60% at the FS stage even without the permit. That’s why this looks so fishy..
Economics still makes sense here as the project will advance quicker than any other and can capture the high prices for the next 5 years until more supply comes online.
The issue is that this stock never went near the valuation of the peers so we cannot complain that we lost value. I wish we had the FL or RCK moment when our value tripled and then collapsed back. I would have moved away and never look back at this management - they are focused to build the mine, not create shareholders’ value in the short term. Had they announced even some worthless letter of intent with some majors back in Nov/Dec when prices were high we would have blown C$4 and who knows high (Looking at you PMET). Now they keep delaying without giving a reason.
Rant over!