I've been on holiday for 3 months and just starting to look at results and announcements. I've updated my valuation of AGY based on the latest lithium carbonate prices and it has slashed the value of AGY substantially.

The operational updates have also been disappointing. I had assumed that they would be ramped up to 2000 tpa or close by now. Only $48 t produced so far. Seems to be much stop and start due to changing their process and "equipment performance issues". The latest excuse if that they are putting in new, better filters. How did they not know that the old filters were inadequate before now? On the flip side, the 2k tpa is the proof of concept for the expansion to 12k tpa so that should go smoother and faster.

The environmental approval of the expansion is still not approved which is a risk. It may never happen and may require additional time and expense.

Running the valuation for AGY helps me understand the reduced valuation of similar players like GLN which seems like a bigger, better resource, with a solid offtake agreement but behind AGY on plant build.

Progressing but behind expectations

"Current commissioning works have progressed to a semi-continuous operations phase, with planned upcoming works targeting to achieve continuous operations and leading to ramping up production operations during H2-CY2023."

Earlier they led the market to expect that the plant would be fully operational in FY23 but it's slipped. As above, they are not even committing to achieve a rate 2000 tpa in the next 6 months, merely "ramping up". To what?

Total production to date, 17.5 tonnes - about 3 days of nameplate production.

I'm losing patience with this mob. Maybe the technology is harder to scale than they thought?

Still haven't heard anything about an offtake agreement. Are they going to sell it all on the spot market? At least prices have stopped falling.

Link to ann: 05q7rw17cz0vk0.pdf (asx.com.au)

The latest operational update was a bit disappointing. I had been hoping that they would get up to nameplate during FY23Q4 but no, it looks like commissioning is taking longer.

It's great that they've produced 10 tonnes of 99.7% lithium carbonate but really, that's less than 2 days of nameplate production.

I see risk of further delays and a good chance that they don't produce 500 t in the September quarter. Also lithium prices continue to tumble which hits revenue and profit directly.

And I haven't heard anything about an offtake agreement. Are they going to sell it all on the spot market?

I'm really hoping or approval of the expansion which should make the share price pop. No news there either.

Link: Rincon Operational Update (asx.com.au)

AGY's share price has crashed over the last two days on no news at all. Even Hot Copper has nothing credible to say except short sellers and BEOT (big end of town) which is a vague conspiracy theory about price manipulation. What's really going on?

The price of lithium carbonate is definitely down and hasn't yet found a floor. AGY has no offtake agreement and are not producing at anywhere near capacity yet. This means that all of their production is exposed to the falling prices.

China is suffering a whole heap of flu - not surprising after the lock-down, so that tends to counter the "China reopening" thesis and sap hope of a short-term lithium recovery.

Lastly, there are still some question marks over AGY. They are a bit light on JORC and their process is unproven at volume. It's better than DLE which is touted by other brine players. AGY seem to be scaling up to commercial production right now.

I'm sticking with my original thesis that they have a good resource, enough cash to commission it, will be cash flow positive in 2023 and have some substantial upside with the possible plant expansion (which is not approved or funded.)

I'm going to be greedy while others are fearful.

AFR is saying an investor roadshow is being organised which suggests a cap raise coming.

https://www.afr.com/street-talk/argosy-minerals-tees-up-fund-manager-chats-raising-tipped-20230116-p5ccur

Could be to fund the +10ktpa expansion. Could be an acquisition. Could be a cost blow-out of the 2ktpa.

We haven't got approval for the expansion and no ann on anything else. If they get expansion approval the SP should rise - massive NPV in that - but I'd like to see the 2k plant finished and operating at nameplate first.

Fun and games. Could present a buying opportunity if you are brave.

Operational Update

Latest update 45kbmbxl0kvrbh.pdf (asx.com.au) is a real "steady as she goes" release. Nothing market sensitive about it.

Have produced 1 tonne of Lithium Carbonate which is not much. will need over 5 tonnes per day to hit 2000 tpa

"Ramp-up phase of continuous lithium carbonate production operations scheduled during current quarter and advancing toward steady-state production operations by end of Q2-CY2023"

Nothing new here. Maintaining my production estimates.

The latest operational update was a bit disappointing. The headlines:

• 98% of 2,000tpa operational development works complete -with plant commissioning 86% complete 
• Current commissioning and production test-works producing primary lithium product toward battery quality lithium carbonate production 
• Continuous lithium carbonate production operations scheduled during next quarter 

Unpacking this. 98% sounds good but the last 1% of a project always takes a long time. Second, "toward battery quality lithium" seems to mean that they are not there yet. The last statement is a bit vague. Next quarter runs till March 23 and it just says "scheduled" and doesn't even say that this will be nameplate production. Most likely production will ramp up to 2000 tpa from there so probably less than 500 tonnes produced this FY and it may not be shipped and sold.

Plugging this delay into my DCF/NPV model actually doesn't make much difference. They will be minting money soon enough if the Li price stays high. The really big factors are the price of lithium carbonate in future years and whether they will expand production. There has been talk about increasing by 10000 tpa to 12 ktpa but this needs approvals that they don't have yet.

I'm keeping my valuation - the slip in production dates is roughly the time elapsed so I'm discounting back by the same amount.