Before making comments about the demerger anns of yesterday I'd like to say hello to "Screaming Sixties" and congrulations to holders wo are holding this much from 2c like me. (I will be still holding as you know).
The screaming part of sixties is the people who sold before at fifties, forties, thirties, twenties,.. and retired form LTR. They are screaming now.
Now 60c will be a support soon instead of being a resistance at the end of today I guess.
My opinion is that this anns yesterday afternoon looked to me that it was rushed a little bit, maybe against some leaks.
In standard terms, this demerger action would mean for us that Liontown will be taken over. However I am not sure that's definitely the case here. I will explain my opinions below why the demerger might be necessary even though there is no takeover, and company is going full steam to developing the lithium project(s).
The eligibility conditions for LTR shareholders should have been stated on anns, but it is obvious to me that it will be proportionally free shares. It could happen like this IMO;
- LTR has 1,800m shares (1.8b)
- We should get same amount of free shares or in the proportional amount in the new NewCo.
- If you have 180k shares in LTR you should be allocated 180k shares in NewCo.
- However 1.8b would be too much in the new company, so they must make a share consolidation in NewCo.
- For example 1-to-6 share consolidation is being done.
- Then you will have 30k shares in the NewCo. (180k / 6)
- The total amount of allocated free shares on issue for NewCo will be 300m.
- That is the amount coming from demerger operation.
- Then the new IPO shares will be issued at 20c. (20c is the standard issue price for IPOs)
- If we consider that 300m shares will be 70% of the total shares on issue of the NewCo, then 128m shares will be issued.
- And total shares on issue will be 428m.
- The new IPO shares will be sold at 20c through the IPO for capital raising of $25m.
- The NewCo will have a market cap of $85m in the opening day of the NewCo in stock market (42m shares x 20c)
The 20c share value can go up or down depends on Mr Market's valuation of the NewCo. We can't know that now. We can only look at the MC of other companies doing similar exploration in the area. That's why LTR has given the table on the anns. That table helps us to make a calcualtion/valuation for the NewCo's MC.
As you can see on the table. NewCo will have the 2nd largest landholding in the Julimar Mineral Province, far ahead of anyone.
The closest one is Caspin (CPN), they have intersected massive sulphides (no assays yet) its MC went to $160m. That tells me the opening MC $85m of the NewCo, can easily double in the same day of listing day of NewCo, as there will be some moer drilling and assay results coming from there until the IPO.
Now it looks certain that we will have a baby; The NewCo which owns Moora-Koojan (Maybe other tenements as well). The stock price will start at 20c but it may go up significantly depends on the success of further drilling of NewCo, or the other around us.
(A poster was asking why ENX was not shown there. I can give you the answer in my opinion. That part of the area is not considered as an area in Julimar mineral province. You need to look at the maps. There is a Julimar trend there, but it's not in ANX's tenements).
Why the demerger might be necessary even though there is no takeover
I am not saying there is no takeover, but I am saying this demerger operation may be for other reason.
LTR might be reducing the liabilities on the company by demerging the new projects which needs a lot of expenses for exploration, commitments for exploration (like spending $5m on Koojan in 5 years), and commitments to govenrment for exploaration and other issues, farmers for land access, native titles, etc.
Because they will have to go to banks for getting credit for developing KV Project after they finish DFS, the banks will look at their liabilities, If they clear all other liabilities and leave onlt the ones related with KV project and lithium, that would be much more handsome appearance for the bank.
Anyway that's all for now. Let's wait and see what comes next. As I said before we have along way to go. We need to make our own research, and do it well.
I also like to thank to all guys who support LTR with their relentless info input here.
@cash hound is working a lot to feed us with media news.
@vmp and
@TrayonRanger with their excellent comments for long time, and all the others which I can't name here. Thank you everyone.
(20min delay)