AZS Media related thread, page-55

A few comments about TO speculation.

Firstly, anything can happen in the corporate world - companies initiate TO’s at over the top valuations - just look at IGO which has written off a large part of what they paid for WSA. In hindsight they clearly overpaid. On the other hand we had Wesfarmers TO KDR for what is now in hindsight, a very cheap price.

Secondly they are clearly many companies wanting to expand their footprint in lithium - eg RIO, SQM, etc etc and they have been very direct about it. There are lots of farm in deals from the same companies but not many that I am aware of where a company buys 20% of a stock like AZS. Lithium is a very hot commodity and they want in and there are many hundreds of stocks exploring for lithium. LTR’s rejection of the TO proposal tells me buyers are going to have to pay up big time in a hot lithium market. RIO has been upfront that the prices are too high but that is their own opinion. Have you noticed that the same companies wanting to increase lithium exposure are the same ones committing to not just one but many farm-ins - is that perhaps a message that prices being asked in TO’s are just too high for them? SQM’s investment in AZS was a very smart move by SQM and also AZS.

Thirdly it takes 2 to tango. It’s all very well if there are lots of buyers but will they seller have any interest in selling and if they want to sell the price may be so high that buyers say no (looks like that happened at LTR). The only lithium TO that I am aware of recently is ESS and it has a very small resource and the first TO failed. One needs to look at the motivation of a seller to sell and the key one is not necessarily the price now or in a TO but the potential of a project to make a lot of money over the longer term. Creasy and other top 20 holders are patient investors and are smart and they will want top dollar.

SQM ended up with a 20% holding in AZS but do we know if SQM really wanted to TO AZS or do a farm-in? We don’t the answer to these two questions and if I was SQM shoes I would have started with a TO offer and then perhaps a farm-in and isn’t it possible that AZS’s board and Creasy stated no way are we selling or doing a farm-in - it’s all speculation on my part but the point is we will probably never know what discussions went on behind closed doors prior to SQM 20% investment in AZS.

In my view the potential at Andover, as Tony has stated, to be a world class resource is ‘enormous’ and not just 100mt but over potentially 200mt even 300mt. Even if SQM or RIO were to pay triple the current AZS SP, Creasy and other top 20 shareholders would be potentially giving up very big upside in Andover in accepting cash or shares particularly in RIO, where Andover would be a pimple on an elephant and less so if it was SQM. When Sirius was sold to IGO, mainly for shares, IGO was a lot smaller and Creasy and other Sirius shareholders were still receiving enormous upside from the Nova discovery as IGO share holds - Sirius was sold for $1.8b and pro-forma MC of combined IGO entity was $2.7b! Remember PLS is valued at $15b with a resource of 300mt and when they finish their expansion from 580,000t to 1mt production I doubt the share price will stay at the current levels ie it will be a lot higher. If Tony and other directors really believe the potential is 200mt to 300mt they would want not double the current SP but maybe 5-10 times the current SP - would a buyer really pay that much in the next 6 months without an MRE of that size?

That is, while no one can rule out a TO of AZS at any point in time, the probability is extremely low in the next 9-12 months until the potential resource and value of Andover’s lithium project is much clearer. If in the next 12 months the 200mt to 300mt or even more, potential is validated then the AZS SP will be a lot higher than current levels. Then it may be worthy of sellers considering a sale but I doubt it.

The point I am making is the comments to date from posters stating AZS will be sold seems to be focused on the motivation of the buyers but they seem to be ignoring the interests and motivation of sellers. Why would the AZS board or a top 20 shareholder sell when the CEO publicly stated Andover has enormous potential to be of world class scale and move well up to possibly a top 3 resource unless the bid was $10b and that ain’t going to happen. Tony, in private to the board and Creasy may be making comments that are even more positive than he is making public - I am not suggesting he is making such comments but no one knows what discussions are held behind closed doors.