Ann: Urea Manufacturing Facility Binding Heads of Agreement, page-67

Small 'caps' from the dealing desk. SS Insight would like to update you on our current buy recommendation on LCK due to LCK market news today.Leigh Creek Energy (LCK .ASX) – Pulse Markets initiated coverage on LCK on the 28th of October 2020 at $0.09 we again recommended it in March at price $0.15 Last $0.275 Buy Recommended LCK has been going up very well over the last 3 months and we are still anticipating that within the next 6 weeks management will be able to close one of the following tasks that will re-rate the stock. Short to medium term positive catalysts. Strategic PartnerOff take agreementFunding agreementLCK today announced a binding and exclusive heads of agreement for stage 2 of the Urea project which we see as a positive catalyst for the share price.Highlights• Execution of the binding Heads of Agreement (HoA) grants DL E&C Co., Ltd. (DL E&C) an exclusive right to negotiate the terms & conditions of the proposed agreement (Agreement) by 31 May 2021.• Under the HoA, DL E&C and LCK agree to settle the Agreement terms by which DL E&C will become the Engineering, Procurement, Construction, and Commissioning (EPCC) contractor.• Under the Agreement DL E&C will be contracted for the Feasibility, Front End Engineering & Design (FEED) stages, the EPCC contract and start-up of the urea manufacturing facility will be exclusively negotiated between the two parties.• Under the Agreement, DL E&C with LCK’s assistance will arrange the required finance for the turnkey price of the urea manufacturing facility from mainly Korean financial institutions.• DL E&C is a leading global engineering, procurement and construction contractor with deep technical expertise and corporate capability to partner with LCK.• Once the Agreement is finalised LCK will retain 100% ownership of the Leigh Creek Energy Project (LCEP).• The LCEP will be the only fully integrated urea production facility in Australia, with all inputs for low carbon urea production on-site. The project has strong economics with a Pre-tax leveraged Net Present Value (NPV) of A$3.4 billion, and an Internal Rate of Return (IRR) of 30%. This is substantial and we think the market may have missed that this could be a debt deal as LCK could potentially retain 100% of the project.Also as the contract will be signed by the 31st May 2021 we believe the share price will re-rate once the HoA becomes a binding contract. Clearly, the binding and exclusive nature of the HoA shows how serious DL E&C is to conclude a contract with LCK.Also, given the size of DL E&C, we can assume that their due diligence of LCK’s urea project has been detailed and comprehensive, so this announcement not only represents a significant de-risking event for LCK, it also shows another instance of third party validation of the urea project technical operations and market economics.Watch this space closely.