Good News & Bad News, page-514

As per Andyroo, previously the company announced that POSCO will fund ~$160 mill via a convertible bond and another debt instrument. In order to prepare for POSCO JV, while keeping other offtake customers happy, I believe PLS will need to spend ~ $300 mill to do that, so there is an additional ~$140 mill required. The said $300 mill includes fixing plant 2 and expanding plant 1 so that PLS have say overall spod production capacity of ~650kt.

At a $400 spod margin and $7k hydroxide margin, the POSCO JV would generate gross profit of ~$200 mill. Say $110 mill after tax and loan repayments, which equates to 36% return pa on $300 mill capex, so payback period less than 3 years.

The above numbers are very rough, they assume it happens today, and underlines a strategy assuming all debt. If POSCO fund said $160 mill and PLS raise $140 mill, the $140 mill could be split 50/50 debt and equity, which would lower debt and reduce payback period at the expense of share holder dilution.

I guess it's important to note that PLS's role in getting ready for the POSCO JV is 18 months away, and if we can make $400 gross margin from spod production of 380kt over the coming 12 months, that would deliver $150 mill profit, which could be recycled to fund 50% of the JV capex. As said in previous post, PLS just need 2 good years under their belt, which will transform the optionality for downstream participation.

AIMO, DYOR