I have made a quick summary on what the potential takeover price could be.
The CEO has reiterated many times that the price will be based on NPV rather than the current share price.
Stage 1- DFS
Prepared in Jan 2022, the updated DFS can be found on this link:
https://lithiumpowerinternational.com/wp-content/uploads/2022/01/NI43-101_DFS2022_LR.pdfThis provided a NPV (after tax) of US$1.458B and an IRR of 29.3%.
It was based on the following assumptions
- Total Capex of US$626M (may seem comparatively high but includes the necessary salt removal plant)
- OPEX of US$3,864/tonne
- Avg battery-grade carbonate price of US$25,217/tonne (sale price)
The project has also achieved the following:
- Environmental Impact Assessment (EIA) has been approved
- CcHEN Regulatory License to produce, market and export lithium products for 30 years
- Secured water supply rights and relevant environmental licenses for such rights
- LCE plant will be carbon neutral with 50% water recovery
- Working with Indigenous community, with revenue-sharing agreements agreed.
- 100% ownership of the project (as of this year)
- Project is shovel ready!!
Stage 2There is not that much financial information available on Stage 2, however, the resources are estimated to be the same, if not bigger, than Stage 1.
I believe the issue with Stage 2 for LPI is that we may require a CEOL to operate. We may struggle to get a CEOL with the current political situation in Chile. Stage 1 is on the 'old code' tenements and does not require a CEOL.
However, as the most likely acquirer is a state run entity (Codelco), they will be able to fast track a CEOL and therefore would factor in the value of Stage 2.
For comparative purposes, I have allocated a very conservative US$1B for the Stage 2 NPV.
Stage 1 NPV- US$1.458B
Stage 2 Value- US$1B
Total Value US$1.568B - AUD$3.89B
Current Shares Outstanding- 629M
Fair Value Share Price- $6.18
Fair Value Share Price (Just Stage 1)- $3.67
Naturally there has to be some discount to NPV as the purchaser is taking on a large risk. Consideration has to be made to the falling carbonate prices, although recently the market is showing signs of a potential rebound.
Keep in mind LPI's extra 10m of cash in bank is an 6 or so cents per share on top of takeover price as well. More importantly, it shows we have the capital to not be pressured into accepting low ball offers for an extended period of time.
IMO I believe that the offer should be between $1.2 - $1.5 which is still a massive discount to what the project is worth.
