KDR (ASX) Ann: Kidman and SQM to form Mt Holland JV

Originally posted by charlie123456 ↑

To: Andrew Shearer <[email protected]>
Subject: KDR JV Deal - first thoughts - positive for KDR to become an integrated lithium company

Event: Kidman Resources (KDR) has announced a 50/50 JV on their lithium project with Sociedad Química y Minera de Chile S.A. (SQM). Whilst full details are still unknown at this stage we see the deal as positive for KDR in the longer term. There is likely to be some initial caution in the market around have KDR done the deal too early and given up 50% of the asset. However we see that bringing one of the top global lithium producers into the project provides strong technical and lithium marketing experience.

Update following Conference Call at 10:30am today

Key Points

Subject to approval a 50/50 JV on the Mt Holland Lithium Project to be established

SQM will pay US$110m (A$146.67m); consisting of US$30m (A$40m) to KDR, and a staged payment of US$80m (A$106m) to fund the initial development costs.

SQM to provide technical expertise

KDR will have an option to participate for up to a 50% interest in a proposed refinery to produce lithium carbonate/hydroxide.

KDR retain marketing rights to the lithium concentrate until such time as the carbonate plant is constructed

KDR to retain gold rights

Summary
We see the deal as positive for KDR for whilst they are reducing their ownership by half of the Mt Holland lithium they are gaining access to a world class lithium production partner and the potential access to a value add lithium carbonate plant. We see a number of parallels with the iron ore company, BCI, when they JV’d 50% of their iron ore project to FMG, the market was critical of BCI at the time. But BCI ended up; getting in production, paying dividends and returning significant capital growth for shareholders. Whereas a number of their peers are still sitting on undeveloped iron ore assets.

Recommendation – Maintain Buy Recommendation – Price Target under review – last PT $0.96/sh

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Along the lines that I was thinking.

Yes 50% sold for $146m, however they still hold 50% and will see it actually get mined.

My thoughts are that the mine will be developed and POS will still be used until Mt Holland plant is operational. That option is open until August, I think it is a no brainer and just waiting on the sign off of all concerned.
Mt Holland will have a refinery not just a processing plant.

I called the company this morning whilst the head shed were on a radio interview call. Obviously the company could not confirm a lot of my speculatiin but they also wouldn't deny it. These guys are busy so let them get on with it.

This was a bad deal if you were a ST holder looking for the big bounce.

More announcements to come be sure of that.
Next will be off take agreements (pretty soon) and start cash generation.