Plateau Energy Metals Inc. PLUUF

RE:RE:Report by Haywood. Price target of CAD 3.00

[juanPeru]

Y93H1979 wrote: Very conservative indeed. It looks like they have cut and plasted Nemaskas capital costs (800 mil). Electrolysis plant? Seriously? A better capital estimate would be LACs Thacker Pass project, which involves conventioanl processing (not electrolysis). LACs PFS estimates around $1 billion for a 80 MT pa project, and a little more than half that for a 40 MT pa startup, and that involves building a sulphuric acid plant (they have an acid consumption around double what ANSTO has demonstrated). A little less than half the capital cost goes to building the sulphuric acid plant. So my rough estimate for PLUs proposed 50 MT pa startup is in the 500 mil range.

It also looks like they have cut and pasted the operating cost for producing LCE for hard rock spodumene producers ($6000+ per tonne LCE). These mines only produce spod, which is loaded onto trains in the Pilbarra and then shipped to china, where it is roasted to 1000 degrees and leached with sulphuric acid, then refined. Hence the high costs. There is no way PLUs costs will be anywhere near that considering the simple flow sheet developed by ANSTO. Once again a better estimate would be LACs PFS for Thacker Pass which estimates around $4000 per tonne LCE, and that is with double the H2SO4 consumption. I will go out on a limb and estimate $3500 per tonne.

Lastly, the analyst is right in identifying the yeild as a potential risk. Yes, it is an unanswered question, but a question we can make an educated guess about. The major hurdles in Li processing are getting it out of the rock (leaching) and the impurities in the final product. ANSTO has demonstrated that these 2 hurdles can be easily overcome. The chemistry in the leach solution is unknown, I agree, but the composition of the final product is known and indicates that there are no nasties in the upstream solution. As for the % yield, I'm not too worried, as the flow sheet developed by ANSTO is very short and simple, with very few opportunities to lose product along the way. It is a very conventional straightforward process. In addition, it appears that further refining is not needed, which would be another step where LCE product is lost.

So in short, yes, a VERY conservative evaluation on the technical side. I'll let others comment on the financials, as that's not my area.

Very clarifying technical remarks.

Despite holding an mba, junior financing is not my area, neither. However, just applying common sense, is it necessary or reasonable to issue 450 million additional shares (more than x6 dilution) for a company who project an ebitda of C$648 in its first year of commercial operation? Really? I think there are much better alternatives out there.

At this point of time, for many investors a C$3 sell target to a "very high risk" investment like this is indeed a sell signal. Maybe these guys at Haywood want to buy more cheap shares taking advantage of being the only broker covering PLU.