TY
@thenavigatorYou may not like the answer to your question though. Current our "value" remains entirely speculative and a fraction of the potential value the 20 year revenue stream offers. What does JP do to"bring forward" value to equity shareholders is the essence of answer to your question ... which is a balance sheet exercise.
Just from the most recent Annual Report, what is one action JP did to protect the company? ... Rhetorical....
He knows full well where fundamental lies ... PV of FV of cash flow. In doing so diversification will generally reduce risk and offer secondary sources of income. Do I like his choice of project - Cooper Basin conventional O&G exploration & development ... not particularly ... its a sideshow IMO but at least it wont require a great deal of capital (only at seismic stage and LCK states they will look for a selldown of their interest once a drillable target is located) ... and while it is "developing a revenue stream" its hardly near term ... might even see revenue from LCEP before CB ... But I like his strategic thinking.
Back to the LCKE Balance Sheet (BS).
Treasurer's Equation ....
Total Assets (TA) = Total Equity (BVE) + Total Liabilities i.e
$35,932,450 = $34,157,103 + $1,775,347
The Intrinsic Value (IV) of company is measured a few different ways but the one I used is the BVE (which is a representation of the cost to develop asset to point ... a assumes proper impairment testing is done) plus the PV of the future residual earnings (i.e. earnings above the company's cost of capital)
IV = BVE + RE = $34,157,103 + $0 = $34,157,103 .... and dividing by #shares (355,658,173) = $0.096Share price (SP) = IV + Speculative Value Equity (SVE)$0.165 = $0.096 + SVE ....
therefore "Equity Speculators" (which is us since there is no earnings) say
SVE = $0.069 per share.
Without getting into any arguments, either about relevance of BVE etc., it is the defining measure of value on the BS.
Right now P/B has LCK equity trading at 1.72X ... or you are pay $1.72 for every $1 of asset ... does that sound like value to you? That depends doesn't it. Like every "early stage" company we have to "value success" (so like that Farm-In what is the probability of (a) finding a suitable drilling target from the seismic (b) farming down our interest (c) drilling a commercial O&G well) and then value those earnings (meaning we really need to know the balance sheet to figure out what the equity is worth).
For me, at this stage, I am happy to pay $1.72 for $1 of asset. I might bring up that a couple of weeks ago you could buy $1 of LCK asset for about $1 ... share price of $0.1 late October ... i.e. no SVE and SP = IVIf you need an example of what the right off-take agreement can do for an early stage company look at PLL and what happened after an offtake agmt with Tesla, and the equity raising done after that to take advantage of share price.
Big believer in "Price is what you pay and Value is what you get (buy)". That simply means I believe LCK is going to be successful and that the present assets will be worth a whole lot more as earning assets.
Being practical though, the BS we have now is not the BS we'll have in the future.
1. Off-take agreement gives predictable cash flow ... very useful (necessary?) in BFS and requirement for Debt
2. Asset Equity% sale (and may even be to same party as (1)) will reduce risk and our equity capital contribution
3. JV will reduce risk and our share of profits
4. Green Bonds should be available as source of project finance
5. Expect an equity capital raising ... but when is almost more important than how much ... (1) strengthens our position enormously. For sure shortly after any offtake agmt.
If I use my example, and the off-take includes $600M (from asset selldown) of cash (say 20%/40%/40% as on signing, on construction and on commissioning)
then $120M cash on BS worth $0.34/sh ...
all else being equal that's $0.435 as BVE.
Continuing that thought would be ...
SVE goes up say a little more than double to $0.165 and you end up with $0.60/shThat seems almost far fetched ... but it is just what the value of capital is bringing. But we still don't have anywhere near the amount of capital needed to proceed (~total of $2.6B required and in my example our share is ~$2.08B). Now its dependent a bit on timing and structure (expecting project finance on a SPE (LCEP) with 80% ownership by LCK ... so green bonds to that SPE and specialized project financing matched to cash flows). If we get that right, additional equity capital needed is minimized and raised at much higher prices ... so maybe a Renounceable Rights Issue since it might still be 150M shares at $1 (hopefully).
It's a long story but it IMO it has some legs given the situation we have in country (i.e. replaces imports, lowest cost producer, possibility of exports, green element (CCS), Hydrogen, ...)
(20min delay)