Value! Value! Value!Since Advantage Lithium (AAL) published the PEA for its Cauchari project last month, and since Orocobre (ORL) published its year-end financial results from its Argentinia operation a couple of weeks ago, I thought it would be interesting to do a comparitive quantitive analysis of Cypress's PEA numbers versus these two fine companies, to assess the VALUE of Cypress.
First, let's look at the PEA of AAL versus CYP. Listed below are the key numbers from the PEA's (the first number is for AAL; the second number is for CYP).
LCE Resource size: 3.0M tons / 9.0M tons
NPV: $1.32B / $1.45B
IRR: 28.3% / 32.7%
Mine life: 25years / 40years
LCE production: 20,000tpa / 24,000tpa
Capex Payback: 3.3years / 2.7 years
Opex: $3,667 per ton / $3,983 per ton
The above shows that Cypress has a significantly larger resource, higher annual production, longer mine life, higher NPV, higher IRR, shorter backback period, and slighty higher Opex. On the basis of those numbers, logic dictates that CYP's value should be higher than (or at least equal to) AAL's.
AAL's Market Cap is currently $110M. Since AAL only owns 75% of the Cauchari project, the full value (for 100% of the project) is $146M. Yet CYP's Market Cap, with an arguably better PEA, sits at only $17M, suggesting that it's Value should be at least 8.5 times what it is today. 8.5 times...!!!
Now let's assume that CYP is now in Production and hitting the numbers of its PEA, and let's compare these to Orocobre's latest financial results for FY2018. Again, the first number is for ORL and CYP is second:
LCE production: 11,837 tons / 24,000 tons
LCE sale price FY2018: $12,578 per ton / $13,000 per ton
Opex: $4,194 per ton / $3,983 per ton
Gross profit: $99M / $206M
The above shows that CYP will produce about twice the quantity of LCE per year, at about the same Opex (slightly lower) per ton, resulting in double the gross profits. On that basis logic dictates that CYP's value should be (once in Production) about twice that of ORL (assuming the PEA numbers pan out of course). ORL's Market Cap is currently $879.6M (with PE Ratio of 16). Doubling that gives us $1.8B. CYP's Market Cap is $17M... suggesting its value should ultimately be 104 times what it is today. 104 times !!!
We of course don't know how the above will translate into an increase in share price (since we don't know what dilution the share count will experience as CYP moves forward), but the above should leave no doubt that CYP appears seriously undervalued in relation to AAL and ORL.
The Market will eventually correct this discrepancy...very likely as soon as the residual questions about the commercial viability of the Lithium extraction/leaching process get answered. This is not too far down the road folks...!
We have incredible value on our hands...and the share price should soon catch up to this value (I hope!).
GLTA