Cypress Development (CYP.V) deserves praise for actually raising cash when the money was available rather than waiting for the moment its treasury started to run on fumes. The most recent placement was completed in February when Cypress raised a total of C$18.1M in a placement priced at C$2.00 and in hindsight, the timing couldn’t have been better.
The strong cash position means the company will be able to complete the feasibility study on the Clayton Valley lithium project without any financial issues and given the current strong lithium price (in the $60-70,000/t range), Cypress is in an excellent position to increase the average realized lithium price it uses in the study. That should alleviate all capex and opex uncertainties and odds are the definitive feasibility study could actually be better than the pre-feasibility study thanks to the high lithium price. The upside scenario using $14,250 lithium in the pre-feasibility study shows an after-tax NPV8% of US$2.2B and an IRR of in excess of 40%. This means that even if the capex comes in 40% higher (this is an arbitrary percentage to prove our point), using a lithium price of $15,000/t will likely still result in an after-tax NPV8% of in excess of US$2B.
Disclosure: The author has a long position in Cypress Development. Cypress is a sponsor of the website. Please read our disclaimer.
