Bacanora Minerals - Effects of Higher Lithium Prices

Good evening,


I'm going to re-run some old numbers and use the world's oldest and crudest method for showing resource deposit potential. This is not a look at OPEXs, but if you want an analysis of this, then I suggest you look through Okenia's posts over on the LSE bulletin board for Bacanora Minerals.


Some points will undoubtedly be repeated across older posts of mine, but don't be put off by this. 


The data that I will be using will have come from these websites: 


http://www.bacanoraminerals.com


http://www.mining.com/web/batteries-leave-lithium-hydroxide-facing-tight-supply/


Numerical Analysis:

All of these figures are obviously estimates and should not be used as trading or investment advice.

- The RNS entitled "Expansion Plans for Sonora Lithium Project" told us that the plant and mine would be capable of processing up to 50,000 tonnes of LCE per year (an upgrade from the 40,000 we previously knew of).

- Taking the price of lithium as it currently stands (~$6,500/tonne) you would expect a project value over the lifetime of the mine of $13,000,000,000 in revenue terms and $10,000,000,000 in profit terms at an average production cost of $1,500 per tonne.

50,000 tonnes * $6,500 

=$325,000,000 (Production revenue per year).



50,000 tonnes * $1,500 

=$75,000,000 (Production cost per year).

50,000 tonnes * $6,500 - $1500 

= $250,000,000 (Production profit per year)



$325,000,000 * 40 year mine life 

=$13,000,000,000 (Revenue over the mine's 40 year life span).

$250,000,000 * 40

= $10,000,000,000 (Profit over the 40 year mine lifetime).

Using the revised figure from mining.com of ~$8,000/tonne for 2015 and beyond at the same extraction cost (although this may not be realistic now the company has confirmed that they will be providing for the lithium hydroxide and lithium carbonate market) gives the following figures:

50,000 tonnes * $8,000 

=$400,000,000 (Production revenue per year).



50,000 tonnes * $1,500 

=$75,000,000 (Production cost per year).

50,000 tonnes * $8,000 - $1500 

= $325,000,000 (Production profit per year)



$400,000,000 * 40 year mine life 

=$16,000,000,000 (Revenue over the mine's 40 year life span).

$325,000,000 * 40 year mine life

= $13,000,000,000 (Profit over the 40 year mine lifetime).

                                                     

We must remember that these numbers are only estimates and I implore people to look through the RNS releases and do their own numerical analysis on this company. I still find it hard to believe that such "telephone-esque" numbers are appearing in my calculations, but the more I look at this company the more I come to the conclusion that it's staggeringly undervalued in the market. 

The Masked AIM Trader