Ann: Kathleen Valley Funding Package, page-415

A perspective
Well we now know that Gina decided on a blocking stake and the impact on the SP is disappointing. Having said that, one thing I have noted is that LTR did not ask Hancock for funding. It rather has raised at a hefty discount (causing dilution) rather than seeking funding from Hancock.

That says a lot too me despite all those ASX announcements by Hancock as they were increasing their stake, that Hancock is willing and can bring funding to and experience to LTR. This would suggest too me that any bid for LTR by Hancock is going to have to be hostile or damn good as I don't see TG selling his stake in LTR to Gina (i.e. meaning it is a blocking stake) although Gina in time may seek to try to get over 50%. Given TG knocked back ALB bids to $2.50 a share.

I suspect the relationship between TG and Hancock is frosty given funding was not sought from Hancock and therefore indicatively means LTR certainly don't trust Hancock IMO IMO (as I don't either). I wonder what others think to this comment????

Project economics
We know capex has increased snce the November 2021 DFS, and now DSO looks less likely, but a key too me is that given estimated costs of production (and the fact I suspect the spodumene price is still above what was in the LTR DFS itself) that in production the metrics around EPS and P/E ratios still hold. Time will tell but this is going to production now with TG/BOD remaining.

As I said very disappointing what has happened to SP today, but recovery IMO will happen overtime as production occurs and DFS metrics hold (which is the key assumption and risk in production). A key to ensuring risks are reduced on financial metrics is hitting the 'recovery target' in the WOF process.

Given potential profit in production, on spodumene sales alone one would expect SP to be north of $3 a share, but that requires no significant cost overruns on opex and volume hitting its target. Given the lithium supply/demand imbalance you would expect spodumene prices to remain above what was used in the DFS. I noted in ALB walking away a previous Ann here indicated ALB were happy with the project itself. Now Gina has lost a lot of money today as well - but she ain't here for the short term either and whatever strategy she has will likely IMO show itself over the next few months (and probably before production) - i.e. I think that strategy is to seek to take LTR on the cheap as she does with a number of her previous TO plays (AGO comes to mind btw).

Obviously with higher capex, IRR has probably lowered from the 57% in the Nov 2021 DFS for Kathleen in terms of the spodumene development, although the offset is the higher spodumene price and higher production than what was used in that DFS, but in production SP is no longer a function of NPV IMO IMO - it becomes a function of nominal metrics such as P/E ratios and EPS ratios in production. The DFS was based initially on a plant of 2.5mtpa producing 500,000 tonnes of 6% grade equivalent spodumene concentrate. This was then increased to 3mtpa, producing as a guess estimate 600,000 tonnes spodumene concentrate, with a further expansion to 4mpta been proposed down the track (700,000 tonnes of spodumene concentrate). If metrics are met and the spodumene price holds what has happened today will be in the past, but the pitfalls of today will still need to be played out. That is a lot of profit per tonne of output based on an opex of A$700 per tonne and a spodumene price well north of that in production, but achieving metrics is the risk in production.

The sun will shine in the morning, and a VB or two will be downed tonight.

All IMO