I’m just an amateur investor, so it makes no difference how I...

I’m just an amateur investor, so it makes no difference how I vote, but I will be voting yes. Almost every valuation metric seems to put the two companies within approximately 5% of the 56/44 ratio. I think that’s actually a pretty good effort.

The reason I’m voting yes is for the strategic advantages as listed in the Kroll report. I think these are seriously undervalued. Over the last few years the difficulty of actually making battery quality hydroxide and carbonate has been largely under-appreciated. A few people have mentioned it here, but the message usually gets lost. I think we’re now seeing the consequences of this with other companies appearing unable to sell their spodumene. The capital costs of conversion facilities are generally enormous, and other Australian miners don’t yet appear to have the in house technical capability to achieve this alone. I’m betting that Arcadium will have conversion capacity in spades, and it is something that AKE alone might struggle with.

The Albermarle report suggests that upstream converter inventory has been increasing this year. As for supply/demand, the BMI figures included in many PLS presentations appear similar to me to the Kroll figures. The market does seem to be in balance or slightly oversupplied for the next few years. Coupled with the comments with Paul Graves on the latest Livent quarterly, of prices having a floor somewhere around 20k/tonne, and likely fluctuating between 20-30k, this paints a bleak picture for future spodumene prices. I think we’ll see continued downward pressure on spodumene price.

The interesting point is that the market does not appear to be hugely oversupplied, and at 20k/tonne the brine really drives home the profits. I think we’re seeing the start of the flip from it being desirable to be selling spodumene to being an integrated producer and having brine projects. I predict that after next year it will be the brines that really drive home profits and Mt Cattlin will not be producing a lot of the profits anymore.

The combined entity should have a better cashflow that can be used for targeted expansion than AKE alone. Even still, with their growth pipeline, I doubt that all projects can be funded simultaneously, and a rigorous allocation of capital and sequential development will occur over the next few years.

I struggle to see share price dropping below somewhere in the $7-8 range, and will be accumulating at reasonable prices over the next few years.

I also wouldn’t be betting on a RIO takeover, I think it would be smart for them but last year they were suggesting hat their entire yearly budget for all their growth projects was limited to a few billion $US. If that’s still the case picking up AKE is a considerable overreach. We’ll see.