Sure did, Although it doesn't look any different to my previous forecasted numbers but I've made some substantial changes to it to focus solely on the SC6.0 instead of SC6.0 + LHM operations given there's so many moving components; as LTR have highlighted a few times in relation to their downstream strategy.
The impact of the debt and equity package is minimal (IMO) and a couple of thoughts I have on it:
1. $760m debt (refinancing the $300m + capitalised interest ($8m?) on the Ford Facility) = $452m additional debt of which $110m is for cost overrun which can be repaid/redrawn anytime only if require for 3 years while the operation ramp up to steady state & ultimately to nameplate capacity. If everything runs accordingly - we may not have to rely on the $110m cost overrun facility.
2. The terms of the loan does appears to be "attractive" as the rate is based on BBSY which is currently around 4+% + Bank Margin; which a lot of factors can determine this; in my field of work, commercial/retail properties usually bank margin between 0.75% and 2.00%; there's no mentioned of other fees i.e. Line Fee, Rollover fee, etc - I'll assumed there's none of these.
3. Commercial lenders usually have covenants in place (which the Ford facility did not have - unfortunately this may be why we're re-financing it); as it may be a condition of the new package. Common covenants are ICR (Interest Coverage Ratio), Debt Equity Ratio (see point 4 below) and reporting requirement to the lenders which may be on a quarterly basis.
4. I believe the only reason they have to do the capital raise is to satisfy the suite of commercial lenders so that it meets the debt equity ratio requirement; in the preso released yesterday - John (CFO) mentioned the company will have a debt equity ratio of between 45% to 55% (For comparison, commercial/retail properties are usually 50% to 60%). The Institutional Investors (highly likely) understood this and took advantage to negotiate and secured the $1.80/share placement. The Institutional placement + SPP (if fully taken up) represent 10.62% of LTR's SOI as at 18th of October 2023.
5. The SPP is not underwritten; if there's a shortfall, it will not be underwritten by the brokers (UBS/Bell Potter) as it can be costly to maintain and I see this to be an act of courtesy provided by LTR to its current shareholders (LTR likely do not require this funding but it's a bonus if they can secure them giving them a stronger buffer).
And on to my updated forecast of LTR's KV SC6.0 Operation:
As I've mentioned above, the forecasted EPS and expected DPS remain largely unchanged due to a couple of factors:
1. The forecasted is now only on SC6.0 (less capex, C1, more certainty, etc) instead of SC6.0 + LHM which may be why Tony emphasise on getting their downstream strategy right.
2. C1; I previously have a high $700/t USD and as per LTR; this is $651/t AUD (including tantalum credit) which made a significant difference; however for this exercise - i decided to exclude the tantalum credit and added incremental mining cost annually.
3. The add-on for 4 Mtpa capability was $26m and as we all are aware by now; this may be the cost at this time - I decided to double it; it's still a drop in the ocean compared to revenue.
4. To date, we won't know what the SC6.0 price LTR will achieve, I'll assumed a straight $3,750/t USD which is the low end per LTR's 2023 FY report. With ALB takeover off the table, will they now be trying to secure an offtake agreement? we now have added (20% more) capacity.
5. DSO Revenue - Nil; but not a write-off as this may come into play later either as material for the plant or simply sell off for added revenue once pricing is attractive.
6. The bank margin isn't disclosed; I've used 4.50% and assumed the repayment will be as per the term of the facilities; 10 years (ECA) & 7 years (commercial lenders). Although these can be paid off as soon as the 2nd year of operation.
Dividends
This is a tricky one especially for the 1st five years now that we're with the commercial lenders, they will likely have a number covenant in place restricting how much dividend LTR can pay out to its shareholders.
Debt Equity Ratio mentioned above is one of them, LTR needs to maintain a debt equity ratio of between 45% to 55%, The Company will be unable to pay dividend if as a result of payout will cause the ratio to go over 55% (if 55% is the limit set by the commercial lenders).
In saying that, I don't believe this will be an issue based on the forecasted revenue which will bulk up equity substantially. However it is unknown if there's any other covenants that will affects dividends payout. I've continued to assumed a 20% payout in Year 1 of operation (payable in the following year) and 50% from Year 6 onwards.
Share Price
I've left the P/E ratio at 8.00 as this is subjective; I can expect it to be in the range of $5 - $7 during operation. Again, this is subjective.
Afterthoughts It is a shame there wasn't another bid but we know the reason for it, In any case, the current SP is what it is and is (likely) a result of the institutional placements and what the market perceives its "fair" value is.
However as TG and Tony had mentioned previously, they are the best at determining what the company's value is worth and certainly the current SP and $3 isn't it. Some came to the conclusion $3 is the full value or premium because BOD let Albermarle do their DD, I don't think this is the case. @dynofish and a few others had posted very good info as to why so I won't bother going through it here.
I believe the bid will still fail even if Gina isn't around.
Please download/save a copy onto your computer before making any changes.
As always, this is put together based on information i could get hold off and numbers and forecasted results may not reflect what it will be once LTR is in production; This is not and does not constitute financial advice and decision to buy/sell should not be based on it.
LTR Price at posting:
$1.90 Sentiment: Buy Disclosure: Held
(20min delay)