Ann: Burmeister Lithium Potential Defined, page-98

MIN were clearly sufficiently interested in the deal with POS to pay a $1m non-refundable deposit. The POS's update of 30 April noted that MIN wanted to renegotiate the terms. The remaining key terms being $14m payable as $6.5m on completion of a formal sale and purchase agreement and $7.5m payable a year later. There would also be a 0.75% FOB royalty on all lithium minerals and a 1.5% NSR on all other minerals.

The 0.75% FOB royalty could have been quite a bit. Assuming 70% recovery and 1% head grade, a 1.5Mt front end capacity would have allowed 175kt of SC6 (although grades other than SC6 may be optimal from a recovery optimisation perspective). If typical future price estimates are used of US$1,500/t the royalty would have been US$2m/yr if MIN ran the plant at full capacity.

Where it gets interesting is that POS has 3,713m shares on issue and closed at 0.5c for a MC of $18.6m. The proposed deal was paying 75% of the current MC as cash (over 2 years) and when you add on the royalty that would be payable, MIN's deal was more than the total MC after the deal collapsed. There is a distinct chance that MIN pulled the pin on the deal because its cheaper just to do a takeover of POS.

TG6 has 71.7m shares on issue and appears to have closed on the ASX at 27c but 28c on the Chi-X. At 28c, TG6 has a MC of $20m. Based on current share prices a deal somewhere around a 50:50 merger into the new TG6 structure could be a possibility (I'm not sure if it would be a popular option, but its a possibility). A huge wildcard would be the capex needed to convert an existing flotation plant to lithium and how much worse (if at all) reusing the existing flotation plant would be in recovery rates than a new plant. Based on Essential Metals past scoping study, the cost could actually be quite low because most of the cost was in all the supporting infrastructure and that supporting infrastructure would appear to be metal indifferent. If TG6 were to gain access to (or merge) with POS Lake Johnston plant then the pathway to production is met test work, resource definition drilling, feasibility studies, permitting, Lake Johnston plant modifications and some basic open pit mining to access near-surface ore. There's a cost to all of these, but they may not be huge.

TG6 getting access to the POS plant could be akin to the deal WR1 is proposing.

While ideally from a TG6 perspective this would wait 6 months, I'm not sure if there is 6 months to wait as MIN's plan may have changed from injecting a huge amount of cash back into POS to taking over the whole company as a better deal for MIN shareholders. Do a deal, pay $1m & renegotiate for cheaper. That didn't work so pull the pin on the deal, watch the price of POS fall then announce a takeover.

Background info re flotation plant costs
Develop has a project in the Goldfields and as Essential Metals put out put a scoping study around a 1.2Mtpa operation with A$293m of capex involving DMS and Flotation. They recently put out an updated scoping study for a 1.2Mtpa operation with A$285m of capex but decided to drop any meaningful detail of the capex split. The actual magnetic separation ore sorting and flotation plant wasn't that expensive ($28m). What seriously boosted the price is all the additional costs that come with a flotation operation like the Dry Plant, the crushing plant, the plant services and support for the plant, getting water, contingencies and internals and more staff needing more accommodation. Many of those items are already onsite at the POS plant.