I thought I would take a while before responding to this Ann.
My overall impression is that it is disappointing. Disappointing for a number of reasons:
1. I always felt that the BOD will take this to mining and SH would benefit from dividends. The approach has always appeared so.
2. If it was taken over before mining, given where it is at in the construction process, it would be less than EPS at PE/20 at least (assuming metrics were met in production) for producing 6% spodumene concentrate alone. At this stage the takeover value does not even include, IMO, downstream processing options.
3. Given Albermale and the Min relationship, i.e. supply into the hydroxide trains at Kemerton, has fallen through, Albermale IMO is desperate for supply especially given the proposal to significantly expand its Kemerton facilities, hence surprised LTR did not push for more.
Albemarle announces $1bn expansion of Kemerton lithium hydroxide plant (nsenergybusiness.com)4. When LTR talked about sulphate, i.e. Sumitomo Ann, I was expecting a JV arrangement down the track for hydroxide where LTR would benefit -
Post #:691926945. This Ann too me is final - without an additional offer Albermale will attain the LTR resource at $3 per share, roughly $7 billion - $7.5 billion takeover price.
1.
Why is Albermale interested.As I posted in
Post #:68979201 I made this comment - obviously the answer now is LTR.
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It will be very interesting also where Albermale gets its product - now that the MIN deal is been revised - to feed into their Kemerton plant. Where is the spodumene to come from? One option is to ramp up production from Greenbushes since Albermale owns 49% of it and takes its equity share of production on that basis, but that will simply exhaust that resource quicker."""
2 Is $3 good value.
I guess the answer is ok value but not true value - it removes risks of things not coming together in production (teething problems) and for those who were in very early, although they may and IMO will be disappointed, they have captured ok value (but lost other value - see below).
From post Post #:65922837 is this table I constructed a while back:
Yes since Nov 202,1 capex has increased, but so has spodumene prices. The current TO value of LTR IMO simply captures the spodumene EPS, and not even at PE/20, in production ($4.75).
I would expect, despite capex increasing, with price growth and DSO now not much has changed there on a PE/20 basis.
What is my point - well there is absolutely no value IMO accorded to downstream processing in this TO offer, which is really what Albermale is bidding on.
I felt that LTR would have used its cash flow to fund its own hydroxide plants in the past - see 3 below, before its move into sulphate.
The payback period for spodumene sales alone, for Albermale, without expansion in mine production would be around 10 years (probably 5 - 6 with current spodumene pricing assumptions).
With sulphate/hydroxide less than 5 years IMO, and this doesn't take into account expansion opportunities (which I suspect what Albermale will do anyway) or Buldania, noting the fact Albermale wants LTR because it is expecting to significantly expand its hydroxide production at Kemerton.
Each train Albermale is proposing at Kemerton is 20,000 LHM, and articles in the public arena suggest it could build 5 trains. Each train requires 145,000 tonnes of 6% grade spodumene as feedstock at a 90% recovery rate.
3. Sulphate
I want to go back to the initial scoping study - Post #:48288089 - for Lithium Hydroxide Monohydrate (LHM) in 2020 and Lithium Sulphate (LSM). In this scoping study the 6% grade spodumene plant was going to cost A$325 million, noting in the subsequent DFS all this did get scaled upwards.
The point of me posting the above table was to provide reasons to my previous view that I thought, if LTR were to export sulphate, there would be some form of JV where LTR would also benefit (and get some profit from hydroxide). Why, sulphate pricing is 50% of LHM pricing, but sulphate capex is roughly 75% of hydroxide capex, though producing hydroxide is more complicated than producing sulphate by the way.
While I understood the reasons for sulphate, I would have also expected some form of JV down the track with Sumitomo around hydroxide where LTR would get some benefit there to, given cash flow LTR was expecting to get from spodumene sales alone. My post is here on why sulphate - Post #:69630067I wonder how Sumitomo is viewing this now? Just seems a lost opportunity for LTR and shareholders.
Overall view
I just wonder whether LTR didn't feel confident in been a miner for accepting such an offer. Clearly Albermale has experience as a spodumene producer (i.e. it has a stake in Greenbushes already) and as we know already operates some brine mines and has downstream converters.
I am surprised, going this far the BOD would accept this TO offer given the upside in production were LTR to meet its metrics.
I will agree with Kikker in that never fall in love with a stock as well. It is the way it is.
The only positive I see so far is that at least it is not China.
Will another bid be solicited - only time will tell?
Would love to be a fly on the wall to understand the reasons for accepting this bid, given Tony, on his own appointment, said he was accepting the job as part of the 'long haul'.
All IMO IMO IMO
(20min delay)
