Hi All,
I have largely refrained from discussing the short selling of LTR shares, however as they have been very active recently, here are my thoughts...
Short Sellers?The role of a short seller is to essentially uncover underperforming companies. It should not be used as a weapon to manipulate share price of a well performing company. We are all aware of the monumental progress that LTR has made, it is nothing short of brilliance. In a short period of time, LTR has managed to secure a short-term off take agreement for 100k tons of spodumene concentrate for Sinomine, commence production of spodumene concentrate and delivery to the ports ready for shipment. Now with all this progress and reduction in risk, the share price has dropped. This is blatant weaponisation and not reflective of the fundamental progress the Company has made, I do wonder if this predatory use of short selling can be reported to the ACCC or ASIC.
And further to the Sinomine deal, for those paying extra close attention to the Diggers and Dealers conference, Tony did mention that there is a possibility of supplying another 100k tons of spodumene to Sinomine... a detail not mentioned in the original announcement or that I had seen in earlier comments on HotCopper. This will give LTR the option if management decides it is strategic for the Company.
Anyway, so what are the intentions of the shorter sellers?
Well... as published in The Australian two days ago, Tony Ottaviano has stated that the short sellers are targeting his stock with a view it will raise equity (implying a capital raise). However, a (capital) raise at this current price would be "very dilutive" so this has been ruled out. Considering what the shares are actually worth, it would be unwise to capital raise unless at a much higher price similar to what we saw with the LG convertible notes (which was brilliance). Further, the Company does not require a capital raise as it already has at least $450 million dollars of cash in the bank which will see us past ramp up and into spodumene price stability.
At the stage of full production capacity, LTR with modern facilities and efficient processing methods is positioned to achieve cost parity with PLS as production stabilises also keeping in mind that PLS produced approximately 700ktpa of spodumene concentrate, the same output LTR expects to achieve. If the rumours are true about the former COO of PLS joining LTR, we might get there a bit sooner.
Noting that both companies use similar processing methods involving crushing, dense media separation, and flotation, LTR’s Kathleen Valley however does focus on producing high-grade lithium concentrate and tantalum by-products. LTR has the added advantage of renewable solar and wind energy to easy some costs.
Where from here:
Acquire more stock! Whilst short sellers can influence share price, they really have no control or influence over the Company's operations and profitability.
If you consider the market cap of LTR is currently 4.3x smaller than PLS, but can achieve cost parity and output the same 700ktpa as an $8.9bn market cap company which pays a dividend, you, as a shareholder of LTR will receive monster dividends in comparison to share price and a very rapid and immediate upwards price correction for this stock. This will serve as a painful lesson anyone shorting the stock.
Regards,
Equity Magnet
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