Daily Brief Energy/Materials: Lithium Americas , Pan African Resources, Pharos Energy, Summit Midstream Partners LP, Western Midstream Partners LP, Wheaton Precious Metals and more

• LAC is a pre-revenue junior miner with aspirations to turn its lithium clay deposit at the Thacker Pass mine in Nevada into the world’s sixth-largest lithium producer by 2028, eventually rising to 25% of global supply. 
• LAC’s Thacker Pass mine is grossly uneconomic. Using the company’s own inputs, Thacker Pass has an NPV of zero at current lithium prices, which remain far above long-term averages.
• The Thacker Pass mine is a clay deposit mine. There does not appear to be a single operational lithium clay mine globally. Experts agree that extracting lithium from clay does not work using reasonable output price assumptions.

This morning, Pan African announced that it may have been in technical breach of the net asset test when it paid out dividends to shareholders in the five years from FY19–23 and also when it instigated its share buyback programme in 2022. As attested to by the fact that it took five years to be noticed, the apparent breach arises from the nexus of an arcane bit of legislation and a curious distinction between the presentation currency of the group (the US dollar) and its functional currency (the South African rand) and the effect of the depreciation of the latter against the former on the distributable versus undistributable reserves of Pan African Resources. Fortunately, there is a relatively simple remedy that involves a court sanctioned capital reduction process via a clever reserve juggling act. There will be no change to the number of Pan African shares in issue. However, it will require shareholder assent, which is the reason for PAF’s announcement. We believe it is in shareholders’ interest to vote in favour of these resolutions at its forthcoming general meeting on 10 June.

• Production from January to the end of April was 5,755 boe/d including 4,347 boe/d in Vietnam and 1,408 bbl/d in Egypt.
• This is in line with the company FY24 guidance of 5.2-6.5 mboe/d including 3.9-5.0 mbpoe/d in Vietnam and 1.3-1.5 mbbl/d in Egypt.
• The FY24 capex guidance is unchanged. The key near term news flow remains the farm-out of an interest in Blocks 125 & 126 in Vietnam. Several interested farm-in parties are awaiting confirmation of timing of a rig slot and clarity on the well cost.

• Summit Midstream previously hinted at significant news in their strategic process
• Author anticipates that this news could lead to a positive outcome and increase in stock price
• Soft Q4 earnings due to natural gas environment are seen as a limited-term concern before the upcoming announcement

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only. This article was originally published 3 months ago on Value Investors Club.

• Western Midstream Partners, LP began the first quarter of 2024 with promising results, which points towards the potential for continuing growth for current and potential investors. The company posted a record-breaking adjusted EBITDA of $608 million for the quarter. This unexpected and impressive increase is largely attributed to the substantial increase in throughput in the gas segment of their business, better than expected performances in terms of gross margin per unit, and the strong performance of the water business, indicating an overall proficiently managed operation by the firm. Looking into the specifics, the Delaware Basin saw a 3% increase, DJ Basin saw a 2% rise, and the company’s other assets also had notable growth. The oil-side, however, experienced a decline by 19% on a quarter-to quarter basis due to the divestiture of certain JVs. Yet, the DJ Basin managed to rise by 7%, and the PRB Basin rose by 15%.
• Baptista Research looks to evaluate the different factors that could influence the company’s price in the near future and attempts to carry out an independent valuation of the company using a Discounted Cash Flow (DCF) methodology. In this report, we have carried out a fundamental analysis of the historical financial statements of the company. We have added reasonable forecasts of the annualized income statement and cash flows and carried out a DCF valuation of the company using its Weighted Average Cost of Capital (WACC) to determine a forecasted share price. We have further incorporated a sensitivity analysis/ scenario analysis to understand how changes in key assumptions could impact the valuation under 3 scenarios – a base case, a bull case, and a bear case. These additional layers of analysis serve to provide a comprehensive and robust valuation, giving investors a nuanced understanding of the inherent risks and opportunities.

• Distinguished by generating approximately $220 million in operating cash flow and over $160 million in net earnings, Wheaton Precious Metals’ financial results for the first quarter of 2024 reveal the efficacy of its business model, particularly in the context of a rising commodity price environment. The company maintains strong cash operating margins and orchestrated the successful completion of an upfront payment of $450 million for the acquisition of the Platreef and Kudz Ze Kayah Streams from Orion Resource Partners. Wheaton Precious Metals’ strong liquidity position is evident through its holding of $306 million in cash, an undrawn revolving credit facility of $2 billion, and robust operating cash flows. These assets equip the company to meet all outstanding commitments and pursue promising mineral stream interests. Baptista Research looks to evaluate the different factors that could influence the company’s price in the near future and attempts to carry out an independent valuation of the company using a Discounted Cash Flow (DCF) methodology. In this report, we have carried out a fundamental analysis of the historical financial statements of the company. We have added reasonable forecasts of the annualized income statement and cash flows and carried out a DCF valuation of the company using its Weighted Average Cost of Capital (WACC) to determine a forecasted share price. We have further incorporated a sensitivity analysis/ scenario analysis to understand how changes in key assumptions could impact the valuation under 3 scenarios – a base case, a bull case, and a bear case. These additional layers of analysis serve to provide a comprehensive and robust valuation, giving investors a nuanced understanding of the inherent risks and opportunities.