Following the recent explosion of lithium stocks I decided to see if I could find any that were still undervalued and I think I may have found the one. TL;DR at the bottom

MCap = $61M, SP = 0.19

Investor Presentation

Arcadia Lithium Project DFS

This is just my opinion so I welcome any corrections where I may have stuffed up. I did not undertake an exhaustive analysis of every lithium miner, I was specifically looking for those that were still on the launch pad.

IRR (bigger is better)

Internal rate of return summarises how good the investment is. PSC have an IRR of 71%, most other lithium miners are around 20-40%. PSC is the one of the few that do not have the IRR priced into the SP yet.

VUL IRR = 26%, LKE IRR = 25%, LPD IRR = 31%

Why is their IRR so much higher? PSC will mine both petalite and spodumene. The petalite allows them to sell into the stable glass and ceramics markets while also taking advantage of rising demand for spodumene from the EV market.

Cash Flow / Profitability

Thanks to a higher profit margin, Prospect have a very profitable model. With a market cap of ~$63M their DFS forecasts an EBITDA of US$168M (AUD $217M). This is currently 3.5x MCap (very undervalued).

Most other Lithium miners that are at the same stage have a MCap much closer to their forecast EDITDA. There are of course exceptions to this depending on how advanced they are to production.

CAPEX

They are fully financed up to production plant meaning that there will be less/no shareholder dilution. Some lithium miners need to keep going back to rattle the can for each stage of development. Prospect have stated that development will come from cashflow (as much as is reasonably possible). This does not mean that they will never need to raise capital but between now and production the amount and frequency will likely be significantly less.

The CAPEX required to build the production plant is neither high nor low but it is cheap relative to EBITDA.

Pilot Plant and Production Timeline

Prospect are well advanced in their goal to commission a production plant. Pilot plant is scheduled for H1 2021 with production plant scheduled for 2022/2023. Long lead time equipment for pilot plant has been purchased. This puts them ahead of competition as most of the emerging lithium miners will be commencing production 2023/24 or later.

Additionally their plant will be cash flow positive 18 months after commencement. Most other lithium miners require 2-3 years to achieve this.

Prospect already have offtake agreements in place for 72% of production.

There is some risk in that the mine is located in Zimbabwe but the gov is supportive of miners considering large amount of economic dependency.

So to summarise

- Low market cap (yet to rocket).

- Very profitable (shortened time to be cash flow positive).

- Moderate CAPEX fully financed.

- Less shareholder dilution in the future.

- Advanced timeline, pilot plant H1 2021.

- Offtake agreements in place.

12 months ago in this report, Pitt Street Research valued them at $0.81-$1.31.

TL;DR: You missed the VUL rocket and FOMO'd too late into LKE, get in early before PSC takes off.