Ann: LPI to Demerge its WA Hard Rock Lithium Assets, page-39

Looks like it is inevitable that the world's second highest lithium grade Maricunga project will be bought out. Spinning out the WA assets to a separate entity ensures that LPI can be taken over cleanly.

Really good news, as the Maricunga resource needs consolidation. The question then becomes, who are the candidates and what would the takeover price be?

The first point to raise here is that LPI has spent over US$52 million over the years to de-risk the project. LPI also have first mover advantage on the Maricunga. Whoever comes to the party at Maricunga will be 3-5 years behind LPI as we are "shovel ready"



The obvious partners who would takeover LPI are the ones that recently took part in the quota in Chile, with the following results:

* BYD Chile offered 61 million USD for one allocation of 80,000t LCE
* SQM offered 60 million USD for one allocation of 80,000t LCE
* Cosayach Caliche offered 30.1 million USD for one allocation of 80,000t LCE
* Albemarle offered 60 million USD for two allocations of 80,000t LCE
Totaling 211.1 million USD (292 million AUD) for a total of 400,000 tonnes quota of LCE.

** NB - The Chilean Government awarded LPI a licence for lithium production (CCHEN licence) for the grand-fathered old mining code properties in 2018. The approval permits the extraction quota of 472,868 tonnes of lithium carbonate equivalent (LCE). That is more than all of those mentioned above - combined! Can you see why I say, take over is the most likely scenario.


So what would the takeover price be?

Let's take the most recent acquisition of PSC (Zimbabwe asset taken over by Chinese). They had an NPV of $1.3 billion. The company was acquired for $422 million.

Let's say the updated DFS, imminently due, puts LPI at $US 2.2 billion NPV (stage 2 included). With 51% ownership, that leaves us with $1.1 billion NPV ($US).

Based solely on those metrics, if LPI is acquired tomorrow on those comparisons (with PSC), LPI would be taken out for $578 million ($AUD). With the lower jurisdictional risk of Chile vs Zimbabwe, arguably better metrics from the updated DFS (better IRR, NPV, CAPEX reduction, etc) we could say at least an additional 20% more for LPI makes it a 5 bagger or share price of $2.05 per share. That would still be a bargain price for the take over partner in the long run.

Crazy to think LPI is at MC of $202m compared to other brines:

AGY MC $507m
GLN MC $522m
LKE MC $1.2B
AKE MC $6.9B

LPI is SERIOUSLY UNDERVALUED!