Woodlawn Ramp Up And New Lithium Stream Will Support A Stronger Long Term Profile

Catalysts

About Develop Global

Develop Global is a resources group that owns base metals and lithium projects alongside an underground mining services business.

What are the underlying business or industry changes driving this perspective?

• Woodlawn is progressing toward nameplate capacity of 850,000 tonnes per year, supported by higher grade lenses such as Kate and the newly identified N lens. This points to a longer mine life potential and a possible lift in concentrate revenue and earnings as more ore is brought into the plan.
• Sulphur Springs has an updated pretax NPV of A$921m, with management targeting a final investment decision in the June quarter of 2026. Ongoing drilling is intersecting mineralisation outside the current resource, which together point to project scale and duration that could influence long term revenue and earnings.
• Industry wide treatment and refining charges for copper, lead and zinc are currently at very low or negative levels. Develop has moved onto spot indices from 1 January 2026, which is feeding into a higher net smelter return of about A$470 per tonne at Woodlawn and could support margins and cash flow while these conditions persist.
• Pioneer Dome is fully permitted, with the ability to commence direct shipping ore within roughly six months and a capital requirement of about A$35m to A$40m. In a lithium price environment where recent spot SC6 pricing has been above US$2,400 per tonne, this could add an additional revenue stream and influence group earnings if developed.
• The mining services division now has two contracts, including a A$200m tunnelling contract at Waihi North. Management is assessing further tenders while highlighting very tight labour and equipment markets, which can support pricing power and potentially improve services margins and group earnings if capacity is allocated carefully between internal mines and external clients.

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming Develop Global's revenue will grow by 55.3% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 24.8% today to 21.5% in 3 years time.
• Analysts expect earnings to reach A$236.6 million (and earnings per share of A$0.41) by about August 2029, up from A$73.1 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting A$278.4 million in earnings, and the most bearish expecting A$128.1 million.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 12.1x on those 2029 earnings, down from 23.4x today. This future PE is greater than the current PE for the AU Metals and Mining industry at 11.1x.
• Analysts expect the number of shares outstanding to grow by 0.46% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.64%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• If Woodlawn and Sulphur Springs move from ramp up and planning into sustained production at higher grades, the extra tonnes and metal could lift concentrate revenue and earnings meaningfully over time. This may support a higher share price, rather than it staying flat, by increasing group revenue and operating margins.
• The updated pretax NPV of A$921m at Sulphur Springs and management comments that spot pricing and treatment charges would lift this figure further suggest that, if the project is funded and developed as planned, longer life and higher output could change the company’s earnings profile. This could potentially put upward pressure on the share price through higher long term cash flow.
• Pioneer Dome is fully permitted, with management indicating first direct shipping ore could be achieved in less than six months for about A$35m to A$40m of capital. With recent SC6 prices quoted above US$2,400 per tonne and very active offtake interest, a new lithium revenue stream could emerge faster than expected, raising total revenue and possibly group margins.
• The move to spot based treatment and refining charges from 1 January 2026 for copper, lead and zinc, at a time when management highlights very low or negative charges, has already lifted Woodlawn’s net smelter return to about A$470 per tonne. If such terms persist longer term, this could structurally support higher earnings and cash generation than a flat share price might imply.
• The mining services division already has two contracts, including a A$200m Waihi North tunnelling job, and management is assessing a substantial volume of tenders in what they describe as a very tight labour and equipment market. If they secure additional work on acceptable terms, this services arm could add a growing, more recurring earnings stream that may support a higher valuation through steadier revenue and potentially stronger net margins.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The analysts have a consensus price target of A$6.65 for Develop Global based on their expectations of its future earnings growth, profit margins and other risk factors.
• In order for you to agree with the analysts, you'd need to believe that by 2029, revenues will be A$1.1 billion, earnings will come to A$236.6 million, and it would be trading on a PE ratio of 12.1x, assuming you use a discount rate of 8.6%.
• Given the current share price of A$5.19, the analyst price target of A$6.65 is 22.0% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.