rkeeb - thanks for posting the Morningstar analyst report – I find it very valuable to compare and contrast these reports against my own assumptions and analysis.

These are the most significant (disclosed) Morningstar assumptions, in my view:

1.       LAC/BLM will prevail in the TP lawsuit.

2.       By the end of the decade, production will be 150ktpa+

3.       Eventually, production ramps up to 324ktpa+

4.       By 2030, lithium chemical prices will have decreased to $12k/t (Morningstar estimate of all-in marginal cost of production for the sector).

I agree with assumptions 1 & 2. Assumption 3 is about 15% more aggressive than I am assuming.

Assumption 4 is a major driver of the terminal value, and therefore has an outsized impact on the Fair Value Estimate. Given it is so far into the future, and therefore highly uncertain, it is understandable and prudent for Morningstar to be conservative with this assumption. Personally, I don’t believe lithium supply has any chance of keeping up with demand over the next 10+ years, so I expect prices to remain elevated well beyond 2030. Notwithstanding, I conservatively assume a price of $15k/t from 2030.

For what it is worth, my Fair Value Estimate for LAC is US$68. This is based on a 15-year discounted cashflow analysis, incorporating more than 50 assumptions. Ofcourse 100% of my assumptions will turn out to be wrong, but I do tend to be conservative, so hopefully the end result is close to the mark.

Anyway, onwards and upwards!